EXHIBIT 4.5


 





Applied
Nanotech Holdings, Inc.

Convertible Promissory Note


 





 


	Issuance Date: January 23, 2013	 U.S. $225,000.00


 


FOR VALUE RECEIVED,
Applied Nanotech Holdings, Inc., a Texas corporation (the “Company”),
hereby promises to pay to the order of Tonaquint, Inc., a Utah corporation, or its
registered assigns (the “Holder”), the initial principal sum of $225,000.00 (the “Original Principal
Amount”), and any additional advances and other amounts that may accrue or become due under the terms of this Convertible
Promissory Note (this “Note”) when due, whether upon the Maturity Date, on any Installment Date with respect
to the Installment Amount due on such Installment Date (each as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof), and to pay interest (“Interest”) on any Outstanding Balance (as defined
below) at the applicable interest rate as set forth herein, whether upon any Installment Date, the Maturity Date or acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are
defined in Section 27


 


hereof. For purposes hereof, the term “Outstanding Balance” means the Original Principal
Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion or otherwise, plus
any accrued but unpaid Interest, collection and enforcements costs, and any other fees or charges (including without limitation
Late Charges (as defined below)) incurred under this Note or under the Agreement (defined below).


 


This Note is issued
pursuant to that certain Securities Purchase Agreement dated January 23, 2013, as the same may be amended from time to time (the
“Agreement”), by and between the Company and the Holder.


 


1.       PAYMENTS
OF PRINCIPAL; PREPAYMENT. On each Installment Date (which includes the Maturity Date), the Company shall pay to the Holder
an amount equal to the Installment Amount due on such Installment Date in accordance with Section 8. Additionally, so long
as no Event of Default (as defined below) shall have occurred, the Company may, in its sole and absolute discretion and upon giving
the Holder not less than five (5) Trading Days written notice (a “Prepayment Notice”), pay in cash all or any
portion of the Outstanding Balance at any time prior to the Maturity Date; provided that in the event the Company elects
to prepay all or any portion of the Outstanding Balance, it shall pay to the Holder 115% of the portion of the Outstanding Balance
the Company elects to prepay (the “Prepayment Premium”).


 


2.       INTEREST;
INTEREST RATE. The Company acknowledges that the Original Principal Amount of this Note exceeds the Purchase Price (as
defined in the Agreement) and that such excess consists of (a) an original issue discount of $20,000.00 and (b) the Carried
Transaction Expense Amount (as defined in the Agreement) in the amount of $5,000.00, both of which shall be fully earned and
charged to the Company as of the Issuance Date and paid to the Holder as part of the Original Principal Amount as set forth
in this Note. Interest on the Outstanding Balance shall accrue from the date set forth
above as the Issuance Date (the “Issuance Date”) at the rate of eight percent (8%) per annum, provided
that upon the occurrence of an Event of Default, Interest shall accrue on the Outstanding Balance at the rate of
twenty-two percent (22%) per annum, as set forth in Section 4.2(d) hereof. All Interest calculations hereunder shall be
computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and
shall be payable in accordance with the terms of this Note. Notwithstanding any
provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest
rate allowed under applicable law. All payments owing hereunder shall be in lawful money of the United States of
America or Conversion Shares, as provided for herein, and delivered to Holder at the address furnished to the Company for
that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any,
then to (c) accrued and unpaid Interest, and thereafter to (d) principal.


 




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3.       CONVERSION
OF NOTE. At the option of the Holder, this Note is convertible into validly issued, fully paid and non-assessable shares of
Common Stock, on the terms and conditions set forth in this Section 3.


 


3.1.       Conversion
Right.


 


(a)       Subject
to the provisions of Section 3.4, at any time or times on or after the Issuance Date, the Holder shall be entitled to convert
any portion of the Outstanding Balance into validly issued, fully paid and non-assessable shares of Common Stock (the “Section
3 Conversion Shares”) in accordance with Section 3.3, calculated using the Conversion Rate (as defined below).


 


(b)       The
Company shall not issue any fraction of a share of Common Stock upon any conversion. All shares issuable upon
each conversion of this Note shall be aggregated for purposes of determining whether such conversion would result in the issuance
of a fractional share. 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 Section 3 Conversion Shares. 


 


3.2.       Conversion
Rate. The number of Section 3 Conversion Shares issuable upon conversion of any portion of the Outstanding Balance
pursuant to Section 3.1(a) shall be determined by dividing (x) the applicable Conversion Amount by (y) the
Conversion Price (such formula is referred to herein as the “Conversion Rate”).


 


(a)       “Conversion
Amount” means the portion of the Outstanding Balance to be converted.


 


(b)       “Conversion
Price” means, as of any Conversion Date or other date of determination, $0.13, subject to adjustment as provided herein.


 


3.3.       Mechanics
of Conversion.


 


(a)       Conversion
by the Holder. To convert any Conversion Amount into shares of Common Stock on any date, the Holder shall deliver (whether
via email, facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date (a “Conversion
Date”), a copy of an executed notice of conversion substantially in the form attached hereto as Exhibit A
(the “Conversion Notice”) to the Company. If the Conversion Notice is received on a Trading Day after the close
of trading, then it will be deemed to have been received on the next Trading Day. If it is received on other than a Trading Day,
it will be deemed to have been received on the next Trading Day. If required by Section 3.3(c) , within five (5) Trading
Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a reputable overnight courier 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 14.2). On or before the first (1st) Trading Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile or email an acknowledgment of confirmation, in the form attached hereto
as Exhibit B, of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer
Agent”). On or before the close of business on the third (3rd) Trading Day following the date of receipt
of a Conversion Notice (the “Delivery Date”), the Company shall, provided that all DWAC Eligible Conditions
are then satisfied, credit the aggregate number of Section 3 Conversion Shares to which the Holder shall be entitled to the account
specified on the Conversion Notice via the DWAC system. If all DWAC Eligible Conditions are not then satisfied, the Company shall
instead 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 Section 3 Conversion Shares to which the Holder shall
be entitled; provided, however, that, in addition to any other rights or remedies that Holder may have under this Note,
such number of shares issued by certificate rather than via the DWAC system shall be increased by 5% for each conversion that
occurs more than six (6) months after the Issuance Date. For the avoidance of doubt, the Company has not met its obligation to
deliver Section 3 Conversion Shares by the Delivery Date unless the Holder or its broker, as applicable, has actually received
the shares electronically into the applicable account, or if the DWAC Eligible Conditions are not then satisfied, has actually
received the certificate representing the applicable Section 3 Conversion Shares no later than the close of business on the relevant
Delivery Date pursuant to the terms set forth above; provided, however, that if the Holder fails to identify its bank or
broker (by providing its name and DTC participant number) or fails to cause its bank or broker to initiate a DWAC Eligible transaction,
the Company will not be held in default with respect to the delivery of the applicable shares. If this Note is physically surrendered
for conversion pursuant to Section 3.3(c) and the Outstanding Balance 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 14.4)) representing the Outstanding Balance 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. In the event of a partial conversion of this Note pursuant hereto, the amount converted
shall be deducted from the Outstanding Balance but shall not otherwise reduce or limit any Installment Amounts to be paid on any
Installment Dates.


 




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(b)       Company’s
Failure to Timely Deliver. Failure for any reason whatsoever to issue any portion of the Section 3 Conversion Shares to Holder
by the applicable Delivery Date in the manner required under this Note shall be a “Conversion Failure”. Upon
the occurrence of a Conversion Failure, in addition to all other remedies available to the Holder, 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 or are owed to the Holder prior to the date
of such notice under any of the Transaction Documents (as defined in the Agreement). Notwithstanding the foregoing, a Conversion
Failure shall not exist to the extent Section 3 Conversion Shares are not issued by the Company in order to comply with the limitations
set forth in Section 3.4 hereof. Upon the occurrence of a Conversion Failure (unless Holder elects to void the Conversion Notice),
in addition to such failure being considered an Event of Default hereunder, for purposes of Section 7.1 the Company shall also
be deemed to have issued the Section 3 Conversion Shares to Holder on the latest possible permitted date and pursuant to the terms
set forth in this Section 3, with Holder entitled to all the rights and privileges associated with such deemed issued shares (the
“Deemed Conversion Issuance”).


 


(c)       Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the name and
address of the holders of all or any portion of this Note and the principal amount of this Note held by such holder (the “Registered
Note”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company
and the holder shall treat each Person whose name is recorded in the Register as the owner of this Note for all purposes (including,
without limitation, the right to receive payments of principal and Interest hereunder) notwithstanding notice to the contrary.
The Registered Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on
the Register. Upon its receipt of a request to assign, transfer or sell all or part of the Registered Note by the holder thereof,
the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same
aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 14. Notwithstanding anything to the contrary in this Section 3.3(c), the Holder may assign this Note
or any portion thereof to its Affiliate without delivering a request to assign or sell this Note to the Company and the recordation
of such assignment or sale in the Register (a “Related Party Assignment”); provided, that (A) the Company
may continue to deal solely with such assigning or selling Holder unless and until such Holder has delivered a request to assign
or sell this Note or portion thereof to the Company for recordation in the Register; (B) the failure of such assigning or selling
Holder to deliver a request to assign or sell such Note or portion thereof to the Company shall not affect the legality, validity,
or binding effect of such assignment or sale; and (C) such assigning or selling Holder shall, acting solely for this purpose as
a non-fiduciary agent of the Company, maintain a register (the “Related Party Register”) comparable to the
Register on behalf of the Company, and any such assignment or sale shall be effective upon recordation of such assignment or sale
in the Related Party Register.  Notwithstanding anything to the contrary set forth in this Section 3, upon 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 entire Outstanding Balance of this Note is being converted (in which event this Note shall
be delivered to the Company as contemplated by Section 3.3(a)) 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 Outstanding Balance and Late Charges converted and/or
paid (as the case may be) and the dates of such conversions and/or payments (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.


 




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3.4.       Limitations
on Conversions.


 


(a)       Notwithstanding
anything to the contrary contained in this Note (except as set forth below in this subsection), 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 to Section 3 or Section 8 hereof, to the extent (but only to the extent) that the Holder
together with any of its Affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”)
of the Common Stock outstanding. Notwithstanding the forgoing, (i) if any of the DWAC Eligible Conditions are not then
satisfied, the term “4.99%” shall be replaced in the preceding sentence with “9.99%” at such time as
the Market Capitalization of the Common Stock is less than $3,000,000.00, but (ii) if all of the DWAC Eligible Conditions are
then satisfied, the term “4.99%” shall be replaced in the preceding sentence with “9.99%” only at
such time as the Market Capitalization of the Common Stock is less than $1,500,000.00. For the avoidance of any doubt,
notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such change to “9.99%” shall be permanent. For purposes of this Agreement,
the term “Market Capitalization of the Common Stock” shall mean the product equal to (i) the average VWAP
of the Common Stock for the immediately preceding thirty (30) Trading Days, multiplied by (ii) the aggregate number of
outstanding shares of Common Stock as reported on the Company’s most recently filed Form 10-Q or Form 10-K.


 


(b)       To
the extent the limitation set forth in subsection (a) immediately above 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 Section 3.4 shall have any effect on the
applicability of the provisions of this Section 3.4 with respect to any subsequent determination of convertibility. For
purposes of this Section 3.4 , 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(e) of the 1934 Act
(as defined in the Agreement) and the rules and regulations promulgated thereunder. The provisions of this Section 3.4 shall
be implemented in a manner otherwise than in strict conformity with the terms of this Section 3.4 to correct this Section 3.4
(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 Section 3.4 shall apply to a successor Holder of this Note. The
holders of Common Stock shall be third party beneficiaries of this Section 3.4 and the Company may not waive this Section 3.4
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) Trading 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.


 




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4.       RIGHTS
UPON EVENT OF DEFAULT.


 


4.1.       Event
of Default. Each of the following events shall constitute an “Event of Default”:


 


(a)       Failure
to Pay. The Company shall fail to make any payment when due and payable under the terms of this Note including, without limitation,
any payment of costs, fees, interest, principal (including, without limitation, the Company’s failure to deliver any Installment
Amount when due or to pay any redemption payments or amounts hereunder), or other amount due hereunder or under any other Transaction
Document (as defined in the Agreement).


 


(b)       Failure
to Deliver or Process Shares. The Company (or its Transfer Agent, as applicable) (i) fails to issue Section 3 Conversion
Shares by the Delivery Date; (ii) fails to issue any Pre-Installment Conversion Shares, Post-Installment Conversion Shares,
Pre-Installment Certificated Shares, or Post-Installment Certificated Shares, as applicable, within the time periods required
by Section 8 ; (iii) announces (or threatens in writing) that it will not honor its obligation to issue shares to Holder in
accordance with Section 3 and/or Section 8 of this Note; (iv) fails to transfer or cause its Transfer Agent to transfer or
issue (electronically or in certificated form, as applicable) any Section 3 Conversion Shares, Pre-Installment Conversion
Shares, Post-Installment Conversion Shares, Pre-Installment Certificated Shares, or Post-Installment Certificated Shares, as
applicable, issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note; (v)
directs its Transfer Agent not to transfer, or delays, impairs, and/or hinders its Transfer Agent in transferring or issuing
(electronically or in certificated form, as applicable) any Section 3 Conversion Shares, Pre-Installment Conversion Shares,
Post-Installment Conversion Shares, Pre-Installment Certificated Shares, or Post-Installment Certificated Shares, as
applicable, to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note; or (vi) as applicable, fails to remove (or directs its Transfer Agent not to remove or impairs, delays, and/or hinders
its Transfer Agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any Section 3 Conversion Shares, Pre-Installment Certificated Shares or Post-Installment Certificated
Shares as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to
honor any such obligations).


 




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(c)       Judgment.
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) calendar days after the entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within thirty (30) calendar 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) calendar days of the issuance of such judgment.


 


(d)       Breach
of Obligations; Covenants. The Company or its Subsidiaries, if any, shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Note or any of the other Transaction Documents, including without limitation (i) all
reporting covenants and covenants to timely file all required quarterly and annual reports and any other filings required pursuant
to Rule 144, and (ii) strict compliance with all provisions of Sections 3, 8, and 10 of this Note.


 


(e)       Breach
of Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made
or furnished by or on behalf of the Company to the Holder in writing included in this Note or in connection with any of the Transaction
Documents, or as an inducement to the Holder to enter into this Note or any of the other Transaction Documents, shall be false,
incorrect, incomplete or misleading in any material respect when made or furnished or becomes false thereafter.


 


(f)       Receiver
or Trustee. The Company shall make an assignment for the benefit of creditors, or apply for, or consent to, or otherwise be
subject to, the appointment of a receiver, trustee, liquidator, assignee, custodian, sequestrator, or other similar official for
a substantial part of its property or business.


 


(g)       Failure
to Pay Debts. If any of the Company’s assets are assigned to its creditors, or upon the occurrence of any default under,
redemption of or acceleration prior to maturity of any Indebtedness of the Company or any of its Subsidiaries in an amount equal
to $100,000 or more.


 


(h)       Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company.


 


(i)       Delisting
of Common Stock. The suspension from trading or the failure of the Common Stock to be trading on an Eligible Market for a period
of five (5) consecutive Trading Days or for more than an aggregate of ten (10) Trading Days in any 365-day period.


 


(j)       Liquidation.
Any dissolution, liquidation, or winding up of the Company or any substantial portion of its business.


 


(k)       Cessation
of Operations. Any cessation of operations by the Company or the Company admits it is otherwise generally unable to pay its
debts as such debts become due; provided, however, that any disclosure of the Company’s ability to continue as a “going
concern” shall not be an admission that the Company cannot pay its debts as they become due.


 




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(l)       Maintenance
of Assets. The failure by the Company to maintain any material intellectual property rights, personal, real property or other
assets which are reasonably necessary to conduct its business (whether now or in the future).


 


(m)       Financial
Statement Restatement. The restatement of any financial statements filed by the Company with the SEC for any date or period
from two years prior to the date of this Note and until this Note is no longer outstanding, if the result of such restatement would,
by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Company with
respect to this Note or the Agreement.


 


(n)       Reverse
Split. The Company effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to
the Holder.


 


(o)       Replacement
of Transfer Agent. In the event that the Company proposes to replace its Transfer Agent, the Company fails to provide, prior
to the effective date of such replacement, a fully executed Transfer Agent Letter (as defined by the Agreement) in a form as required
to be initially delivered pursuant to the Agreement (including but not limited to the provision to irrevocably reserve shares of
Common Stock in the Share Reserve) signed by the successor transfer agent and delivered to the Company and the Holder.


 


(p)       Governmental
Action. If any governmental or regulatory authority takes or institutes any action against the Company, a Subsidiary, or an
executive officer or director of the Company, that will materially affect the Company’s financial condition, operations or
ability to pay or perform the Company’s obligations under this Note.


 


(q)       Share
Reserve. The Company’s failure to maintain the Share Reserve (as defined in the Agreement).


 


(r)       Certification
of Equity Conditions. A materially false or inaccurate certification (including, without limitation, a false or inaccurate
deemed certification) by the Company that the Equity Conditions are satisfied, that there has been no Equity Conditions Failure
or as to whether any Event of Default has occurred.


 


(s)       DWAC
Eligibility. The failure of any of the DWAC Eligible Conditions to be satisfied at any time during which the Company has obligations
under this Note.


 


(t)       Cross
Default. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, a breach or default
by the Company of any covenant or other term or condition contained in (i) any of the other Transaction Documents, or (ii) any
Other Agreements (defined below); shall, at the option of the Holder, be considered a default under this Note, in which event
the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this
Note. The Company hereby agrees to notify the Holder in writing within three (3) Trading Days after any such default; provided,
however, any filing of an 8-K that identifies any such default shall not be deemed notice under this Section 4.1(t). “Other
Agreements” means, collectively, (1) all existing and future agreements and instruments between, among or by the Company
(or a Subsidiary), on the one hand, and the Holder (or an Affiliate of Holder), on the other hand, and (2) any financing agreement
or a material agreement that affects the Company’s ongoing business operations. For the avoidance of doubt, all existing
and future loan transactions between the Company and the Holder and its Affiliates will be cross-defaulted with each other loan
transaction and with all other existing and future debt of the Company to the Holder.


 




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(u)       Reduced
Market Capitalization of the Common Stock. If at any time the Market Capitalization of the Common Stock is less than five (5)
times the Original Principal Amount.


 


Each subsection of
this Section 4.1 shall be interpreted and applied independently, and no such subsection shall be deemed to limit or qualify
any other subsection in any manner whatsoever.


 


4.2.       Notice
of an Event of Default; Remedies; Redemption Right.


 


(a)       Upon
the Company becoming aware of an occurrence of an Event of Default, the Company shall within one (1) Trading Day deliver written
notice thereof via facsimile and reputable overnight courier (with next day delivery specified) (an “Event of Default
Notice”) to the Holder, unless overnight delivery is waived by Holder upon receipt of the facsimile.


 


(b)       At
any time and from time to time (i) after the fifth (5th) day following the earlier of the Holder’s receipt
of an Event of Default Notice pertaining to any Event of Default occurring under any of Sections 4.1(c), (d), (e), (i), (l),
or (p) above, and the Holder becoming aware of any such Event of Default, if such Event of Default is not cured by such fifth
(5th) day, or (ii) after the thirtieth (30th) day following the earlier of the Holder’s receipt
of an Event of Default Notice pertaining to any Event of Default occurring under Section 4.1(s) above, and the Holder
becoming aware of any such Event of Default, if such Event of Default is not cured by such thirtieth (30th) day; provided,
however, that if such an Event of Default cannot reasonably be cured within such thirty (30) day period, the Company
shall not have any right to cure the same and subsection (iii) immediately below shall pertain to such Event of Default
instead of this subsection (ii), or (iii) after the earlier of the Holder’s receipt of an Event of Default Notice
pertaining to any Event of Default occurring under any provision of Section 4.1 not specifically referenced immediately above
in this Section 4.2(b), and the Holder becoming aware of any such Event of Default, the Holder may require the Company to
redeem (regardless of whether 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 the Outstanding Balance the Holder is electing to redeem (the
“Default Redemption Amount”). Redemptions required by this Section 4.2(b) shall be made in accordance with
the provisions of Section 10. Notwithstanding anything to the contrary in this Section 4, but subject to
Section 3.4, until the Default Redemption Amount (together with Late Charges thereon) is paid in full pursuant to and in
accordance with the terms set forth in Section 10, the Outstanding Balance (together with any Late Charges thereon), may be
converted, in whole or in part from time to time, by the Holder into Common Stock pursuant to the other terms of this Note.
In the event of a partial redemption of this Note pursuant hereto, the applicable Default Redemption Amount shall be deducted
from the Installment Amount(s) relating to the applicable Installment Date(s) as set forth in the Event of Default Redemption
Notice. Notwithstanding the foregoing, this Section 4.2(b) shall not apply to an Event of Default arising under Section
4.1(h) (Bankruptcy). Notwithstanding any other provision contained herein, and for the avoidance of doubt, the Company shall
not have any right to cure any Event of Default occurring under Sections 4.1(a) or (b) above.


 


(c)       Upon
the occurrence of an Event of Default occurring under Section 4.1(h) due to the institution by or against the Company of any
bankruptcy proceeding for relief under any bankruptcy law or any law for the relief of debtors, (i) the Outstanding Balance
shall automatically increase to an amount equal to the Outstanding Balance immediately prior to such Event of Default
multiplied by the Redemption Premium, and (ii) all amounts owed under this Note shall accelerate and be immediately due and
payable, all without the need for any further notice to or action by any party hereunder.


 




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(d)       Upon
the occurrence of any Event of Default not cured within the applicable cure period, this Note shall thereafter accrue interest
at the rate of 1.83% per month (or 22% per annum), compounding daily, whether before or after judgment; provided, however,
that notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the
maximum interest rate allowed under applicable law.


 


5.       RIGHTS
UPON FUNDAMENTAL TRANSACTION.


 


5.1.       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 5.1 pursuant to written agreements in form and substance satisfactory to the Holder and approved
by the Holder, in its sole discretion, prior to such Fundamental Transaction, including agreements to deliver to the Holder
in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Note, including, without limitation, having a principal amount and interest rate equal to the principal
amounts then outstanding and the interest rates of this Note, having similar conversion rights as this Note and having
similar ranking to this Note, and being satisfactory to the Holder in its sole discretion, (ii) the Successor Entity is
a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market, and (iii) the
Company has received the Holder’s prior written consent to enter into such Fundamental Transaction. 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 6 , which
shall continue to be receivable thereafter) issuable upon the conversion or redemption of this Note 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. The provisions of this Section 5
shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of this Note.


 


5.2.       Notice
of a Fundamental Transaction; Redemption Right. No sooner than twenty (20) Trading Days nor later than ten (10) Trading
Days prior to the consummation of a Fundamental Transaction, but not prior to the public announcement of such Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile and reputable overnight courier to the Holder (a “Fundamental
Transaction Notice”). At any time during the period beginning after the Holder’s receipt of a Fundamental Transaction
Notice or the Holder becoming aware of a Fundamental Transaction if a Fundamental Transaction Notice is not delivered to the Holder
in accordance with the immediately preceding sentence (as applicable) and ending on the later of twenty (20) Trading Days
after (i) consummation of such Fundamental Transaction and (ii) the date of receipt of such Fundamental Transaction
Notice, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Fundamental
Transaction Redemption Notice”) to the Company, which Fundamental Transaction Redemption Notice shall indicate the portion
of the Outstanding Balance the Holder is electing to redeem (the “Fundamental Transaction Redemption Amount”).
The Fundamental Transaction Redemption Amount shall be redeemed by the Company in cash pursuant to and in accordance with Section 10
and shall have priority to payments to stockholders in connection with such Fundamental Transaction. Notwithstanding anything
to the contrary in this Section 5, but subject to Section 3.4, until the Fundamental Transaction Redemption Amount (together
with any Late Charges thereon) is paid in full pursuant to and in accordance with the terms set forth in Section 10, the Outstanding
Balance (together with any Late Charges thereon), may be converted, in whole or in part from time to time, by the Holder into
Common Stock pursuant to Section 3. In the event of a partial redemption of this Note pursuant hereto, the applicable Fundamental
Transaction Redemption Amount shall be deducted from the Installment Amount(s) relating to the applicable Installment Date(s)
as set forth in the Fundamental Transaction Redemption Notice.


 




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5.3.       Paid
in Full. Notwithstanding anything to the contrary in this Section 5, in no case shall any Fundamental Transaction be consummated
prior to the prepayment in full of the Outstanding Balance of this Note, with such prepayment subject to the Prepayment Premium
for the entire Outstanding Balance.


 


6.       DISTRIBUTION
OF ASSETS; RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.


 


6.1.       Distribution
of Assets. Without the prior written consent of Holder, the Company agrees not to declare or make any dividend or other
distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return
of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options
by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction).


 


6.2.       Purchase
Rights. In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note
(without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date
as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would
not result in the Holder exceeding the Maximum Percentage).


 


6.3.       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) using 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. The provisions of this Section 6 shall apply similarly and equally to successive
Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.


 




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7.       RIGHTS
UPON ISSUANCE OF SECURITIES.


 


7.1.       Adjustment
of Conversion Price upon Issuance of Common Stock. Except with respect to Excluded Securities, if and whenever on or after
the Issuance Date the Company issues or sells Common Stock, Options, Convertible Securities, or upon any conversion or Deemed
Issuance, or in accordance with subsections (a) through (f) below is deemed to have issued or sold, any shares of Common Stock
(including without limitation the issuance or sale of shares of Common Stock owned or held by or for the account of the Company,
but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration per share (the
“New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such issue,
conversion, or sale or deemed issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For the avoidance of doubt, if
the New Issuance Price is greater than the Applicable Price, there shall be no adjustment to the Conversion Price. For purposes
of determining the adjusted Conversion Price under this Section 7.1, the following shall be applicable:


 


(a)       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, exercise or exchange 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 7.1(a), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option” shall be equal to (1) the lower of (x) 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 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 and (y) the lowest exercise price set forth in such
Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option minus (2) the sum of all amounts paid
or payable to the holder of such Option (or any other Person) 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 plus the
value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other
Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance
of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance
of such share of Common Stock upon conversion, exercise or exchange of such Convertible Securities.


 




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(b)       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, exercise or exchange 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 7.1(b),
the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof”
shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security
for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts
paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible
Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible
Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon
the actual issuance of such share of Common Stock upon conversion, exercise or exchange 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 Conversion
Price has been or is to be made pursuant to other provisions of this Section 7.1, except as contemplated below, no further
adjustment of the Conversion Price shall be made by reason of such issue or sale.


 


(c)       Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or
decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the
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 7.1(c), if the terms of any Option or
Convertible Security that was outstanding as of the Issuance 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 7.1 shall be made if such adjustment would result in an increase of the Conversion Price
then in effect.


 


(d)       Calculation
of Consideration Received. If any Option or Convertible Security is issued or deemed issued in connection with the issuance
or sale or deemed issuance or sale of any other securities of the Company, together comprising
one integrated transaction, (x) such Option or Convertible Security (as applicable) will be deemed to have been issued for
consideration equal to the Black Scholes Consideration Value thereof and (y) the other securities issued or sold or deemed
to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference
of (I) the aggregate consideration received by the Company minus (II) the Black Scholes Consideration Value of each such
Option or Convertible Security (as applicable). 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 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
for such securities will be the average VWAP of such security for the five (5) Trading Day period immediately preceding the
date of receipt. 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 Holder. If such parties are unable to reach
agreement within ten (10) Trading Days after the occurrence of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day
following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. 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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(e)       Deemed
Warrant Issuance. If Company fails to deliver Warrant Shares as required by the Warrant (as both such terms are defined
in the Agreement) issued to Holder pursuant to the Transaction Documents, in addition to such failure to act being considered
an Event of Default hereunder, for purposes of this Section 7.1 the Company shall also be deemed to have issued the Warrant
Shares to Holder on the applicable date set forth in the Warrant and pursuant to the terms set forth therein (the
“Deemed Warrant Issuance”).


 


(f)       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 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). 


 


7.2.       Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 5 or
Section 7.1, if the Company at any time on or after the Issuance 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 Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any
provision of Section 5 or Section 7.1, if the Company at any time on or after the Issuance 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 Conversion Price in effect immediately prior to such combination will be proportionately increased. Any
adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Conversion Price is
calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such
event.


 


7.3.       Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 7 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 shall in good faith determine and implement an appropriate adjustment in the Conversion
Price so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 7.3
will increase the Conversion Price as otherwise determined pursuant to this Section 7,
provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment
bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company. 


 




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8.       COMPANY
INSTALLMENT CONVERSION OR REDEMPTION. Beginning on the date that is two hundred ten (210) calendar days after the Issuance
Date (the “Initial Installment Date”), and on each applicable Installment Date thereafter, the Company shall
pay to the Holder of this Note the applicable Installment Amount due on such date by converting such Installment Amount in accordance
with this Section 8 (a “Company Conversion”); provided, however, the Company may, at its option
as described below, pay all or any part of such Installment Amount by redeeming such Installment Amount in cash (a “Company
Redemption”) or by any combination of a Company Conversion and a Company Redemption so long as the entire amount of
such Installment Amount due shall be converted and/or redeemed by the Company on the applicable Installment Date, subject to the
provisions of this Section 8; provided further that the Company shall not be entitled to effect a Company Conversion
with respect to any portion of such Installment Amount and shall be required to pay the entire amount of such Installment Amount
in cash pursuant to a Company Redemption if on the applicable Pre-Installment Notice Due Date (defined below) or on the applicable
Installment Date (as the case may be) there is an Equity Conditions Failure, and such failure is not waived by Holder as permitted
herein.


 


8.1.       General.
On or prior to the date which is the twenty-third (23rd) Trading Day prior to each Installment Date (each, a “Pre-Installment
Notice Due Date”), the Company shall deliver written notice to the Holder substantially in the form attached hereto
as Exhibit C-1 (each, a “Pre-Installment Notice”), and such Pre-Installment Notice shall (i) either (A) confirm
that the applicable Installment Amount of this Note shall be converted in whole pursuant to a Company Conversion, or (B) (1) state
that the Company elects to redeem, or is required to redeem in accordance with the provisions of this Note, in whole or in part,
the applicable Installment Amount pursuant to a Company Redemption and (2) specify the portion of the applicable Installment
Amount which the Company elects, or is required to redeem, pursuant to a Company Redemption (such amount to be redeemed in cash,
the “Company Redemption Amount”) and the portion of the applicable Installment Amount, if any, with respect
to which the Company will, and is permitted to, effect a Company Conversion (such amount of the applicable Installment Amount
so specified to be so converted pursuant to this Section 8 is referred to herein as the “Company Conversion Amount”),
which amounts when added together, must equal the entire applicable Installment Amount and (ii) if the applicable Installment
Amount is to be paid, in whole or in part, pursuant to a Company Conversion, certify that there is not an Equity Conditions Failure
as of the Pre-Installment Notice Due Date. Each Pre-Installment Notice shall be irrevocable and may not be revoked by the Company.
If the Company does not timely deliver a Pre-Installment Notice on an applicable Pre-Installment Notice Due Date that complies
with this Section 8, then the Company shall be deemed to have delivered on such Pre-Installment Notice Due Date an irrevocable
Pre-Installment Notice confirming a Company Conversion of the entire Installment Amount payable as required hereunder and shall
be deemed to have certified that there is not an Equity Conditions Failure as of the applicable Pre-Installment Notice Due Date.
The applicable Company Conversion Amount (whether set forth in the applicable Pre-Installment Notice or by operation of this Section 8)
shall be converted in accordance with Section 8.2 or Section 8.4, as applicable and the applicable Company Redemption Amount shall
be redeemed in accordance with Section 8.3.


 


8.2.       Mechanics
of Company Conversion. Subject to Section 3.4, if the Company delivers a Pre-Installment Notice and elects, or is
deemed to have delivered a Pre-Installment Notice and deemed to have elected, in whole or in part, a Company Conversion in
accordance with Section 8.1, then this Section 8.2 shall apply. Notwithstanding the foregoing, if an Equity Conditions
Failure has occurred as of the applicable Pre-Installment Notice Due Date, then the Company shall identify each such Equity
Conditions Failure in the Pre-Installment Notice and request a waiver thereof from Holder pursuant to Section 8.6 hereof. (i)
If such waiver is obtained, and all DWAC Eligible Conditions are then satisfied and a Company Conversion is not otherwise
prohibited under any other provision of this Note, then the remainder of this Section 8.2 shall apply to the Company
Conversion; (ii) if such waiver is obtained, but all DWAC Eligible Conditions are not then satisfied, then the remainder of
this Section 8.2 shall not apply and the Company must deliver certificated Common Stock to Holder pursuant to Section 8.4
hereof; or (iii) if such waiver is not obtained, then the remainder of this Section 8.2 shall not apply and the Company must
elect a Company Redemption and deliver cash to the Holder in an amount equal to the Installment Amount (or such lessor amount
authorized by the Holder in writing) pursuant to Section 8.3 hereof. To the extent applicable as set forth above:


 




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(a)       No
later than three (3) Trading Days after each applicable Pre-Installment Notice Due Date, the Company shall deliver to the Holder’s
account the Pre-Installment Conversion Shares, and as to which the Holder shall be the owner thereof as of the applicable Pre-Installment
Notice Due Date.


 


(b)       No
later than three (3) Trading Days after each Installment Date, the Company shall deliver to the Holder’s account a
number of shares of Common Stock equal to the amount, if any, by which the Post-Installment Conversion Shares exceed the
Pre-Installment Conversion Shares previously delivered to Holder, registered in the name of the Holder or its designee. So
long as no Event of Default has occurred regarding payment, conversion or redemption under this Note (each a
“Payment Default”), if the Pre-Installment Conversion Shares on the applicable Installment Date exceed the
Post-Installment Conversion Shares, then the excess will be applied towards the next Conversion Shares to be issued by the
Company (unless the Outstanding Balance has been reduced to zero, in which case Holder will return such excess shares to the
Company). If a Payment Default has occurred and the Pre-Installment Conversion Shares for the applicable Installment Date
exceed the Post-Installment Conversion Shares, then Holder shall not be required to return to the Company any of the excess
shares or apply such excess shares to any future issuance or conversion of shares hereunder. The Company agrees to deliver to
the Holder such information and calculations required under this Section 8.2(b) substantially in the form attached hereto as
Exhibit C-2 (each, an “Installment Date Notice”).


 


(c)       If
an Event of Default occurs during any applicable Company Conversion Measuring Period (defined below), then Holder may elect to
either (i) return any Pre-Installment Conversion Shares delivered in connection with the applicable Installment Date, or (ii) retain
such Pre-Installment Conversion Shares and reduce the Outstanding Balance in connection therewith by an amount equal to the Market
Price of such retained Pre-Installment Conversion Shares as of the Installment Date, but in no event shall such reduction be greater
than the Company Conversion Amount used to calculate such Pre-Installment Conversion Shares. “Company Conversion Measuring
Period” means the period beginning on the applicable Pre-Installment Notice Due Date and ending on the applicable Installment
Date.


 


(d)       If
no Equity Conditions Failure existed as of the Pre-Installment Notice Due Date, but an Equity
Conditions Failure exists as of the applicable Installment Date, and such is not waived as permitted herein, or a Company Conversion
is not otherwise permitted as of the Installment Date under any other provision of this Note, then, at the option of the Holder
designated in writing to the Company, the Holder may require the Company to do any one or more of the following:


 


(i)       the
Company must redeem all or any part designated by the Holder of the Company Conversion Amount for which shares have not yet
been delivered to Holder (such designated amount is referred to as the “Designated Redemption Amount”) and
the Company shall pay to the Holder within three (3) Trading Days of such Installment Date, by wire transfer of
immediately available funds, an amount in cash equal to the Redemption Premium multiplied by the Designated Redemption Amount
(the “Designated Redemption Price”) (if the Company fails to pay the Designated Redemption Price by the
third (3rd) Trading Day following such written notice to the Company, then such failure to pay shall be an Event of Default
under Section 4.1(a) hereof), or


 




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(ii)       the
Company Conversion shall be null and void with respect to the Company Conversion Amount for which shares have not yet been delivered
to Holder, and Holder shall be entitled to all the rights of a holder of this Note with respect to such remaining Company Conversion
Amount; provided, however, the Conversion Price for such remaining Company Conversion Amount shall thereafter be adjusted
to equal the lesser of (Y) the Default Conversion Price as in effect on the date on which the Holder voided the Company Conversion
and (Z) the Default Conversion Price that would be in effect on the date on which the Holder delivers a subsequent Conversion
Notice relating thereto as if such date was an Installment Date.


 


(e)       Notwithstanding
anything to the contrary in this Section 8.2, but subject to Section 3.4, until the Company
delivers Common Stock representing the Company Conversion Amount to the Holder pursuant to the terms of this Section 8.2,
the Company Conversion Amount may be converted by the Holder into Common Stock pursuant to Section 3.
In the event that the Holder elects to convert the Company Conversion Amount prior to the applicable Installment
Date as set forth in the immediately preceding sentence, the Company Conversion Amount so converted shall be deducted from the
Installment Amount(s) relating to the applicable Installment Date(s) as set forth in the applicable Conversion Notice.


 


(f)       All
Common Stock to be delivered to the Holder under this Section 8.2 shall be transferred via the DWAC system. Failure to do so shall
constitute an Event of Default under Section 4.1(b) hereof.


 


8.3.       Mechanics
of Company Redemption. If the Company elects, or is required to elect, a Company Redemption, in whole or in part, in accordance
with Section 8.1 or Section 8.2, then the Company Redemption Amount, if any, which is to
be paid to the Holder on the applicable Installment Date shall be redeemed by the Company on such Installment Date in an amount
of cash (without incurring any Prepayment Premium), and the Company shall pay to the Holder on such Installment Date, by wire
transfer of immediately available funds an amount, equal to the applicable Company Redemption Amount. If the Company fails to
pay the applicable Company Redemption Amount on the applicable Installment Date, then, at the option of the Holder designated
in writing to the Company (any such designation shall be a “Conversion Notice” for purposes of this Note), the Holder
may require the Company to convert all or any part of the Company Redemption Amount at the Default Conversion Price (determined
as of the date of such designation as if such date were an Installment Date). Conversions required by this Section 8.3
shall be made in accordance with the provisions of Section 3.3. Notwithstanding
anything to the contrary in this Section 8.3, but subject to Section 3.4
and the Holder’s right to require the Company to convert all or any part of the Company Redemption Amount at the
Default Conversion Price as set forth above, until the Company Redemption Amount (together with any Late Charges thereon) is paid
in full, the Company Redemption Amount (together with any Late Charges thereon) may be converted, in whole or in part, by the
Holder into Common Stock pursuant to Section 3. In the event the Holder elects to convert
all or any portion of the Company Redemption Amount prior to the applicable Installment Date as set forth in the immediately preceding
sentence, the Company Redemption Amount so converted shall be deducted from the Installment Amounts relating to the applicable
Installment Date(s) as set forth in the applicable Conversion Notice.


 


8.4.       DWAC
Eligibility. If, when the Company delivers a Pre-Installment Notice and elects, or is deemed to have delivered a
Pre-Installment Notice and deemed to have elected, in whole or in part, a Company Conversion in accordance with Section 8.1,
and the DWAC Eligible Conditions are not then satisfied but Holder waives the corresponding Equity Conditions Failure
pursuant to Section 8.6, then, in accordance with Section 8.2, although such status will constitute an Event of Default
hereunder, shares required to be issued to the Holder under this Section 8 shall be issued (without limiting any of
Holder’s rights with respect to the Event of Default) as follows:


 




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(a)       No
later than three (3) Trading Days after delivery or deemed delivery (as applicable) of the applicable Pre-Installment Notice setting
forth a Company Conversion Amount, the Company shall deliver to the Holder or its broker, via reputable overnight courier, the
Pre-Installment Certificated Shares by original share certificate, registered in the name of the Holder or its designee; provided,
however, that so long as shares are not provided electronically to the Holder under Section 8, the Pre-Installment Certificated
Shares shall equal two (2) times the number of Pre-Installment Conversion Shares that would otherwise be transferred electronically
to the Holder.


 


(b)       The
Company agrees to use its best efforts to cause such shares to become Free Trading (the first date such occurs, the “Free
Trading Date”). The Holder will notify the Company of the Free Trading Date via email within two (2) Trading Days after
the occurrence of the Free Trading Date.


 


(c)       Provided
that there is no Equity Conditions Failure as of the date that is twenty-three (23) Trading Days after the applicable Free
Trading Date (the “Certificated Shares Installment Date”) (or such failure is waived as permitted herein) and
a Company Conversion is not otherwise prohibited under any other provision of this Note, no later than three (3) Trading Days after
the applicable Certificated Shares Installment Date, the Company shall deliver to the Holder or its broker via reputable overnight
courier the Post-Installment Certificated Shares, less the Pre-Installment Certificated Shares previously delivered to the Holder,
by original share certificate, registered in the name of the Holder or its designee. So long as no Payment Default has occurred,
if the Pre-Installment Certificated Shares for the applicable Certificated Shares Installment Date exceed the Post-Installment
Certificated Shares, then the excess will be applied towards the next Conversion Shares to be issued by the Company (unless the
Outstanding Balance has been reduced to zero, in which case Holder will return such excess shares to the Company). If a Payment
Default has occurred and the Pre-Installment Certificated Shares for the applicable Certificated Shares Installment Date exceed
the Post-Installment Certificated Shares, then Holder shall not be required to return to the Company any of the excess shares or
apply such excess shares to any future issuance or conversion of shares hereunder.


 


8.5.       Deemed
Issuance. If the Company fails to deliver shares as required by any portion of this Section 8, in addition to such failure
to act being considered an Event of Default hereunder, for purposes of Section 7.1, the Company
shall also be deemed to have issued the Pre-Installment Conversion Shares, Post-Installment Conversion
Shares, Pre-Installment Certificated Shares, or Post-Installment Certificated Shares, as applicable, to Holder on the latest possible
permitted date pursuant to the terms set forth in this Section 8, with Holder entitled to all the rights and privileges
associated with such deemed issued shares (the “Deemed Installment Issuance”).


 


8.6.       Waiver
of Equity Conditions Failure. Notwithstanding anything in this Note to the Contrary, the Holder may waive in
writing any Equity Conditions Failure, except for the Non-Waivable Equity Conditions (defined below). For purposes of this
Section 8, “Non-Waivable Equity Conditions” refers to (A) the Equity Condition set forth in Section 27.19
(iv) (indicating that Holder may not own more than the Maximum Percentage set forth in Section 3.4 of this Note), and (B) the
Equity Condition set forth in Section 27.19 (v) (Common Stock may be issued without violating the rules of the Eligible
Market). Any such waiver shall only be made for the purposes of permitting a Company Conversion to occur under this Section 8
and shall not be deemed a waiver of the underlying default or a continuing waiver of a future Equity Conditions Failure. Any
such waiver shall not excuse the Company from the performance of any of its current or future obligations under this
Note.


 




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8.7.       Preparation
of Installment Notices. Because of the complexity of the calculations contemplated
under this Note, the Holder may, at its discretion, prepare the Pre-Installment Notice and/or the Installment Date Notice for the
benefit of the Company, including the calculation of Pre-Installment Conversion Shares, Post-Installment Conversion Shares, Pre-Installment
Certificated Shares, Post-Installment Certificated Shares; provided, however, that no error or mistake in the preparation
of such notices or information may be deemed a waiver of the Holder’s right to enforce the terms of this Note, even if such
error or mistake arises from the Holder’s own calculation. Nothing in this Section shall be deemed an obligation of the Holder
to prepare any such notices or information, or a waiver of any of its rights and remedies under this Note.


 


8.8.       Transfer
Fees. 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 Pre-Installment Conversion Shares, Post-Installment Conversion Shares, Pre-Installment Certificated Shares,
and Post-Installment Certificated Shares.


 


9.       NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined
in the Agreement), 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 non-assessable shares of Common Stock upon the conversion of this Note, and (iii) shall, so long as this
Note is outstanding, take all action necessary to maintain the Share Reserve (as defined in the Agreement).


 


10.       HOLDER’S
REDEMPTIONS. If the Holder has submitted to the Company an Event of Default Redemption Notice in accordance with Section
4.2(b), then the Company shall pay to the Holder in cash within ten (10) Trading Days after the Company’s receipt of
such Event of Default Redemption Notice an amount equal to the Default Redemption Amount multiplied by the Redemption Premium
(the “Event of Default Redemption Price”); provided, however, that the Redemption Premium may only
be applied in computing the Event of Default Redemption Price with respect to the first two Events of Default to occur under
this Note, and not to any subsequent Events of Default. If the Holder has submitted to Company a Fundamental Transaction
Redemption Notice in accordance with Section 5.2, then the Company shall pay to the Holder in cash prior to the consummation
of such Fundamental Transaction if such notice is received prior to the consummation of such Fundamental Transaction and
within ten (10) Trading Days after the Company’s receipt of such notice otherwise, an amount equal to the Fundamental
Transaction Redemption Amount multiplied by the Redemption Premium (the “Fundamental Transaction Redemption
Price”). Notwithstanding anything in this Note to the contrary, the failure of the Company to pay the Redemption
Price under this Section 10 shall not be considered a separate Event of Default hereunder. In the event that the Company does
not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to cancel the
Event of Default Redemption Notice or the Fundamental Transaction Redemption Notice, as applicable, by written notice to the
Company (the “Redemption Cancellation Notice”). Upon the Company’s receipt of a Redemption
Cancellation Notice, (x) the Outstanding Balance of this Note as of the date of the Redemption Notice shall be increased by
an amount equal to (1) the applicable Event of Default Redemption Price, or Fundamental Transaction Redemption Price (as
the case may be), minus (2) the principal portion of the Outstanding Balance submitted for redemption; (y) this Note shall
thereafter be due and payable upon demand, with payment of the Outstanding Balance being due ten (10) Trading Days after
written demand therefor from the Holder; and (z) the Conversion Price of this Note shall be automatically adjusted with
respect to each conversion under this Note effected thereafter by the Holder to the lowest of (A) 65% of the lowest Closing
Bid Price of the Common Stock during the period beginning on and including the date on which the applicable Redemption Notice
is delivered to the Company and ending on and including the date of the Redemption Cancellation Notice, (B) the Market Price
as of the date of the Redemption Cancellation Notice, (C) the then current Market Price, and (D) the then current Conversion
Price. The Holder’s delivery of a Redemption Cancellation 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
Redemption Cancellation Notice and shall not be deemed a waiver of any Event of Default identified in the applicable Event of
Default Redemption 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 and as expressly provided in this Note.


 


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


 


13.       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. 


 


14.       REISSUANCE
OF THIS NOTE.


 


14.1.       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 14.4), registered as the Holder may request,
representing the Outstanding Balance being transferred by the Holder and, if less than the entire Outstanding Balance is being
transferred, a new Note (in accordance with Section 14.4) to the Holder representing the
Outstanding Balance not being transferred.


 


14.2.       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 14.4) representing
the Outstanding Balance. 


 


14.3.       Note
Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder by delivery
to the principal office of the Company, for a new Note or Notes (in accordance with Section 14.4 and in principal amounts of
at least $1,000) representing in the aggregate the Outstanding Balance of this Note, and each such new Note will represent
such portion of such Outstanding Balance as is designated by the Holder at the time of such surrender. 


 


14.4.       Issuance
of New Notes. Subject to Section 10, 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 Outstanding Balance (or in the case of a new Note being issued pursuant to Section 14.1 or
Section 14.3, the portion of the Outstanding Balance designated by the Holder which, when added
to the outstanding balance represented by the other new Notes issued in connection with such issuance, does not exceed the Outstanding
Balance 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 and other increases to the Outstanding
Balance as permitted hereunder from the Issuance Date. 


 




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15.       REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies, including without limitation the Redemption
Premium, Prepayment Premium, and all other charges, fees, and collection costs provided for 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 (including, without limitation, compliance with Section 7).


 


16.       PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement
prior to commencing legal proceedings, 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.


 


17.       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 Issuance Date in such other Transaction Documents unless otherwise
consented to in writing by the Holder. 


 


18.       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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19.       DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Conversion Price, Default Conversion Price,
Pre-Installment Conversion Price, Conversion Rate, the Closing Bid Price, the Closing Sale Price, VWAP or fair market value
(as the case may be) or the arithmetic calculation of Conversion Shares 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) Trading 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 (including, without limitation, as to whether any issuance or sale or deemed issuance or sale was an issuance or
sale or deemed issuance or sale of Excluded Securities). If the Holder and the Company are unable to agree upon such
determination or calculation within two (2) Trading 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) Trading Days, submit via facsimile (a) the disputed determination of the Conversion Price, Default Conversion
Price, Pre-Installment Conversion Price, Conversion Rate, the Closing Bid Price, the Closing Sale Price, VWAP or fair market
value (as the case may be) to an independent, reputable investment bank selected by the Holder or (b) the
disputed arithmetic calculation of the Conversion Shares or any Redemption Price (as the case may be) to the Company’s
independent, outside accountant. 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) Trading 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 with respect to the
disputes set forth in this Section 19 (as the case may be) shall be binding upon all parties absent demonstrable
error. 


 


20.       NOTICES;
PAYMENTS.


 


20.1.       Notices.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with the subsection of the Agreement titled “Notices.” The Company shall provide the Holder
with prompt written notice as may be required hereunder, including without limitation the following actions (such notice to include
in reasonable detail a description of such action and the reason therefore): (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) Trading 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 all 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.


 


20.2.       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). 


 




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20.3.       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 wire transfer of immediately available funds
pursuant to wire transfer instructions delivered to Company by Holder from time to time. Whenever any amount expressed to be due
by the terms of this Note is due on any day which is not a Trading Day, the same shall instead be due on the next succeeding day
which is a Trading Day. Any amount due under the Transaction Documents which is not paid when due 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 twenty-two percent (22%)
per annum from the date such amount was due until the same is paid in full (“Late Charge”).


 


21.       CANCELLATION.
After repayment or conversion of the entire Outstanding Balance, this Note shall automatically be deemed canceled, shall be surrendered
to the Company for cancellation and shall not be reissued.


 


22.       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
Agreement.


 


23.       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 Utah, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of Utah. The Company hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in Salt Lake City 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. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
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. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Company or any of its Subsidiaries in any other jurisdiction to collect
on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. 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.


 


24.       SEVERABILITY.
If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties
or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor
in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with one or more valid provisions,
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).


 




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25.       FEES
AND CHARGES. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of this Note,
the Holder’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’
inability to predict future interest rates, the Holder’s increased risk, and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder, among other reasons. Accordingly, any fees, charges, and interest due under this
Note, including without limitation the Prepayment Premium and the Redemption Premium, are 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 a penalty, and shall not
be deemed in any way to limit any other right or remedy Holder may have hereunder, at law or in equity.


 


26.       UNCONDITIONAL
OBLIGATION. Subject to the terms of the Agreement, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the
coin or currency or where contemplated herein in shares of its Common Stock, as applicable, as herein prescribed. This Note is
the direct obligation of the Company and not subject to offsets, counterclaims, defenses, credits or deductions.


 


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



 


27.1.       “Affiliate”
means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person, it being understood for purposes of this definition that “control” of a Person means
the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.


 


27.2.       “Agreement”
means that certain Securities Purchase Agreement, dated as of January 23, 2013, as may be amended from time to time, by and between
the Company and the Holder, pursuant to which the Company issued this Note.


 


27.3.       “Approved
Stock Plan” means any stock option plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company.


 


27.4.       “Black
Scholes Consideration Value” means the value of the applicable Option or Convertible Security (as the case may be) as
of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function
on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading
Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such
Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of such Option or Convertible Security (as the case may be) as of the date of issuance
of such Option or Convertible Security (as the case may be), and (iii) an expected volatility equal to the greater of 100%
and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization
factor) as of the Trading Day immediately following the date of issuance of such Option or Convertible Security (as the case
may be).


 




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27.5.       “Bloomberg”
means Bloomberg, L.P. 


 


27.6.       “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 “OTC Pink” by Pink OTC Markets Inc. (formerly Pink Sheets LLC), and any successor thereto. 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 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 19


 


. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period.


 


27.7.       “Common
Stock” means (i) the Company’s shares of 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.


 


27.8.       “Contingent
Obligation” means as to any Person, any direct or indirect liability, contingent or otherwise, of that Person
with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect thereto.


 


27.9.       “Conversion
Shares” means shares of Common Stock issuable by the Company upon any conversion of this Note, including without
limitation, Section 3 Conversion Shares, Pre-Installment Conversion Shares, Post-Installment Conversion Shares, Pre-Installment
Certificated Shares, and Post-Installment Certificated Shares.


 


27.10.       “Convertible
Securities” means any stock, preferred stock, stock appreciation rights, phantom stock, equity related rights, equity
linked rights, 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.


 


27.11.       “Current
Subsidiary” means any Person in which the Company on the Issuance Date, directly or indirectly, (i) owns any of
the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any
part of the business, operations or administration of such Person, and all of the foregoing, collectively, “Current Subsidiaries.”


 




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27.12.       “Deemed
Issuance” means (i) a Deemed Conversion Issuance as defined in Section 3.3(b) hereof, (ii) a Deemed Warrant Issuance
as defined in Section 7.1(e) hereof, and (iii) a Deemed Installment Issuance as defined in Section
8.5 hereof.


 


27.13.       “Default
Conversion Price” means, with respect to a particular date of determination, the lower of (i) the Conversion Price then
in effect and (ii) the Market Price as of the specified Pre-Installment Notice Due Date or the Installment Date, as applicable.
All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination
or other similar transaction during any applicable Measuring Period.


 


27.14.       “DTC”
means the Depository Trust Company.


 


27.15.       “DTC/FAST
Program” means the DTC’s Fast Automated Securities Transfer Program.


 


27.16.       “DWAC”
means Deposit Withdrawal at Custodian as defined by the DTC.


 


27.17.       “DWAC
Eligible Conditions” means that (i) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational
Arrangements, including without limitation transfer through DTC’s DWAC system, (ii) the Company has been approved (without
revocation) by the DTC’s underwriting department, (iii) the Transfer Agent is approved as an agent in the DTC/FAST Program,
(iv) the Conversion Shares are otherwise eligible for delivery via DWAC, and (v) the Transfer Agent does not have a policy
prohibiting or limiting delivery of the Conversion Shares via DWAC.


 


27.18.       “Eligible
Market” means The New York Stock Exchange, NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the
Nasdaq Capital Market, the OTC Bulletin Board, the OTCQX or the OTCQB, or the Principal Market.
In no event shall quotations provided in OTC Pink by Pink OTC Markets Inc., or its successor, be considered an Eligible Market.


 


27.19.       “Equity
Conditions” means: (i) with respect to the applicable date of determination all of the Conversion Shares are
freely tradable under Rule 144 or without the need for registration under any applicable federal or state securities laws (in
each case, disregarding any limitation on conversion of this Note); (ii) on each day during the period beginning one
month prior to the applicable date of determination and ending on and including the applicable date of determination (the
“Equity Conditions Measuring Period”), the Common Stock 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) Trading Days and occurring prior to the applicable date of determination due to
business announcements by the Company); (iii) on each day during the Equity Conditions Measuring Period, the Company
shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in
Section 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 3.4 hereof (the Holder acknowledges that the
Company shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from
the Holder); (v) any shares of Common Stock to be issued in connection with the event requiring determination may be
issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or
designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public
announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be
expected to cause any of the Conversion Shares to not be freely tradable without the need for registration under any
applicable state securities laws (in each case, disregarding any limitation on conversion of this Note); (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, term, provision, covenant, representation or warranty of any Transaction Document;
(ix) without limiting clause (viii) above, 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; (x) all DWAC Eligible Conditions shall be satisfied as of each applicable Pre-Installment Notice Due Date and
Installment Date; (xi) on each Pre-Installment Notice Due Date and each Installment Date, the average and median daily dollar
volume of the Common Stock on its Principal Market for the previous twenty-three (23) Trading Days shall be greater than
$12,000.00; and (xii) the ten (10) day average VWAP of the Common Stock is greater than $0.05.


 




    	25



    	 



    

 


 


27.20.       “Equity
Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing
twenty three (23) Trading Days immediately prior to such date of determination and ending on such date of determination, the
Equity Conditions have not been satisfied (or waived in writing by the Holder). If an Equity Conditions
Failure is the result of an Event of Default, then the Equity Conditions Failure shall be deemed permanent and may not be cured
by the Company.


 


27.21.       “Excluded
Securities” means any shares of Common Stock, options, or convertible securities issued or issuable (i) in connection
with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuances pursuant
to such Approved Stock Plan are not amended, modified or changed on or after the Issuance Date; (ii) pursuant to that certain terms
sheet for a convertible promissory note in the original principal amount of $38,000 to be issued by the Company in favor of Howard
Holderness and convertible into Common Stock at a conversion price of $0.08 per share; and (iii) in connection with mergers, acquisitions,
strategic licensing arrangements, strategic business partnerships or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm’s-length basis, the purpose of which is not to raise additional capital; provided, that such
third parties are not granted any registration rights.  Notwithstanding the foregoing, any Common Stock issued or issuable
to raise capital for the Company or its Subsidiaries, directly or indirectly, in connection with any transaction contemplated by
clause (ii) above, including, without limitation, securities issued in one or more related transactions or that result in similar
economic consequences, shall not be deemed to be Excluded Securities.


 


27.22.       “Free
Trading” means that (i) the certificate representing the applicable shares of Common Stock has been cleared and approved
for public resale by the compliance departments of Holder’s brokerage firm and the clearing firm servicing such brokerage,
and (ii) such shares are held in the name of the clearing firm servicing Holder’s brokerage firm and have been deposited
into such clearing firm’s account for the benefit of Holder.


 


27.23.       “Fundamental
Transaction” means that (i) (1) the Company or any of its Subsidiaries shall, directly or indirectly, in one or
more related transactions, 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) the Company or any of its Significant Subsidiaries shall, directly or indirectly, in
one or more related transactions, 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) the Company or any of its Subsidiaries shall, directly
or indirectly, in one or more related transactions, 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) the Company or any of its Subsidiaries shall,
directly or indirectly, in one or more related transactions, 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 (5) the Company
or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify
the Common Stock, other than an increase in the number of authorized shares of the Company’s Common Stock, 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.


 




    	26



    	 



    

 


 


27.24.       “GAAP”
means United States generally accepted accounting principles, consistently applied. 


 


27.25.       “Indebtedness”
of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services, including, without limitation, “capital leases” in accordance
with GAAP (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations
with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property,
assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or
sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses
(i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (i) through (vii) above.


 


27.26.       “Installment
Amount” means the greater of (i) $28,125 ($225,000.00 ÷ 8), plus the sum of any accrued and unpaid Interest as
of the applicable Installment Date and accrued, and unpaid Late Charges, if any, under this Note as of the applicable Installment
Date, and any other amounts accruing or owing to Holder under this Note as of such Installment Date, and (ii) the then Outstanding
Balance divided by the number of Installment Dates remaining prior to the Maturity Date. In the event the Holder shall sell or
otherwise transfer any portion of this Note, the transferee shall be allocated a pro rata portion (based on the portion of this
Note transferred compared with the Outstanding Balance of this Note as of the transfer date) of each unpaid Installment Amount
hereunder. Notwithstanding any other provision contained herein, if any Installment Amount is greater than the then Outstanding
Balance of this Note, such Installment Amount shall be reduced to equal such then Outstanding Balance.


 




    	27



    	 



    

 


 


27.27.       “Installment
Date” means the Initial Installment Date and the same day on each of the calendar months following the Initial
Installment Date, regardless of the occurrence of any Event of Default (or the issuance of any Redemption Cancellation
Notice). If the Outstanding Balance is not paid or converted in full on the Maturity Date, then in addition to any remedies
available under the Transaction Documents, the Installment Dates will continue on the same day of each calendar month until
the Outstanding Balance is paid or converted in full (thus requiring the Company to continue to provide Pre-Installment
Notices to the Holder pursuant to Section 8 hereof). If the Initial Installment Date is on the 29th,
30th, or 31st of a calendar month, then Installment Dates for shorter subsequent calendar months shall
be deemed to be on the last day of such applicable calendar month.


 


27.28.       “Market
Price” means 65% of the arithmetic average of the three (3) lowest VWAPs of the shares of Common Stock during
the twenty (20) consecutive Trading Day period immediately preceding the date of such determination (the “Measuring Period”).
All such determinations are to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar
transaction during such Measuring Period.


 


27.29.       “Maturity
Date” shall mean the date that is fourteen (14) months after the Issuance Date.


 


27.30.       “New
Subsidiary” means, as of any date of determination, any Person in which the Company after the Issuance Date, directly
or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest
of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all
of the foregoing, collectively, “New Subsidiaries.” 


 


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



 


27.32.       “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.


 


27.33.       “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.


 


27.34.       “Post-Installment
Certificated Shares” means a number of shares of Common Stock equal to one (1) times the greater of (i) the Post-Installment
Conversion Shares calculated using the applicable Installment Date, and (ii) the Post-Installment Conversion Shares calculated
using the Certificated Shares Installment Date (as if such date were the designated Installment Date).


 


27.35.       “Post-Installment
Conversion Price” means, with respect to a particular date of determination, the lower of (i) the Conversion Price then
in effect and (ii) the Market Price for the applicable Installment Date. All such determinations to be appropriately adjusted for
any stock split, stock dividend, stock combination or other similar transaction during any applicable Measuring Period.


 


27.36.       “Post-Installment
Conversion Shares” means that number of shares of Common Stock that would be required to be delivered pursuant to
Section 8 on an applicable Installment Date without taking into account the delivery of any Pre-Installment Conversion
Shares. The Post-Installment Conversion Shares are equal to the quotient of (i) the Company Conversion Amount divided by
(ii) the Post-Installment Conversion Price as of the applicable Installment Date.


 




    	28



    	 



    

 


 


27.37.       “Pre-Installment
Certificated Shares” means the number of shares of Common Stock to be delivered pursuant to Section 8.4(a). The Pre-Installment
Certificated Shares are equal to two (2) times the number of Pre-Installment Conversion Shares that would otherwise be required
to be delivered to the Holder pursuant to Section 8.2(a) under the applicable Pre-Installment Notice.


 


27.38.       “Pre-Installment
Conversion Price” means, with respect to a particular date of determination, the lower of (i) the Conversion Price
then in effect and (ii) the Market Price for the applicable Pre-Installment Notice Due Date. All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination or other similar
transaction during any applicable Measuring Period. 


 


27.39.       “Pre-Installment
Conversion Shares” means the number of shares of Common Stock to be delivered pursuant to Section 8.1. The Pre-Installment
Conversion Shares are equal to the quotient of (i) the Company Conversion Amount divided by (ii) the Pre-Installment Conversion
Price as of the applicable Pre-Installment Notice Due Date.


 


27.40.       “Principal
Market” means the OTCQB.


 


27.41.       “Redemption
Notices” means, collectively, Event of Default Redemption Notices and Fundamental Transaction Redemption Notices, and
each of the foregoing, individually, a “Redemption Notice.”


 


27.42.       “Redemption
Premium” means 135%. 


 


27.43.       “Redemption
Price” means either the Event of Default Redemption Price or the Fundamental Transaction Redemption Price, as the context
requires or permits.


 


27.44.       “SEC”
means the United States Securities and Exchange Commission or the successor thereto. 


 


27.45.       “Significant
Subsidiaries” means, as of any date of determination, collectively, all Subsidiaries that would constitute a “significant
subsidiary” under Rule 1-02 of Regulation S-X promulgated by the SEC, and each of the foregoing, individually,
a “Significant Subsidiary.”


 


27.46.       “Subsidiaries”
means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing,
individually, a “Subsidiary.”


 


27.47.       “Successor
Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction
or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly
traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor
Entity shall mean such Person's Parent Entity. 


 


27.48.       
“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. 


 




    	29



    	 



    

 


 


27.49.       “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).


 


27.50.       “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 “Volume at Price” 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 “OTC Pink” by Pink OTC Markets Inc. (formerly Pink Sheets LLC), and any successor thereto. If the 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 19.
All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.


 


28.       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) Trading 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.


 


29.       MAXIMUM
PAYMENTS. Nothing contained in this Note shall, or 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 under this Note exceeds 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. 


 


[Remainder of page intentionally left
blank]


 




    	30



    	 



    

 


 


 


 


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


 


 


 





 


	 	THE COMPANY:
	 	 
	 	Applied Nanotech Holdings, Inc.
	 	 
	 	 
	 	By: _________________________
	 	Name: _______________________
	 	Title: ________________________


 


 


ACKNOWLEDGED, ACCEPTED AND AGREED:





 


Tonaquint, Inc.





 


By: _________________________





John M. Fife, President


 


 


 


 


 


 


 


[Signature page
to Convertible Promissory Note]


 




    	31



    	 



    

 


 


EXHIBIT A


 


Tonaquint,
Inc.





303 East Wacker Drive, Suite 1200





Chicago, Illinois 60601


 





 


 


	Applied Nanotech Holdings, Inc.	Date: ______________________
	Attn: Doug Baker	 
	3006 Longhorn Boulevard, Suite 107	 
	Austin, Texas 78758	 


 


 


CONVERSION NOTICE 


 


       The
above-captioned Holder hereby gives notice to Applied Nanotech Holdings, Inc., a Texas corporation (the “Company”),
pursuant to that certain Convertible Promissory Note made by the Company in favor of the Holder on January 23, 2013 (the “Note”),
that the Holder elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of
Common Stock of the Company as of the date of conversion specified below. Said conversion shall be based on the Conversion Price
set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of the Holder in its sole discretion, the Holder may provide a new form of Conversion Notice to conform to the
Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.


 


 


A.       Date
of conversion:       ____________ 


B.       Conversion
#:                 ____________ 


C.       Conversion
Amount:       ____________ 


D.       Conversion
Price: _______________ 


E.       Section
3 Conversion Shares: _______________ (C divided by D)





F.       Remaining
Outstanding Balance of Note: ____________*


 


* Subject to adjustments for corrections
and defaults, and other adjustments permitted by the Transaction Documents (as defined in the Agreement).


 


□
If this box is checked, the Section 3 Conversion Shares set forth above shall reduce the Transfer Agent Reserve (as defined
in the Agreement) in accordance with Section 5.2(bb)(iii) of the Agreement.


 


Please transfer the Section 3 Conversion
Shares electronically (via DWAC) to the following account:





 


	Broker: _____________	Address:
	DTC#: ______________	___________________
	Account #: ___________	___________________
	Account Name:__________	___________________


 


 


To the extent the
Section 3 Conversion Shares are not able to be delivered to the Holder electronically via the DWAC system, please add additional
certificated Common Stock equal to five percent (5%) of the number of Section 3 Conversion Shares so converted (per Section 3.3(a)
of the Note), and deliver all such certificated shares to the Holder via reputable overnight courier after receipt of this Conversion
Notice (by facsimile transmission or otherwise) to:


   


              _____________________________________


 


              _____________________________________


 


              _____________________________________


 


 


Sincerely, 


 


Holder:     Tonaquint,
Inc.


 


 


By: _________________________





John M. Fife, President


 


 


 




    	 



    	 



    

EXHIBIT B

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 Irrevocable Instructions to Transfer Agent dated January 23, 2013 from the Company and acknowledged
and agreed to by ___________________.


 


	 
	
        Applied Nanotech Holdings,
        Inc.

        

         

	By: ________________________
	Name: ______________________
	Title: _______________________


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




    	 



    	 



    

EXHIBIT C-1 


 


Applied Nanotech Holdings, Inc.





3006 Longhorn Boulevard, Suite 107





Austin, Texas 78758


 





 


	Tonaquint, Inc.	Date: ___________
	Attn: John Fife	 
	303 E. Wacker Dr., Suite 1200	 
	Chicago, IL 60657	 


 


PRE-INSTALLMENT NOTICE


 


The above-captioned Company hereby gives
notice to Tonaquint, Inc., a Utah corporation (the “Holder”), pursuant to that certain Convertible Promissory
Note made by the Company in favor of the Holder on January 23, 2013 (the “Note”), of certain Company elections
and certifications related to payment of the Installment Amount of $_________________ due on ___________, 201_ (the “Installment
Date”). In the event of a conflict between this Pre-Installment Notice and the Note, the Note shall govern, or, in the
alternative, at the election of the Holder in its sole discretion, the Holder may provide a new form of Pre-Installment Notice
to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.


 


PRE-INSTALLMENT ELECTIONS AND CERTIFICATIONS 


AS OF THE PRE-INSTALLMENT NOTICE DUE
DATE


 


 


 


A.       COMPANY
ELECTIONS


 


The Company elects to pay the Installment
Amount as follows (check one):


 


	______(i)	Redeeming the Installment Amount in cash in accordance with Section 8 of the Note (“Company Redemption”) (if selected, no other sections of this Notice need to be completed)
	______(ii)	Converting the Installment Amount in accordance with Section 8 of the Note (“Company Conversion”) (if selected, complete Section B(1) and Section (C) of this Notice)
	______(iii)	Combination of Company Redemption and Company Conversion (if selected, complete Section B(2) and Section (C) of this Notice)


 


B.       COMPANY
CONVERSION (if applicable)


 


1.       Company
Conversion:


 


A.       Pre-Installment
Notice Due Date: ____________, 201_





B.       Company
Conversion Amount:        _____________





C.       Pre-Installment
Conversion Price: _______________ (lower of (i) Conversion Price in effect and (ii) Market Price as of Pre-Installment Notice Due
Date)





D.       Pre-Installment
Conversion Shares: _______________ (B divided by C)





E.       Excess
shares to be applied from previous installment (if any): _____________





F.       Installment
shares to be delivered: ________________ (D minus E)





G.       Remaining
Outstanding Balance of Note: ____________ *


 




    	 



    	 



    

 


 


2.       Combination
of Company Redemption and Company Conversion (if elected above):


 


A.       Pre-Installment
Notice Due Date: ____________, 201_





B.       Installment
Amount:        ____________





C.       Company
Redemption Amount: _____________





D.       Company
Conversion Amount: _____________ (B minus C)





E.       Pre-Installment
Conversion Price: _______________ (lower of (i) Conversion Price in effect and (ii) Market Price as of Pre-Installment Notice Due
Date)





F.       Pre-Installment
Conversion Shares: _______________ (D divided by E)





G.       Excess
shares to be applied from previous installment (if any): _____________





H.       Installment
shares to be delivered: ________________ (F minus G)





I.       Remaining
Outstanding Balance of Note: ____________ *


 


* Subject to adjustments for corrections
and defaults, and other adjustments permitted by the Transaction Documents (as defined in the Agreement).


 


□
If this box is checked, the installment shares to be delivered set forth above shall reduce the Transfer Agent Reserve (as defined
in the Agreement) in accordance with Section 5.2(bb)(iii) of the Agreement.


  


 


C.       EQUITY
CONDITIONS CERTIFICATION (if applicable)


 


	1.		Market Capitalization of the Common Stock:________________



 


(Check One)


 


	2.		_________The Company herby certifies that no Equity Conditions Failure exists as of
the Pre-Installment Notice Due Date.



 


	3.		_________The Company hereby gives notice that an Equity Conditions Failure has occurred
and requests a waiver from the Holder with respect thereto. The Equity Conditions Failure is as follows:



 





 



 


 



 





 






 


 


Sincerely,


 


Company: Applied Nanotech Holdings, Inc.


 


 


 


By: ___________________________________


 


       Name: ______________________________


 


Title: _______________________________


 






    	32



    	 



    





 


EXHIBIT C-2


  


 


Applied Nanotech Holdings, Inc. 


3006 Longhorn Boulevard, Suite 107





Austin, Texas 78758


 





 


	Tonaquint, Inc.	Date: _________________
	Attn: John Fife	 
	303 E. Wacker Dr., Suite 1200	 
	Chicago, IL 60657	 


 


INSTALLMENT DATE NOTICE


 


The above-captioned Company hereby gives
notice to Tonaquint, Inc., a Utah corporation (the “Holder”), pursuant to that certain Convertible Promissory
Note made by the Company in favor of the Holder on January 23, 2013 (the “Note”), of Post-Installment Conversion
Shares and Equity Conditions Certifications related to _____________, 201_ (the “Installment Date”). In the
event of a conflict between this Installment Date Notice and the Note, the Note shall govern, or, in the alternative, at the election
of the Holder in its sole discretion, the Holder may provide a new form of Installment Date Notice to conform to the Note. Capitalized
terms used in this notice without definition shall have the meanings given to them in the Note.


 


POST-INSTALLMENT CONVERSION SHARES
AND CERTIFICATIONS





AS OF THE INSTALLMENT DATE


 


 


 


1.       POST-INSTALLMENT
CONVERSION SHARES


 


	A.		Pre-Installment Notice Due Date: ____________, 201_



 


	B.		Company Conversion Amount:        _____________



 


	C.		Post-Installment Conversion Price: _______________ (lower of (i) Conversion Price
in effect and (ii) Market Price as of Installment Date)



 


	D.		Post-Installment Conversion Shares: _______________ (B divided by C)



 


	E.		Pre-Installment Conversion Shares delivered: ________________



 


	F.		Post-Installment Conversion Shares to be delivered: ________________ (only applicable
if D minus E is greater than zero)



 


	G.		Pre-Installment Conversion Shares to be applied to next installment or returned:_________________
(only applicable if D minus E is less than zero and no Payment Default has occurred)



 


	H.		Pre-Installment Conversion Shares to be retained by the Holder because of a Payment
Default: _________________ (only applicable if D minus E is less than zero and a Payment Default has occurred)



 




    	33



    	 



    

 


 


 


 


□
If this box is checked, the Post-Installment Shares Conversion Shares to be delivered set forth above shall reduce the Transfer
Agent Reserve (as defined in the Agreement) in accordance with Section 5.2(bb)(iii) of the Agreement.


 


The Transfer Agent Reserve shall automatically
be increased by any Pre-Installment Conversion Shares that previously reduced the Transfer Agent Reserve and that are subsequently
returned to the Company.


 


 


 


2.       EQUITY
CONDITIONS CERTIFICATION


 


	A.		Market Capitalization of the Common Stock:________________



 


(Check One)


 


	B.		_________The Company herby certifies that no Equity Conditions Failure exists as of
the applicable Installment Date.



 


	C.		_________The Company hereby gives notice that an Equity Conditions Failure has occurred
and requests a waiver from the Holder with respect thereto. The Equity Conditions Failure is as follows:



 





 


 


Sincerely,


 


Company: Applied Nanotech Holdings, Inc.


 


 


 


By: ___________________________________


 


       Name: _____________________________


 


       Title: ______________________________