Exhibit 10.2


 


EXECUTION VERSION


 


Workhorse
Group Inc.


 


Senior Secured Convertible Note due 2023


 


Certificate No. A-1


 


Workhorse Group Inc.,
a Nevada corporation (the “Company”), for value received, promises to pay to HT Investments MA, LLC (the “Initial
Holder”), or its registered assigns, one hundred and ten percent (110%) of the principal sum of seventy million dollars
($70,000,000) (such principal sum, the “Principal Amount,” and 110% of such Principal Amount, the “Maturity
Principal Amount”) on July 1, 2023, and to pay interest thereon, as provided in this Note, in each case as provided in
and subject to the other provisions of this Note, including the earlier redemption, repurchase or conversion of this Note.


 


Additional provisions
of this Note are set forth on the other side of this Note.


 


[The Remainder of This Page Intentionally
Left Blank; Signature Page Follows]


 




     


     


    

 


IN WITNESS WHEREOF,
Workhorse Group Inc. has caused this instrument to be duly executed as of the date set forth below.


 


	 	Workhorse Group Inc.
	 	 
	Date: July 16,
2020	By:	 
	 	 	Name: Duane A. Hughes
	 	 	Title: Chief Executive Officer


 


[Signature Page to Senior Secured Convertible Note due 2023,
Certificate No. A-1]


 




     


     


    

 


Workhorse
Group Inc.


 


Senior Secured Convertible Note due 2023


 


This Note (this “Note”
and, collectively with any Note issued in exchange therefor or in substitution thereof, the “Notes”) is issued
by Workhorse Group Inc., a Nevada corporation (the “Company”), and designated as its “Senior Secured
Convertible Notes due 2023.”


 


Section
1. Definitions.


 


“Affiliate”
has the meaning set forth in Rule 144 under the Securities Act.


 


"Attribution
Parties" means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder
funds or managed accounts, currently, or from time to time after the Issue Date, directly or indirectly managed or advised by the
Holder's investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any
of the foregoing, (iii) any Person acting or who could be deemed to be acting as a “group” (within the meaning of Section
13(d)(3) of the Exchange Act) together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership
of the Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for purposes of Section 13(d)
of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage.


 


“Authorized
Denomination” means, with respect to the Notes, a Principal Amount thereof equal to $1,000 or any integral multiple of
$1,000 in excess thereof.


 


“Bankruptcy
Law” means Title 11, United States Code, or any similar U.S. federal or state or non-U.S. law for the relief of debtors.


 


“Board of
Directors” means the board of directors of the Company or a committee of such board duly authorized to act on behalf
of such board.


 


“Business
Combination Event” has the meaning set forth in Section 10.


 


“Business
Day” means any day other than a Saturday, a Sunday or any day on which commercial banks in The City of New York are authorized
or required by law or executive order to close or be closed; provided, however, for clarification,
commercial banks in The City of New York shall not be deemed to be authorized or required by law or executive order to close or
be closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other
similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so
long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are open
for use by customers on such day.


 


“Capital Lease”
means, with respect to any Person, any leasing or similar arrangement conveying the right to use any property, whether real or
personal property, or a combination thereof, by that Person as lessee that, in conformity with GAAP, is required to be accounted
for as a capital lease on the balance sheet of such Person.


 






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“Capital Lease
Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a Capital Lease
that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which
such lease may be prepaid by the lessee without payment of a penalty.


 


“Capital Stock”
of any Person means any and all shares of, interests in, rights to purchase, warrants or options for, participations in, or other
equivalents of, in each case however designated, the equity of such Person, but excluding any debt securities convertible into
such equity.


 


 “Cash” means all
cash and liquid funds. 


 


 “Cash Equivalents”
means, as of any date of determination, any of the following: (A) marketable securities (i) issued or directly and unconditionally
guaranteed as to interest and principal by the United States Government, or (ii) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United States, in each case maturing within one (1) year after
such date; (B) marketable direct obligations issued by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof, in each case maturing within one (1) year after such date and having, at
the time of the acquisition thereof, a rating of at least A-1 from Standard & Poor’s Corporation or at least P-1 from
Moody’s Investors Service; (C) commercial paper maturing no more than one (1) year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from Standard & Poor’s Corporation or at least
P-1 from Moody’s Investors Service; (D) certificates of deposit or bankers’ acceptances maturing within one (1) year
after such date and issued or accepted by any commercial bank organized under the laws of the United States of America or any State
thereof or the District of Columbia that (i) is at least “adequately capitalized” (as defined in the regulations of
its primary federal banking regulator), and (ii) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000;
and (E) shares of any money market mutual fund that (i) has substantially all of its assets invested continuously in the types
of investments referred to in clauses (A) and (B) above, (ii) has net assets of not less than $500,000,000, and (iii) has the highest
rating obtainable from either Standard & Poor’s Corporation or Moody’s Investors Service. 


 


“Close of
Business” means 5:00 p.m., New York City time.


 


“Collateral”
has the meaning set forth in the Security Agreement.


 


“Collateral
Agent” means HT Investments MA, LLC in its capacity as collateral agent for the Holder and each Other Holder, together
with any successor thereto in such capacity.


 


“Commission”
means the U.S. Securities and Exchange Commission.


 


“Common Stock”
means the common stock, $0.001 par value per share, of the Company, subject to Section 8(J).


 






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“Common Stock
Change Event” has the meaning set forth in Section 8(J).


 


“Company Redemption
Base Price” means, with respect to a redemption of this Note pursuant to Section 7(A), a cash amount equal to
the greater of (A) one hundred and five percent (105%) of the portion of the then outstanding Maturity Principal Amount of such
Note elected to be redeemed by the Company; and (B) one hundred and fifteen percent (115%) of the product of (i) the Conversion
Rate in effect as of the Trading Day immediately preceding the related Company Redemption Date; (ii) the Principal Amount of this
Note to be so redeemed divided by $1,000; and (iii) the Company Redemption Stock Price for such redemption.


 


“Company Redemption
Date” has the meaning set forth in Section 7(A).


 


“Company Redemption
Excess Amount” means, with respect to a redemption of this Note pursuant to Section 7(A), a cash amount equal
to (A) one hundred and fifteen percent (115%) of the product of (i) the Conversion Rate in effect as of the Trading Day immediately
preceding the related Company Redemption Date; (ii) the Principal Amount of this Note to be so redeemed divided by $1,000; and
(iii) the Company Redemption Stock Price for such redemption; minus (B) the Maturity Principal Amount of such Note; provided,
that such Company Redemption Excess Amount shall not be less than zero.


 


“Company Redemption
Price” means the cash price payable by the Company to redeem this Note pursuant to Section 7(A)(ii).


 


“Company Redemption
Stock Price” means, with respect to any redemption of this Note, the highest Daily VWAP per share of Common Stock occurring
during the thirty (30) consecutive days ending on, and including, the day immediately before the related Company Redemption Date.


 


 “Contingent Obligation”
means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (A)
any Indebtedness or other obligations of another Person, including any such obligation directly or indirectly guaranteed, endorsed,
co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly
liable; (B) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the
account of that Person; and (C) all obligations arising under any interest rate, currency or commodity swap agreement, interest
rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation
in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation”
shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations
under the guarantee or other support arrangement 


 


“Conversion
Consideration” has the meaning set forth in Section 8(D)(i).


 






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“Conversion
Date” means, with respect to a Note, the first Business Day on which the requirements set forth in Section 8(C)(i)
to convert such Note are satisfied.


 


“Conversion
Price” means, as of any time, an amount equal to (A) one thousand dollars ($1,000) divided by (B) the Conversion
Rate in effect at such time.


 


“Conversion
Rate” initially means 52.6316 shares of Common Stock per $1,000 Principal Amount of Notes; provided, however,
that the Conversion Rate is subject to adjustment pursuant to Section 8; provided, further, that whenever
this Note refers to the Conversion Rate as of a particular date without setting forth a particular time on such date, such reference
will be deemed to be to the Conversion Rate immediately after the Close of Business on such date.


 


“Copyright
License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or
hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest.


 


“Copyrights”
means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or
of any other country.


 


“Covering
Price” has the meaning set forth in Section 8(D)(vi)(1).


 


“Certus”
has the meaning set forth in the definition of “Permitted Investments”.


 


“Daily VWAP”
means, for any VWAP Trading Day, the per share volume-weighted average price of the Common Stock as displayed under the heading
“Bloomberg VWAP” on Bloomberg page “WKHS <EQUITY> VAP” (or, if such page is not available, its equivalent
successor page) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary
trading session on such VWAP Trading Day (or, if such volume-weighted average price is unavailable, the market value of one share
of Common Stock on such VWAP Trading Day, determined, using a volume-weighted average price method, by a nationally recognized
independent investment banking firm selected by the Company). The Daily VWAP will be determined without regard to after-hours trading
or any other trading outside of the regular trading session.


 


“Default”
means any event that is (or, after notice, passage of time or both, would be) an Event of Default.


 


“Default Interest”
has the meaning set forth in Section 4(B).


 


“Defaulted
Amount” has the meaning set forth in Section 4(B).


 


“Defaulted
Shares” has the meaning set forth in Section 8(D)(vi).


 






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“Disqualified
Stock” means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:


 


(A) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise;


 


(B) is convertible
or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option
of the issuer or a Subsidiary; provided that any such conversion or exchange will be deemed an incurrence of Indebtedness or Disqualified
Stock, as applicable); or


 


(C) is redeemable at
the option of the holder thereof, in whole or in part,


 


in the case of each of clauses (A), (B)
and (C), at any point prior to the one hundred eighty-first (181st) day after the Maturity Date. 


 


“DTC”
means The Depository Trust Company.


 


“Early Redemption
Date” means, with respect to a Note, (A) the first calendar day of each month beginning on October 1, 2020; and (B) if
not otherwise included in clause (A), the Maturity Date.


 


“Early Redemption
Payment” means three million eight hundred fifty thousand dollars ($3,850,000) on each such Early Redemption Date; provided,
that the Holder and the Company may agree to increase the size of any Early Redemption Payment by mutual written consent; and provided
further, that in no event shall the amount of any Early Redemption Payment exceed one hundred and ten percent (110%) of the
portion of the Principal Amount being redeemed as of such Early Redemption Date.


 


“Early Redemption
Stock Payment Date” has the meaning set forth in Section 5(C).


 


“Early Redemption
Stock Payment Notice” has the meaning set forth in Section 5(C).


 


“Early Redemption
Stock Payment Period” has the meaning set forth in Section 5(C).


 


“Eligible
Exchange” means any of The New York Stock Exchange, The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq
Global Select Market (or any of their respective successors).


 


 “Equipment” means
all “equipment” as defined in the UCC with such additions to such term as may hereafter be made, and includes
without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of
the foregoing. 


 






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“Equity Conditions”
will be deemed to be satisfied as of any date if all of the following conditions are satisfied as of such date and on each of the
twenty (20) previous Trading Days: (A) the shares issuable upon conversion of this Note are Freely Tradable; (B) the Holder is
not in possession of any material non-public information provided by or on behalf of the Company; (C) the issuance of such shares
will not be limited by Section 8(K); (D) the Company is in compliance with Section 8(E)(i) and such shares will satisfy
Section 8(E)(ii); (E) no public announcement of a pending, proposed or intended Fundamental Change has occurred that has
not been abandoned, terminated or consummated; (F) the Daily VWAP per share of Common Stock is not less than $4.00 (subject to
proportionate adjustments for events of the type set forth in Section 8(G)(i)(1)); (G) the daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the applicable Eligible Exchange is not less than one million five hundred thousand
dollars ($1,500,000) ; and (H) no Default or Event of Default will have occurred or be continuing.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.


 


“Event of
Default” has the meaning set forth in Section 11(A).


 


“Event of
Default Acceleration Amount” means, with respect to the delivery of a notice pursuant to Section 11(B)(ii) declaring
this Note to be due and payable immediately on account of an Event of Default, a cash amount equal to the greater of (A) one hundred
percent (100%) of the then outstanding Maturity Principal Amount of this Note plus accrued and unpaid interest; and (B) one hundred
and fifteen percent (115%) of the product of (i) the Conversion Rate in effect as of the Trading Day immediately preceding the
date such notice is so delivered; (ii) the total then outstanding Principal Amount (expressed in thousands) of this Note plus accrued
and unpaid interest; and (iii) the greater of (x) the highest Daily VWAP per share of Common Stock occurring during the thirty
(30) consecutive VWAP Trading Days ending on, and including, the VWAP Trading Day immediately before the date such notice is so
delivered and (y) the highest Daily VWAP per share of Common Stock occurring during the thirty (30) consecutive VWAP Trading Days
ending on, and including, the VWAP Trading Day immediately before the date the applicable Event of Default occurred.


 


“Event of
Default Additional Shares” means, with respect to the conversion of this Note (or any portion of this Note), an amount
equal to the excess, if any, of (A) the Event of Default Conversion Rate applicable to such conversion over (B) the Conversion
Rate that would otherwise apply to such conversion without giving effect to Section 8(I). For the avoidance of doubt, the
Event of Default Additional Shares cannot be a negative number.


 


“Event of
Default Conversion Period” means, with respect to an Event of Default, the period beginning on, and including, the date
such Event of Default occurs and ending on later of (A) the twentieth (20th) Trading Day after the Holder’s receipt of an
Event of Default Notice and (B) five (5) Trading Days after the date the Holder receives notice from the Company that such Event
of Default has been cured.


 


“Event of
Default Conversion Price” means, with respect to the conversion of this Note (or any portion of this Note), the greater
of (i) the Floor Price and (ii) the lesser of (A) the Conversion Price that would be in effect immediately after the Close of Business
on the Conversion Date for such conversion, without giving effect to Section 8(I); and (B) seventy five percent (75%) of
the lowest Daily VWAP per share of Common Stock during the ten (10) consecutive VWAP Trading Days ending on, and including, such
Conversion Date (or, if such Conversion Date is not a VWAP Trading Day, the immediately preceding VWAP Trading Day).


 






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“Event of
Default Conversion Rate” means, with respect to the conversion of this Note (or any portion of this Note), an amount
(rounded to the nearest 1/10,000th of a share of Common Stock (with 5/100,000ths rounded upward)) equal to (A) one thousand dollars
($1,000) divided by (B) the Event of Default Conversion Price applicable to such conversion.


 


“Event of
Default Notice” has the meaning set forth in Section 11(C).


 


“Ex-Dividend
Date” means, with respect to an issuance, dividend or distribution on the Common Stock, the first date on which shares
of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance,
dividend or distribution (including pursuant to due bills or similar arrangements required by the relevant stock exchange). For
the avoidance of doubt, any alternative trading convention on the applicable exchange or market in respect of the Common Stock
under a separate ticker symbol or CUSIP number will not be considered “regular way” for this purpose.


 


“Excess Shares”
has the meaning set forth in Section 8(K)(i).


 


“Exchange
Act” means the U.S. Securities Exchange Act of 1934, as amended.


 


“Expiration
Date” has the meaning set forth in Section 8(G)(i)(5).


 


“Expiration
Time” has the meaning set forth in Section 8(G)(i)(5).


 


“Floor Price”
means $1.00.


 


“Forced Conversion”
means the conversion of this Note pursuant to Section 8(G).


 


“Freely Tradable”
means, with respect to any shares of Common Stock issued or issuable upon conversion of this Note, that (A) such shares would be
eligible to be offered, sold or otherwise transferred by the Holder pursuant to Rule 144, without any requirements as to volume,
manner of sale, availability of current public information (whether or not then satisfied) or notice under the Securities Act and
without any requirement for registration under any state securities or “blue sky” laws; or (B) such shares are (or,
when issued, will be) (i) represented by book-entries at DTC and identified therein by an “unrestricted” CUSIP number;
(ii) not represented by any certificate that bears a legend referring to transfer restrictions under the Securities Act or other
securities laws; and (iii) listed and admitted for trading, without suspension or material limitation on trading, on an Eligible
Exchange; and (C) no delisting or suspension by such Eligible Exchange has been threatened (with a reasonable prospect of delisting
occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or
pending as evidenced by (x) a writing by such Eligible Exchange or (y) the Company falling below the minimum listing maintenance
requirements of such Eligible Exchange.


 






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“Fundamental
Change” means any of the following events:


 


(A) a
“person” or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than the Company
or its Wholly Owned Subsidiaries, or the employee benefit plans of the Company or its Wholly Owned Subsidiaries, files any report
with the Commission indicating that such person or group has become the direct or indirect “beneficial owner” (as defined
below) of shares of the Company’s common equity representing more than fifty percent (50%) of the voting power of all of
the Company’s then-outstanding common equity;


 


(B) the
consummation of (i) any sale, lease or other transfer, in one transaction or a series of transactions, of all or substantially
all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person (other than solely to one or more of the
Company’s Wholly Owned Subsidiaries); or (ii) any transaction or series of related transactions in connection with which
(whether by means of merger, consolidation, share exchange, combination, reclassification, recapitalization, acquisition, liquidation
or otherwise) all of the Common Stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive,
other securities, cash or other property (other than a subdivision or combination, or solely a change in par value, of the Common
Stock); provided, however, that any merger, consolidation, share exchange or combination of the Company pursuant
to which the Persons that directly or indirectly “beneficially owned” (as defined below) all classes of the Company’s
common equity immediately before such transaction directly or indirectly “beneficially own,” immediately after such
transaction, more than fifty percent (50%) of all classes of common equity of the surviving, continuing or acquiring company or
other transferee, as applicable, or the parent thereof, in substantially the same proportions vis-à-vis each other as immediately
before such transaction will be deemed not to be a Fundamental Change pursuant to this clause (B);


 


(C) the
Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company; or


 


(D) the
Common Stock ceases to be listed on any Eligible Exchange.


 


For the purposes of
this definition, (x) any transaction or event described in both clause (A) and in clause (B)(i) or (ii) above
(without regard to the proviso in clause (B)) will be deemed to occur solely pursuant to clause (B) above (subject
to such proviso); and (y) whether a Person is a “beneficial owner” and whether shares are “beneficially
owned” will be determined in accordance with Rule 13d-3 under the Exchange Act.


 


“Fundamental
Change Redemption Date” means the date designated by the Holder for redemption of this Note in connection with a Fundamental
Change, as provided in Section 6(F).


 


“Fundamental
Change Base Repurchase Price” means, with respect to this Note (or any portion of this Note to be repurchased) upon a
Repurchase Upon Fundamental Change, a cash amount equal to the greater of (x) one hundred percent (100%) of the Maturity Principal
Amount of such Note (or portion thereof) to be so repurchased; and (y) one hundred and fifteen percent (115%) of the product of
(A) the Conversion Rate in effect as of the Trading Day immediately preceding the effective date of such Fundamental Change; (B)
the Principal Amount of this Note to be repurchased upon a Repurchase Upon Fundamental Change divided by $1,000; and (C) the Fundamental
Change Stock Price for such Fundamental Change.


 






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“Fundamental
Change Notice” has the meaning set forth in Section 6(C).


 


“Fundamental
Change Repurchase Date” means the date as of which this Note must be repurchased for cash in connection with a Fundamental
Change, as provided in Section 6(B).


 


“Fundamental
Change Repurchase Price” means the cash price payable by the Company to repurchase this Note (or any portion of this
Note) upon its Repurchase Upon Fundamental Change, calculated pursuant to Section 6(D).


 


“Fundamental
Change Stock Price” means, with respect to any Fundamental Change, the highest Daily VWAP per share of Common Stock occurring
during the thirty (30) consecutive days ending on, and including, the day immediately before the effective date of such Fundamental
Change.


 


 “GAAP” means generally
accepted accounting principles in the United States of America, as in effect from time to time; provided the definitions set forth
in this Note and any financial calculations required by thereby shall be computed to exclude any change to lease accounting rules
from those in effect pursuant to Financial Accounting Standards Board Accounting Standards Codification 840 (Leases) and other
related lease accounting guidance as in effect on the date hereof. 


 


“Holder”
means the person in whose name this Note is registered on the books of the Company, which initially is the Initial Holder.


 


The term “including”
means “including without limitation,” unless the context provides otherwise.


 


“Indebtedness”
means, indebtedness of any kind, including, without duplication (A) all indebtedness for borrowed money or the deferred purchase
price of property or services (excluding trade credit entered into in the ordinary course of business due within ninety (90) days),
including reimbursement and other obligations with respect to surety bonds and letters of credit, (B) all obligations evidenced
by notes, bonds, debentures or similar instruments, (C) all Capital Lease Obligations, (D) all Contingent Obligations, and (E)
Disqualified Stock.


 


“Independent
Investigator” has the meaning set forth in Section 9(Q).


 


“Initial Holder”
has the meaning set forth in the cover page of this Note.


 


“Interest
Payment Date” means, with respect to a Note, (A) each January 1, April 1, July 1 and October 1 of each calendar year,
beginning on October 1, 2020; and (B) if not otherwise included in clause (A), the Maturity Date.


 


 “Intellectual Property”
means all of the Company’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; mask works; the Company’s
applications therefor and reissues, extensions, or renewals thereof; and the Company’s goodwill associated with any of the
foregoing, together with the Company’s rights to sue for past, present and future infringement of Intellectual Property and
the goodwill associated therewith. 


 






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“Investment”
means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any
loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person
or the purchase of any assets of another Person for greater than the fair market value of such assets to solely the extent of the
amount in excess of the fair market value.


 


“Issue Date”
means July 16, 2020.


 


“Last Reported
Sale Price” of the Common Stock for any Trading Day means the closing sale price per share (or, if no closing sale price
is reported, the average of the last bid price and the last ask price per share or, if more than one in either case, the average
of the average last bid prices and the average last ask prices per share) of Common Stock on such Trading Day as reported in composite
transactions for the principal U.S. national or regional securities exchange on which the Common Stock is then listed. If the Common
Stock is not listed on a U.S. national or regional securities exchange on such Trading Day, then the Last Reported Sale Price will
be the last quoted bid price per share of Common Stock on such Trading Day in the over-the-counter market as reported by OTC Markets
Group Inc. or a similar organization. If the Common Stock is not so quoted on such Trading Day, then the Last Reported Sale Price
will be the average of the mid-point of the last bid price and the last ask price per share of Common Stock on such Trading Day
from a nationally recognized independent investment banking firm selected by the Company.


 


“License”
means any Copyright License, Patent License, Trademark License or other written license of rights or interests.


 


 “Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale
or other title retention agreement, and any lease in the nature of a security interest; provided, that for the avoidance of doubt,
licenses, strain escrows and similar provisions in collaboration agreements, research and development agreements that do not create
or purport to create a security interest, encumbrance, levy, lien or charge of any kind shall not be deemed to be Liens for purposes
of this Note. 


 


“Market Disruption
Event” means, with respect to any date, the occurrence or existence, during the one-half hour period ending at the scheduled
close of trading on such date on the principal U.S. national or regional securities exchange or other market on which the Common
Stock is listed for trading or trades, of any material suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by the relevant exchange or otherwise) in the Common Stock or in any options contracts or futures contracts
relating to the Common Stock.


 






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“Market Stock
Payment Price” means, with respect to any Interest Payment Date, Early Redemption Stock Payment Date, Fundamental Change
Redemption Date or Company Redemption Date, as applicable, an amount equal to the greater of (A) the Floor Price and (B) ninety
two and one half percent (92.5%) of the lesser of (i) the Daily VWAP on the VWAP Trading Day immediately prior to such Interest
Payment Date, Early Redemption Stock Payment Date, Fundamental Change Redemption Date or Company Redemption Date, as applicable,
and (ii) the average of the lowest two (2) Daily VWAPs during the five (5) VWAP Trading Day period ending on the VWAP Trading Day
immediately prior to such Interest Payment Date, Early Redemption Stock Payment Date, Fundamental Change Redemption Date or Company
Redemption Date, as applicable.


 


“Maturity
Date” means July 1, 2023.


 


“Maturity
Principal Amount” has the meaning set forth in the cover page of this Note.


 


“Maximum Percentage”
has the meaning set forth in Section 8(K)(i).


 


“Open of Business”
means 9:00 a.m., New York City time.


 


The term “or”
is not exclusive, unless the context expressly provides otherwise.


 


“Other Holder”
means any person in whose name any Other Note is registered on the books of the Company.


 


“Other Notes”
means any Notes that are of the same class of this Note and that are represented by one or more certificates other than the certificate
representing this Note.


 


“Patents”
means all letters patent of, or rights corresponding thereto, in the United States or in any other country, all registrations and
recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States or any other
country.


 


“Patent License”
means any written agreement granting any right with respect to any invention covered by a Patent that is in existence or a Patent
application that is pending, in which agreement the Company now holds or hereafter acquires any interest.


 


“Permitted
Indebtedness” means (A) Indebtedness evidenced by this Note; (B) Indebtedness deemed to be disclosed pursuant to the
Securities Purchase Agreement, as in effect as of the Issue Date (including all other Indebtedness accrued in the balance sheet
included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020); (C) Indebtedness of up to
five million dollars ($5,000,000) outstanding at any time secured by a Lien described in clause (G) of the defined term “Permitted
Liens,” provided such Indebtedness does not exceed the cost of the Equipment and related expenses financed with such Indebtedness;
(D) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness incurred in the ordinary
course of business with corporate credit cards; (E) Indebtedness that also constitutes a Permitted Investment; (F) Subordinated
Indebtedness of the Company; (G) reimbursement obligations in connection with letters of credit or similar instruments that are
secured by Cash or Cash Equivalents and issued on behalf of the Company or a Subsidiary thereof in an aggregate amount not to exceed
$1,000,000 at any time outstanding; (H) other unsecured Indebtedness of the Company, so long as such Indebtedness does not have
(i) a final maturity date, amortization payment, sinking fund, mandatory redemption or other repurchase obligation or put right
at the option of the lender or holder of such Indebtedness earlier than one hundred eighty-one (181) days following the Maturity
Date, or (ii) any other material terms more favorable to the holder of such Indebtedness than this Note, including applicable interest
rates; (I) Indebtedness in respect of a Traditional Working Capital Facility in aggregate amount not to exceed one hundred million
dollars ($100,000,000); (J) Contingent Obligations that are guarantees of Indebtedness described in clauses (A) through (E) and
(G) and (I); (K) extensions, refinancings and renewals of any items of Permitted Indebtedness (other than any Indebtedness repaid
with the proceeds of this Note), provided that the principal amount is not increased or the terms modified to impose materially
more burdensome terms upon the Company or its Subsidiaries, as the case may be, and provided further, that if the lender
of any such proposed extension, refinancing or renewal of Permitted Indebtedness incurred hereunder is different from the lender
of the Permitted Indebtedness to be so extended, refinanced or renewed then, in addition to the foregoing proviso, such Permitted
Indebtedness shall also not have a final maturity date, amortization payment, sinking fund, mandatory redemption or other repurchase
obligation earlier than one hundred eighty-one (181) days following the Maturity Date.


 






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“Permitted
Intellectual Property Licenses” means Intellectual Property (A) licenses in existence at the Issue Date, including those
listed on the Schedules to the Security Agreement, and (B) non-perpetual licenses granted in the ordinary course of business on
arm’s length terms consisting of the licensing of technology, the development of technology or the providing of technical
support which may include licenses with unlimited renewal options solely to the extent such options require mutual consent for
renewal or are subject to financial or other conditions as to the ability of licensee to perform under the license; provided such
license was not entered into during continuance of a Default or an Event of Default.


 


“Permitted
Investment” means: (A) Investments deemed to be disclosed pursuant to the Securities Purchase Agreement, as in effect
as of the Issue Date; (B) (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America
or any agency or any State thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing
no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard
& Poor’s Corporation or Moody’s Investors Service, (iii) certificates of deposit issued by any bank headquartered
in the United States with assets of at least $500,000,000 maturing no more than one year from the date of investment therein, and
(iv) money market accounts; (C) Investments accepted in connection with Permitted Transfers; (D) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations
of, and other disputes with, customers or suppliers arising in the ordinary course of the Company’s business; (E) Investments
consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers in the ordinary
course of business and consistent with past practice, provided that this subparagraph (E) shall not apply to Investments of the
Company in any Subsidiary; (F) Investments consisting of loans not involving the net transfer on a substantially contemporaneous
basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of the Company pursuant to
employee stock purchase plans or other similar agreements approved by the Company’s Board of Directors; (G) Investments consisting
of travel advances in the ordinary course of business; (H) (i) Investments in wholly-owned Subsidiaries and (ii) Investments in
a 50/50 joint venture with Moog Inc. formed as Certus Unmanned Aerial Systems LLC, a Delaware limited liability company (“Certus”)
(provided that there shall be no amendment, restatement, supplement or modification to that certain Asset Purchase Agreement dated
October 1, 2019 by and among Moog Inc., Surefly, Inc. and the Company, as amended by Amendment No. 1 dated October 4, 2019, that
(i) results in any additional obligations of the Company (provided however that such restrictions shall not prohibit an amendment
to such Asset Purchase Agreement that extends the closing date thereunder by thirty (30) days or less) or (ii) require any additional
consideration from the Company or its Subsidiaries (in cash, equity, indebtedness or otherwise); (I) Permitted Intellectual Property
Licenses; (J) additional Investments that do not exceed fifty thousand dollars ($50,000) in the aggregate in any twelve (12) month
period.


 






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“Permitted
Liens” means any and all of the following: (A) Liens in favor of Holder or the Collateral Agent; (B) Liens deemed to
be disclosed pursuant to the Securities Purchase Exchange Agreement, as in effect as of the Issue Date; (C) Liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings;
provided, that the Company maintains adequate reserves therefor in accordance with GAAP; (D) Liens securing claims or demands of
materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of business;
provided, that the payment thereof is not yet required; (E) Liens arising from judgments, decrees or attachments in circumstances
which do not constitute a Default or an Event of Default hereunder; (F) the following deposits, to the extent made in the ordinary
course of business: deposits under workers’ compensation, unemployment insurance, social security and other similar laws,
or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity,
performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed
money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds,
or to secure indemnity, performance or other similar bonds; (G) Liens on Equipment or software or other intellectual property constituting
purchase money Liens and Liens in connection with Capital Leases securing Indebtedness permitted in clause (C) of “Permitted
Indebtedness”; (H) leasehold interests in leases or subleases and licenses granted in the ordinary course of the Company’s
business and not interfering in any material respect with the business of the licensor; (I) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become
due; (J) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the
date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets);
(K) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks,
other depository institutions and brokerage firms; (L) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or
marketability of the related property; (M) Liens on Cash or Cash Equivalents securing obligations permitted under clause (D) and
(G) of the definition of Permitted Indebtedness; (N) Liens securing obligations related to Indebtedness in respect of a Traditional
Working Capital Facility permitted under clause (I) of the definition of Permitted Indebtedness; and (O) Liens incurred in connection
with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (A) through (N)
above (other than any Indebtedness repaid with the proceeds of this Note); provided, that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended,
renewed or refinanced (as may have been reduced by any payment thereon) does not increase.


 






    - 13 -


     


    

 


“Permitted
Transfers” means (A) dispositions of inventory sold, and Permitted Intellectual Property Licenses entered into, in each
case, in the ordinary course of business, (B) dispositions of worn-out, obsolete or surplus property at fair market value in the
ordinary course of business; (C) dispositions of accounts or payment intangibles (each as defined in the UCC) resulting from the
compromise or settlement thereof in the ordinary course of business for less than the full amount thereof; (D) transfers consisting
of Permitted Investments in wholly-owned Subsidiaries and Certus under clause (H) of Permitted Investments; (E) the sale of assets
of Surefly, Inc. pursuant to that certain Asset Purchase Agreement dated October 1, 2019 by and among Moog Inc., Surefly, Inc.
and the Company, as may be amended, restated, supplemented or modified from time to time (provided that any such amendment, restatement,
supplement or modification does not (i) result in any additional obligations of the Company or (ii) require any additional consideration
from the Company or its Subsidiaries (in cash, equity, indebtedness or otherwise), and (F) other transfers of assets to any Person
other than to a joint venture and which have a fair market value of not more than fifty thousand dollars ($50,000) in the aggregate
in any fiscal year.


 


“Person”
or “person” means any individual, sole proprietorship, partnership, limited liability company, joint venture,
company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock
company, estate, entity or government agency.


 


“Principal
Amount” has the meaning set forth in the cover page of this Note; provided, however, that the Principal
Amount of this Note will be subject to reduction (A) pursuant to Section 6, Section 7, and Section 8 and (B)
by an amount equal to (i) the sum of all Early Redemption Payments made prior to date of determination of the Principal Amount
of the Note then outstanding, divided by (ii) one and ten-hundredths (1.10).


 


“Reference
Property” has the meaning set forth in Section 8(J)(i).


 


“Reference
Property Unit” has the meaning set forth in Section 8(J)(i).


 


“Related Parties”
has the meaning set forth in Section 22(B).


 


“Reported
Outstanding Share Number” has the meaning set forth in Section 8(K)(i).


 


“Repurchase
Upon Fundamental Change” means the repurchase of any Note by the Company pursuant to Section 6.


 


“Requisite
Stockholder Approval” means the stockholder approval contemplated by Nasdaq Listing Standard Rule 5635(d) with respect
to the issuance of shares of Common Stock upon conversion of this Note in excess of the limitations imposed by such rule; provided,
however, that the Requisite Stockholder Approval will be deemed to be obtained if, due to any amendment or binding change
in the interpretation of the applicable listing standards of The Nasdaq Capital Market, such stockholder approval is no longer
required for the Company to settle all conversions of this Note by delivering shares of Common Stock without limitation pursuant
to Section 8(K)(ii).


 






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“Scheduled
Trading Day” means any day that is scheduled to be a Trading Day on the principal U.S. national or regional securities
exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities
exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded,
then “Scheduled Trading day” means a Business Day.


 


“Securities
Act” means the U.S. Securities Act of 1933, as amended.


 


“Securities
Purchase Agreement” means that certain Securities Purchase Agreement, dated as of June 30, 2020, between the Company
and HT Investments MA, LLC providing for the issuance of this Note.


 


“Security
Agreement” means that certain Security Agreement, dated as of July 16, 2020, between the Company and the Collateral Agent.


 


“Security
Document” has the meaning set forth in the Security Agreement.


 


“Significant
Subsidiary” means, with respect to any Person, any Subsidiary of such Person that constitutes a “significant subsidiary”
(as defined in Rule 1-02(w) of Regulation S-X under the Exchange Act) of such Person.


 


“Spin-Off”
has the meaning set forth in Section 8(G)(i)(3)(b).


 


“Spin-Off
Valuation Period” has the meaning set forth in Section 8(G)(i)(3)(b).


 


“Stated Interest
Rate” means, as of any date, a rate per annum equal to 4.50%.


 


“Subordinated
Indebtedness” means Indebtedness subordinated to the Notes in amounts and on terms and conditions satisfactory to the
Holder in its sole discretion.


 


“Stock Payment
Notice” has the meaning set forth in Section 5(B).


 


“Subsidiary”
means, with respect to any Person, (A) any corporation, association or other business entity (other than a partnership or limited
liability company) of which more than fifty percent (50%) of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency, but after giving effect to any voting agreement or stockholders’ agreement that effectively
transfers voting power) to vote in the election of directors, managers or trustees, as applicable, of such corporation, association
or other business entity is owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries
of such Person; and (B) any partnership or limited liability company where (i) more than fifty percent (50%) of the capital accounts,
distribution rights, equity and voting interests, or of the general and limited partnership interests, as applicable, of such partnership
or limited liability company are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries
of such Person, whether in the form of membership, general, special or limited partnership or limited liability company interests
or otherwise; and (ii) such Person or any one or more of the other Subsidiaries of such Person is a controlling general partner
of, or otherwise controls, such partnership or limited liability company.


 






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“Successor
Corporation” has the meaning set forth in Section 10(A).


 


“Successor
Person” has the meaning set forth in Section 8(J)(i).


 


“Tender/Exchange
Offer Valuation Period” has the meaning set forth in Section 8(G)(i)(5).


 


“Trademark
License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or
hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest.


 


“Trademarks”
means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof.


 


“Trading Day”
means any day on which (A) trading in the Common Stock generally occurs on the principal U.S. national or regional securities exchange
on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities exchange,
on the principal other market on which the Common Stock is then traded; and (B) there is no Market Disruption Event. If the Common
Stock is not so listed or traded, then “Trading Day” means a Business Day.


 


“Traditional
Working Capital Facility” means non-convertible debt (or similar instruments) resulting in net proceeds to the Company
of no less than thirty million dollars ($30,000,000) with (A) annual interest of no greater than LIBOR plus 8.00%, including any
original issue discount, allocated levelly over the scheduled maturity of the facility (B) no redemption provisions prior to the
Maturity Date, (C) the only liens on the assets of the Company and its Subsidiaries securing the facility shall be on the Cash,
Cash Equivalents, accounts receivable, accounts and inventory of the Company and its Subsidiaries and (D) the purpose of which
is to fund working capital for truck production.


 


“Transaction
Documents” has the meaning set forth in the Securities Purchase Agreement.


 


“UCC”
means the Uniform Commercial Code as the same is, from time to time, in effect in the State of New York.


 






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“VWAP Market
Disruption Event” means, with respect to any date, (A) the failure by the principal U.S. national or regional securities
exchange on which the Common Stock is then listed, or, if the Common Stock is not then listed on a U.S. national or regional securities
exchange, the principal other market on which the Common Stock is then traded, to open for trading during its regular trading session
on such date; or (B) the occurrence or existence, for more than one half hour period in the aggregate, of any suspension or limitation
imposed on trading (by reason of movements in price exceeding limits permitted by the relevant exchange or otherwise) in the Common
Stock or in any options contracts or futures contracts relating to the Common Stock, and such suspension or limitation occurs or
exists at any time before 1:00 p.m., New York City time, on such date.


 


“VWAP Trading
Day” means a day on which (A) there is no VWAP Market Disruption Event; provided that the Holder, by written notice to
the Company, may waive any such VWAP Market Disruption Event; and (B) trading in the Common Stock generally occurs on the principal
U.S. national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed
on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If
the Common Stock is not so listed or traded, then “VWAP Trading Day” means a Business Day.


 


“Wholly Owned
Subsidiary” of a Person means any Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors’ qualifying shares) are owned by such Person or one or more Wholly Owned Subsidiaries of such
Person.


 


“Withheld
Shares” has the meaning set forth in Section 8(K)(ii).


 


Section
2. Persons deemed owners.


 


The Holder of this
Note will be treated as the owner of this Note for all purposes.


 


Section
3. Registered Form.


 


This Note, and any
Note issued in exchange therefor or in substitution thereof, will be in registered form, without coupons.


 


Section
4. Accrual of Interest; Defaulted Amounts.


 


(A) Accrual
of Stated Interest. This Note will accrue interest (the “Stated Interest”) at a rate per annum equal to
the Stated Interest Rate. Stated Interest on this Note will (i) accrue on the Principal Amount of this Note; (ii) accrue from,
and including, the most recent date to which Stated Interest has been paid or duly provided for (or, if no Stated Interest has
theretofore been paid or duly provided for, the Issue Date) to, but excluding, the date of payment of such Stated Interest; (iii)
be payable quarterly in arrears on each Interest Payment Date; and (iv) be computed on the basis of a 360-day year comprised of
twelve 30-day months.


 


(B) Defaulted
Amounts. If (i) the Company fails to pay any amount payable on this Note on or before the due date therefor as provided in
this Note, then, regardless of whether such failure constitutes an Event of Default, or (ii) a Default or Event of Default occurs
(such amount payable or the Principal Amount outstanding as of such failure to pay or Default or Event of Default, (as applicable,
a “Defaulted Amount”)) then in each case, to the extent lawful, interest (“Default Interest”)
will accrue on such Defaulted Amount at a rate per annum equal to eighteen percent (18.0%), from, and including, such due date
or the date of such Default or Event of Default, as applicable, to, but excluding, the date such failure to pay or Default or Event
of Default is cured and all outstanding Default Interest under this Note has been paid, as applicable.


 






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Section
5. Method of Payment; When Payment Date is Not a Business Day.


 


(A) Method
of Payment. Except as set forth in Section 5(B), the Company will pay all cash amounts due under this Note by wire transfer
of immediately available funds to the account or accounts specified by the Holder by written notice at least three (3) Business
Days in advance of the date such amount is due.


 


(B) Company’s
Election to Pay Stated Interest or Company Redemption Excess Amounts in Cash or Common Stock. At least ten (10) Trading Days
(but no more than twenty (20) Trading Days) prior to an Interest Payment Date or, with respect to a redemption of this Note pursuant
to Section 7(A), the Company Redemption Date (if any), the Company, if it desires to elect to make a payment of Stated Interest
due on such Interest Payment Date or the Company Redemption Excess Amount (if any) due on such Company Redemption Date, as applicable,
in shares of Common Stock, shall deliver to the Holder a written notice of such election (a “Stock Payment Notice”)
(and such election shall be irrevocable as to such Interest Payment Date or Company Redemption Date, as applicable). Failure to
timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the Stated Interest or Company
Redemption Excess Amount (if any) on such Interest Payment Date or Company Redemption Date, as applicable, in cash. With respect
to any Interest Payment Date or applicable Company Redemption Date for which the Company has elected to make a payment of Stated
Interest or the Company Redemption Excess Amount (if any) in shares of Common Stock in accordance with this Section 5(B),
the Company shall issue to the Holder, in lieu of such payment in cash of Stated Interest or the Company Redemption Excess Amount
(if any), as applicable, a number of validly issued, fully paid and Freely Tradable shares of Common Stock equal to the quotient
(rounded up to the closest whole number) obtained by dividing such payment of Stated Interest or the Company Redemption Excess
Amount (if any), as applicable, by the Market Stock Payment Price for such payment of Stated Interest or the Company Redemption
Excess Amount (if any), as applicable. In the event that the number of shares of Common Stock issued to the Holder under this Section
5(B) is reduced as a result of the Floor Price, the Company shall concurrently with the issuance of such shares also pay to
the Holder an amount, in cash, equal to the product of (i) the number of shares by which the Stated Interest or Company Redemption
Excess Amount, as applicable, was reduced as a result of the Floor Price, multiplied by (ii) the Market Stock Payment Price. Notwithstanding
anything herein to the contrary, the Company will not have the right to, and will not, make any payment of Stated Interest or pay
any Company Redemption Excess Amount in shares of Common Stock if the Equity Conditions are not satisfied for each VWAP Trading
Day occurring between the day of the delivery of the Stock Payment Notice and the applicable Interest Payment Date or Company Redemption
Date, and such payment of Stated Interests or Company Redemption Excess Amount shall instead be paid in cash in accordance with
Section 5(A), unless such failure of the Equity Conditions to be so satisfied is waived in writing by the Holder, which
waiver may be granted or withheld by the Holder in its sole discretion.


 






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(C) Company’s
Election to Pay Early Redemption Payments in Cash or Common Stock. At least ten (10) Trading Days (but no more than twenty
(20) Trading Days) prior to an Early Redemption Date, the Company, if it desires to elect to make an Early Redemption Payment with
respect to such Early Redemption Date, entirely or partially, in shares of Common Stock, shall deliver to the Holder a written
notice of such election stating which portion thereof the Company has elected to pay in shares of Common Stock (an “Early
Redemption Stock Payment Notice”) (and such election shall be irrevocable as to such Early Redemption Date). Failure
to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the Early Redemption Payment
with respect to such Early Redemption Date in cash. With respect to any Early Redemption Date for which the Company has elected
to make an Early Redemption Payment (or any applicable portion thereof) in shares of Common Stock in accordance with this Section
5(C), (i) the Holder shall have the right to (x) convert such Early Redemption Payment (or any applicable portion thereof)
into shares of Common Stock pursuant to Section 8 hereof at any time up until the subsequent Early Redemption Date, (y)
allocate all or any portion of the applicable Early Redemption Payment to up to three (3) different Scheduled Trading Days (any
such date, an “Early Redemption Stock Payment Date”) during the period beginning on, and including, the applicable
Early Redemption Date and ending on, and including, the Scheduled Trading Day immediately before the subsequent Early Redemption
Date (the “Early Redemption Stock Payment Period”) or (z) defer such Early Redemption Payment (or applicable
portion thereof) to any future Early Redemption Date selected by the Holder; and (ii) the Company shall issue to the Holder, a
number of validly issued, fully paid and Freely Tradable shares of Common Stock equal to the quotient (rounded up to the closest
whole number) obtained by dividing such Early Redemption Payment (or any applicable portion thereof) by the Market Stock Payment
Price as of such Early Redemption Stock Payment Date. In the event that the number of shares of Common Stock issued to the Holder
under this Section 5(C) is reduced as a result of the Floor Price, the Company shall concurrently with the issuance of such
shares also pay to the Holder an amount, in cash, equal to the product of (i) the number of shares by which the Stated Interest
or Company Redemption Excess Amount, as applicable, was reduced as a result of the Floor Price, multiplied by (ii) the Market Stock
Payment Price. The Holder must provide notice to the Company of its election of any Early Redemption Stock Payment Date and the
applicable portion of the Early Redemption Payment it is electing to receive on each such Early Redemption Stock Payment Date no
later than 4:30 p.m. New York Time on such Early Redemption Stock Payment Date. Notwithstanding anything herein to the contrary,
the Company will not have the right to, and will not, make any Early Redemption Payment (or any applicable portion thereof) in
shares of Common Stock if the Equity Conditions are not satisfied for each VWAP Trading Day occurring between the Early Redemption
Stock Payment Notice and the applicable Early Redemption Date, and such Early Redemption Payment (or any applicable portion thereof)
shall instead be paid in cash in accordance with Section 5(A), unless such failure of the Equity Conditions to be so satisfied
is waived in writing by the Holder, which waiver may be granted or withheld by the Holder in its sole discretion. Any portion of
the Early Redemption Payment not paid in shares of Common Stock because the Holder did not elect to receive shares of Common Stock
for such Early Redemption Payment (or applicable portion thereof) or because the Holder elected to defer the receipt of such shares
to a future Early Redemption Date during the applicable Early Redemption Stock Payment Period will be automatically deferred to
the next Early Redemption Date or such future Early Redemption Date as was elected by the Holder, as applicable. Any such shares
of Common Stock will be delivered by the Company to the Holder on or before the second (2nd) Business Day following the applicable
Early Redemption Stock Payment Date.


 






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(D) Delay
of Payment when Payment Date is Not a Business Day. If the due date for a payment on this Note as provided in this Note is
not a Business Day, then, notwithstanding anything to the contrary in this Note, such payment may be made on the immediately following
Business Day and no interest will accrue on such payment as a result of the related delay.


 


(E) Event
of Default/Equity Triggering Event Additional Shares. In the event of issuance of any Event of Default Additional Shares, to
the extent that the amount of such shares was reduced as a result of the Floor Price, then concurrently with the issuance of such
shares, the Company shall also pay to the Holder an amount, in cash, equal to the product of (i) the number of shares by which
such amount was reduced as a result of the Floor Price, multiplied by (ii) the Event of Default Conversion Price.


 


Section
6. Required Repurchase of Note upon a Fundamental Change.


 


(A) Repurchase
Upon Fundamental Change. Subject to the other terms of this Section 6, if a Fundamental Change occurs, then the Holder
will have the right to require the Company to repurchase this Note (or any portion of this Note in an Authorized Denomination)
on the Fundamental Change Repurchase Date for such Fundamental Change for a cash purchase price equal to the Fundamental Change
Repurchase Price.


 


(B) Fundamental
Change Repurchase Date. The Fundamental Change Repurchase Date for any Fundamental Change will be a Business Day of the Holder’s
choosing that is no more than twenty (20) Business Days after the later of (x) the date the Company delivers to the Holder the
related Fundamental Change Notice pursuant to Section 6(C); and (y) the effective date of such Fundamental Change.


 


(C) Fundamental
Change Notice. No later than the fifth (5th) Business Day before the occurrence of any Fundamental Change, the Company will
send to the Holder a written notice (the “Fundamental Change Notice”) thereof, stating the expected date such
Fundamental Change will occur.


 


(D) Fundamental
Change Repurchase Price. The Fundamental Change Repurchase Price for this Note (or any portion of this Note) to be repurchased
upon a Repurchase Upon Fundamental Change following a Fundamental Change is an amount in cash equal to the Fundamental Change Base
Repurchase Price for such Fundamental Change plus accrued and unpaid interest on this Note (or such portion of this Note) to, but
excluding, the Fundamental Change Repurchase Date for such Fundamental Change. For the avoidance of doubt, if such Fundamental
Change Repurchase Date is on an Interest Payment Date, then the interest otherwise payable on this Note (or such portion of this
Note) on such Interest Payment Date will be paid as part of the Fundamental Change Repurchase Price, in satisfaction of the Company’s
obligation to pay such interest on such Interest Payment Date.


 


(E) Effect
of Repurchase. If this Note (or any portion of this Note) is to be repurchased upon a Repurchase Upon Fundamental Change, then,
from and after the date the related Fundamental Change Repurchase Price is paid in full, this Note (or such portion) will cease
to be outstanding and interest will cease to accrue on this Note (or such portion).


 






    - 20 -


     


    

 


(F) Fundamental
Change Redemption. Notwithstanding anything in this Section 6 to the contrary, at the Holder’s sole discretion
following receipt of a Fundamental Change Notice, in lieu of receiving the Fundamental Change Repurchase Price (or any portion
thereof), the Holder may require the Company to redeem this Note (or any portion of this Note in an Authorized Denomination) in
exchange for a number of validly issued, fully paid and Freely Tradable shares of Common Stock equal to the quotient (rounded up
to the closest whole number) obtained by dividing the Fundamental Change Repurchase Price (or applicable portion thereof) by the
Market Stock Payment Price. The Fundamental Change Redemption Date for any Fundamental Change will be a Business Day of the Holder’s
choosing that is no more than twenty (20) Business Days after the later of (x) the date the Company delivers to the Holder the
related Fundamental Change Notice pursuant to Section 6(C); and (y) the effective date of such Fundamental Change. Any such
shares of Common Stock will be delivered by the Company to the Holder on or before the second (2nd) Business Day following a Fundamental
Change Redemption Date. In the event that the number of shares of Common Stock issued to the Holder under this Section 6(F)
is reduced as a result of the Floor Price, the Company shall concurrently with the issuance of such shares also pay to the Holder
an amount, in cash, equal to the product of (i) the number of shares by which such amount was reduced as a result of the Floor
Price, multiplied by (ii) the Market Stock Payment Price.


 


Section
7. Redemption of this
Note.


 


(A) Company
Redemption of this Note. 


 


(i) Company
Redemption Election. The Company may redeem all of the then outstanding Principal Amount of this Note (or any portion thereof
in an amount equal to at least $8,000,000) on a date (any such date a “Company Redemption Date”) to be determined
by the Company, for a cash redemption price equal to the Company Redemption Price; provided, that the Company must provide notice
thereof at least ten (10) Trading Days prior to any Company Redemption Date and the Company must have, on or prior to 9:00 am,
New York city time, on the Trading Day immediately preceding such notice delivery date, publicly disclosed any material, non-public
information regarding the Company on a Form 8-K or otherwise.


 


(ii) Company
Redemption Price. The Company Redemption Price for this Note to be redeemed pursuant to Section 7(A)(i) is an amount
in cash equal to the Company Redemption Base Price plus accrued and unpaid interest on such amount to, but excluding, the related
Company Redemption Date. For the avoidance of doubt, if such Company Redemption Date is on an Interest Payment Date, then the interest
otherwise payable on this Note on such Interest Payment Date will be paid as part of the Company Redemption Price, in satisfaction
of the Company’s obligation to pay such interest on such Interest Payment Date. If the Company elects to pay the Company
Redemption Excess Amount in shares of Common Stock pursuant to Section 5(B), the cash amount payable pursuant to this Section
7(A)(ii) will be reduced by such Company Redemption Excess Amount.


 


(iii) Effect
of Redemption. If this Note is to be redeemed in full pursuant to Section 7(A)(i), then, from and after the date the
related Company Redemption Price is paid in full, this Note will cease to be outstanding and interest will cease to accrue on this
Note.


 






    - 21 -


     


    

 


(B) Early
Redemption Payments.


 


(i) At
the Holder’s election, in its sole discretion, the Company shall be required to redeem a portion of this Note up to or equal
to the applicable Early Redemption Payment on each Early Redemption Date; provided, however, that the Holder may,
in its sole discretion, defer any Early Redemption Payment to any subsequent Early Redemption Date. The Holder shall deliver to
the Company a written notice of any such election under this Section 7(B)(i) at least eight (8) Business Days prior to the
applicable Early Redemption Date in order to make an effective election; provided, that the Holder may, in its sole discretion,
defer any Early Redemption Payment to any subsequent Early Redemption Date in accordance with the immediately preceding sentence
at any time prior to the applicable Early Redemption Date.


 


Section
8. Conversion.


 


(A) Right
to Convert.


 


(i) Generally.
Subject to the provisions of this Section 8, the Holder may, at its option, convert this Note, including any portion constituting
an Early Redemption Payment that the Holder has elected to convert pursuant to Section 5(C) hereof or that is required to
be paid by the Company on the next Early Redemption Date or Early Redemption Stock Payment Date, as applicable, or a deferred Early
Redemption Payment, into Conversion Consideration.


 


(ii) Conversions
in Part. Subject to the terms of this Section 8, this Note may be converted in part, but only in an Authorized Denomination.
Provisions of this Section 8 applying to the conversion of this Note in whole will equally apply to conversions of any permitted
portion of this Note.


 


(B) When
this Note May Be Converted.


 


(i) Generally.
The Holder may convert this Note at any time until the Close of Business on the second (2nd) Scheduled Trading Day immediately
before the Maturity Date; provided that, with respect to the conversion of any Early Redemption Payment, the Holder must
provide notice of such conversion no later than the Close of Business on the second (2nd) Scheduled Trading Day immediately preceding
the date such Early Redemption Payment is due in accordance with the terms of this Note, and any such conversion will not reduce
the amount of future Early Redemption Payments. For the avoidance of doubt, the Holder’s right to convert this Note shall
not be impacted by a prior notice or election to defer any Early Redemption Payment delivered by the Holder electing pursuant to
Section 7(B)(i) hereof.


 


(ii) Limitations
and Closed Periods. Notwithstanding anything to the contrary in this Section 8, (x) if this Note (or any portion of
this Note) is to be redeemed pursuant to Section 7(A), then in no event may this Note (or such portion) be converted after
the Close of Business on the Scheduled Trading Day immediately before the related Company Redemption Date; and (y) if this Note
(or any portion of this Note) is to be repurchased upon a Repurchase Upon Fundamental Change pursuant to Section 6, then
in no event may this Note (or such portion) be converted after the Close of Business on the Scheduled Trading Day immediately before
the related Fundamental Change Repurchase Date.


 






    - 22 -


     


    

 


(C) Conversion
Procedures.


 


(i) Generally.
To convert this Note, the Holder must (1) complete, manually sign and deliver to the Company the conversion notice attached to
this Note or a facsimile or portable document format (.pdf) version of such conversion notice (at which time such conversion will
become irrevocable); and (2) pay any amounts due pursuant to Section 8(C)(iii). For the avoidance of doubt, the conversion
notice may be delivered by e-mail in accordance with Section 14. If the Company fails to deliver, by the related Conversion
Settlement Date, any shares of Common Stock forming part of the Conversion Consideration of the conversion of this Note, the Holder,
by written notice to the Company, may rescind all or any portion of the corresponding conversion notice at any time until such
Defaulted Shares are delivered.


 


(ii) Holder
of Record of Conversion Shares. The person in whose name any shares of Common Stock is issuable upon conversion of this Note
will be deemed to become the holder of record of such shares as of the Close of Business on the Conversion Date for such conversion,
conferring, as of such time, upon such person, without limitation, all voting and other rights appurtenant to such shares.


 


(iii) Taxes
and Duties. If the Holder converts a Note, the Company will pay any documentary, stamp or similar issue or transfer tax or
duty due on the issue of any shares of Common Stock upon such conversion; provided, however, that if any tax or duty
is due because such Holder requested such shares to be issued in a name other than that of such Holder, then such Holder will pay
such tax or duty and, until having received a sum sufficient to pay such tax or duty, the Company may refuse to deliver any such
shares to be issued in a name other than that of such Holder.


 


(D) Settlement
upon Conversion.


 


(i) Generally.
The consideration (the “Conversion Consideration”) due in respect of each $1,000 Principal Amount of this Note,
including any portion constituting an Early Redemption Payment required to be paid by the Company on the next Early Redemption
Date or Early Redemption Stock Payment Date, as applicable, or any outstanding deferred Early Redemption Payment, to be converted
will consist of the following:


 


(1) subject
to Section 8(D)(ii), a number of shares of Common Stock equal to the Conversion Rate in effect on the Conversion Date for
such conversion; and


 


(2) cash
in an amount equal to the aggregate accrued and unpaid interest on this Note to, but excluding, the Conversion Settlement Date
for such conversion or, at the election of the Company, a number of validly issued, fully paid and Freely Tradable shares of Common
Stock equal to the quotient (rounded up to the closest whole number) obtained by dividing the aggregate accrued and unpaid interest
on this Note to, but excluding, the Conversion Settlement Date by the Market Stock Payment Price (the “Conversion Consideration
Interest Shares”).


 






    - 23 -


     


    

 


(ii) Company’s
Election to Convert Accrued Interest into Common Stock. At least ten (10) Trading Days prior to a Conversion Date, the Company,
if it desires to elect to convert accrued and unpaid interest on this Note into Conversion Consideration Interest Shares pursuant
to Section 8(D)(i)(2), shall deliver to the Holder a written notice of such election (a “Conversion Consideration
Interest Shares Notice”) (and such election shall be irrevocable with respect to such interest and all subsequent conversions
until the Company provides to the Holder at least ten (10) Trading Days written notice of its intent to terminate such election).
Failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay such accrued and
unpaid interest in cash. Notwithstanding anything herein to the contrary, the Company will not have the right to, and will not,
make any conversion of accrued interest into Conversion Consideration Interest Shares if the Equity Conditions are not satisfied
for each VWAP Trading Day occurring between the day of the delivery of the Conversion Consideration Interest Shares Notice and
the applicable Conversion Settlement Date, and such conversion of accrued interest shall instead be paid in cash in accordance
with Section 8(D)(2), unless such failure of the Equity Conditions to be so satisfied is waived in writing by the Holder,
which waiver may be granted or withheld by the Holder in its sole discretion.


 


(iii) Fractional
Shares. The total number of shares of Common Stock due in respect of any conversion of this Note, including any portion constituting
an Early Redemption Payment required to be paid by the Company on the next Early Redemption Date or Early Redemption Stock Payment
Date, as applicable, or any outstanding deferred Early Redemption Payment, will be determined on the basis of the total Principal
Amount of this Note to be converted with the same Conversion Date; provided, however, that if such number of shares
of Common Stock is not a whole number, then such number will be rounded up to the nearest whole number.


 


(iv) Delivery
of the Conversion Consideration. The Company will pay or deliver, as applicable, the Conversion Consideration due upon the
conversion of this Note, including any portion constituting an Early Redemption Payment required to be paid by the Company on the
next Early Redemption Date or Early Redemption Stock Payment Date, as applicable, or any outstanding deferred Early Redemption
Payment, to the Holder on or before the second (2nd) Business Day (or, if earlier, the standard settlement period for the primary
Eligible Exchange on which the Common Stock is traded) immediately after the Conversion Date for such conversion (the “Conversion
Settlement Date”).


 


(v) Effect
of Conversion. If this Note is converted, then, from and after the date the Conversion Consideration therefor is issued or
delivered in settlement of such conversion, this Note will cease to be outstanding and interest will cease to accrue on this Note.


 






    - 24 -


     


    

 


(vi) Conversion
Settlement Defaults. If (x) the Company fails to deliver, by the related Conversion Settlement Date, any shares of Common Stock
(the “Defaulted Shares”) forming part of the Conversion Consideration of the conversion of this Note, including
any portion constituting an Early Redemption Payment required to be paid by the Company on the next Early Redemption Date or Early
Redemption Stock Payment Date, as applicable, or any outstanding deferred Early Redemption Payment; and (y) the Holder (whether
directly or indirectly, including by any broker acting on the Holder’s behalf or acting with respect to such Defaulted Shares)
purchases any shares of Common Stock (whether in the open market or otherwise) to cover any such Defaulted Shares (whether to satisfy
any settlement obligations with respect thereto of the Holder or otherwise), then, without limiting the Holder’s right to
pursue any other remedy available to it (whether hereunder, under applicable law or otherwise), the Holder will have the right,
exercisable by written notice to the Company, to cause the Company to either:


 


(1) pay,
on or before the second (2nd) Business Day after the date such notice is delivered, cash to the Holder in an amount equal to the
aggregate purchase price (including any brokerage commissions and other out-of-pocket costs) incurred to purchase such shares (such
aggregate purchase price, the “Covering Price”); or


 


(2) promptly
deliver, to the Holder, such Defaulted Shares in accordance with this Note, together with cash in an amount equal to the excess,
if any, of the Covering Price over the product of (x) the number of such Defaulted Shares; and (y) the Daily VWAP per share of
Common Stock on the Conversion Date relating to such conversion.


 


To exercise such right, the Holder
must deliver written notice of such exercise to the Company, specifying whether the Holder has elected clause (1) or (2)
above to apply. If the Holder has elected clause (1) to apply, then the Company’s obligation to deliver the Defaulted
Shares in accordance with this Note will be deemed to have been satisfied and discharged to the extent the Company has paid the
Covering Price in accordance with clause (1).


 


(E) Reserve
and Status of Common Stock Issued upon Conversion.


 


(i) Stock
Reserve. At all times when this Note is outstanding, the Company will reserve, out of its authorized but unissued and unreserved
shares of Common Stock, a number of shares of Common Stock equal to three hundred percent (300%) of a fraction, the numerator of
which shall be (x) the then outstanding Principal Amount of this Note and the denominator of which shall be (y) the Market Stock
Payment Price then in effect.


 


(ii) Status
of Conversion Shares; Listing. Each share of Common Stock delivered upon conversion of this Note will be a newly issued or
treasury share and will be duly and validly issued, fully paid, non-assessable, free from preemptive rights and free of any lien
or adverse claim (except to the extent of any lien or adverse claim created by the action or inaction of the Holder or the Person
to whom such share will be delivered). If the Common Stock is then listed on any securities exchange, or quoted on any inter-dealer
quotation system, then the Company will cause each share of Common Stock issued upon conversion of this Note, when delivered upon
such conversion, to be admitted for listing on such exchange or quotation on such system.


 






    - 25 -


     


    

 


(i) Transferability
of Conversion Shares. Any shares of Common Stock issued upon conversion of this Note will be issued in the form of book-entries
at the facilities of DTC, identified therein by an “unrestricted” CUSIP number.


 


(F) Forced
Conversion.


 


(i) Generally.
If (1) the Daily VWAP per share of Common Stock exceeds one hundred and fifty percent (150%) of the Conversion Price on each of
fifteen (15) consecutive VWAP Trading Days beginning after the Issue Date; and (2) the Equity Conditions are satisfied on each
of such fifteen (15) consecutive VWAP Trading Days, then, subject to the limitations on conversion contained in Section 8(K)(i),
the Company may provide written notice to the Holder electing to convert all or a portion of Principal Amount of this Note on the
Conversion Date into Conversion Consideration no later than the fifth (5th) Business Day following such last VWAP Trading Day;
provided that no Forced Conversion will be effected unless (x) the Daily VWAP per share of Common Stock exceeds one hundred
and fifty percent (150%) of the Conversion Price and (y) the Equity Conditions are satisfied on each VWAP Trading Day from the
date of such notice until the corresponding Conversion Consideration is delivered. The Conversion Date with respect to any such
Forced Conversion will be deemed to occur on the second (2nd) Business Day after such written notice to the Holder.
Solely for purposes of the preceding sentence, the Conversion Price will be calculated without giving effect to any adjustments
pursuant to Section 8(I).


 


(ii) Effect
of Forced Conversion. A Forced Conversion will have the same effect as a conversion of the applicable outstanding Principal
Amount of this Note effected at the Holder’s election pursuant to Section 8(A)(i) with a Conversion Date occurring
on the Business Day referred to in Section 8(F)(i) (for the avoidance of doubt, without the need for the Holder to deliver
a conversion notice); provided, however, that the Company will not be obligated to deliver the Conversion Consideration
until the Holder has complied, if applicable, with its obligations under Section 8(C)(iii).


 


(G) Adjustments
to the Conversion Rate.


 


(i) Events
Requiring an Adjustment to the Conversion Rate. The Conversion Rate will be adjusted from time to time as follows:


 


(1) Stock
Dividends, Splits and Combinations. If the Company issues solely shares of Common Stock as a dividend or distribution on all
or substantially all shares of the Common Stock, or if the Company effects a stock split or a stock combination of the Common Stock
(in each case excluding an issuance solely pursuant to a Common Stock Change Event, as to which Section 8(J) will apply),
then the Conversion Rate will be adjusted based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the Open
of Business on the Ex-Dividend Date for such dividend or distribution, or immediately before the Open of Business on the effective
date of such stock split or stock combination, as applicable;



 






    - 26 -


     


    

 


		CR1 =	the Conversion Rate in effect immediately after the Open
of Business on such Ex-Dividend Date or the Open of Business on such effective date, as applicable;



 


		OS0 =	the number of shares of Common Stock outstanding immediately
before the Open of Business on such Ex-Dividend Date or effective date, as applicable, without giving effect to such dividend,
distribution, stock split or stock combination; and



 


		OS1 =	the number of shares of Common Stock outstanding immediately
after giving effect to such dividend, distribution, stock split or stock combination.



 


If any dividend, distribution,
stock split or stock combination of the type described in this Section 8(G)(i)(1) is declared or announced, but not so paid
or made, then the Conversion Rate will be readjusted, effective as of the date the Board of Directors determines not to pay such
dividend or distribution or to effect such stock split or stock combination, to the Conversion Rate that would then be in effect
had such dividend, distribution, stock split or stock combination not been declared or announced.


 


(2) Rights,
Options and Warrants. If the Company distributes, to all or substantially all holders of Common Stock, rights, options or warrants
(other than rights issued or otherwise distributed pursuant to a stockholder rights plan, as to which the provisions set forth
in Sections 8(G)(i)(3)(a) and 8(G)(v)  will apply) entitling such holders, for a period of not more than sixty (60)
calendar days after the record date of such distribution, to subscribe for or purchase shares of Common Stock at a price per share
that is less than the average of the Last Reported Sale Prices per share of Common Stock for the ten (10) consecutive Trading Days
ending on, and including, the Trading Day immediately before the date such distribution is announced, then the Conversion Rate
will be increased based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the Open
of Business on the Ex-Dividend Date for such distribution;



 


		CR1 =	the Conversion Rate in effect immediately after the Open
of Business on such Ex-Dividend Date;



 






    - 27 -


     


    

 


		OS =	the number of shares of Common Stock outstanding immediately
before the Open of Business on such Ex-Dividend Date;



 


		X =	the total number of shares of Common Stock issuable pursuant
to such rights, options or warrants; and



 


		Y =	a number of shares of Common Stock obtained by dividing
(x) the aggregate price payable to exercise such rights, options or warrants by (y) the average of the Last Reported Sale Prices
per share of Common Stock for the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before
the date such distribution is announced.



 


To the extent that shares of Common
Stock are not delivered after the expiration of such rights, options or warrants (including as a result of such rights, options
or warrants not being exercised), the Conversion Rate will be readjusted to the Conversion Rate that would then be in effect had
the increase to the Conversion Rate for such distribution been made on the basis of delivery of only the number of shares of Common
Stock actually delivered upon exercise of such rights, option or warrants. To the extent such rights, options or warrants are not
so distributed, the Conversion Rate will be readjusted to the Conversion Rate that would then be in effect had the Ex-Dividend
Date for the distribution of such rights, options or warrants not occurred.


 


For purposes of this Section
8(G)(i)(2), in determining whether any rights, options or warrants entitle holders of Common Stock to subscribe for or purchase
shares of Common Stock at a price per share that is less than the average of the Last Reported Sale Prices per share of Common
Stock for the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before the date the distribution
of such rights, options or warrants is announced, and in determining the aggregate price payable to exercise such rights, options
or warrants, there will be taken into account any consideration the Company receives for such rights, options or warrants and any
amount payable on exercise thereof, with the value of such consideration, if not cash, to be determined by the Board of Directors
in good faith.


 


(3) Spin-Offs
and Other Distributed Property.


 


(a) Distributions
Other than Spin-Offs. If the Company distributes shares of its Capital Stock, evidences of its indebtedness or other assets
or property of the Company, or rights, options or warrants to acquire Capital Stock of the Company or other securities, to all
or substantially all holders of the Common Stock, excluding:


 


(v) dividends,
distributions, rights, options or warrants for which an adjustment to the Conversion Rate is required pursuant to Section 8(G)(i)(1)
or Section 8(G)(i)(2);


 






    - 28 -


     


    

 


(w) dividends
or distributions paid exclusively in cash for which an adjustment to the Conversion Rate is required pursuant to Section 8(G)(i)(4);


 


(x) rights
issued or otherwise distributed pursuant to a stockholder rights plan, except to the extent provided in Section 8(G)(v);


 


(y) Spin-Offs
for which an adjustment to the Conversion Rate is required pursuant to Section 8(G)(i)(3)(b); and


 


(z) a
distribution solely pursuant to a Common Stock Change Event, as to which Section 8(J) will apply,


 


then the Conversion Rate will
be increased based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the Open
of Business on the Ex-Dividend Date for such distribution;



 


		CR1 =	the Conversion Rate in effect immediately after the Open
of Business on such Ex-Dividend Date;



 


		SP =	the average of the Last Reported Sale Prices per share
of Common Stock for the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before such Ex-Dividend
Date; and



 


		FMV =	the fair market value (as determined by the Board of Directors
in good faith), as of such Ex-Dividend Date, of the shares of Capital Stock, evidences of indebtedness, assets, property, rights,
options or warrants distributed per share of Common Stock pursuant to such distribution;



 


provided, however,
that if FMV is equal to or greater than SP, then, in lieu of the foregoing adjustment to the Conversion Rate, the
Holder will receive, for each $1,000 Principal Amount of this Note held by this Holder on the record date for such distribution,
at the same time and on the same terms as holders of Common Stock, the amount and kind of shares of Capital Stock, evidences of
indebtedness, assets, property, rights, options or warrants that such Holder would have received if such Holder had owned, on such
record date, a number of shares of Common Stock equal to the Conversion Rate in effect on such record date.


 






    - 29 -


     


    

 


To the extent such distribution
is not so paid or made, the Conversion Rate will be readjusted to the Conversion Rate that would then be in effect had the adjustment
been made on the basis of only the distribution, if any, actually made or paid.


 


(b) Spin-Offs.
If the Company distributes or dividends shares of Capital Stock of any class or series, or similar equity interest, of or relating
to an Affiliate, a Subsidiary or other business unit of the Company to all or substantially all holders of the Common Stock (other
than solely pursuant to a Common Stock Change Event, as to which Section 8(J) will apply), and such Capital Stock or equity
interest is listed or quoted (or will be listed or quoted upon the consummation of the transaction) on a U.S. national securities
exchange (a “Spin-Off”), then the Conversion Rate will be increased based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the Open
of Business on the Ex-Dividend Date for such Spin-Off;



 


		CR1 =	the Conversion Rate in effect immediately after the Open
of Business on such Ex-Dividend Date;



 


		FMV =	the product of (x) the average of the Last Reported Sale
Prices per share or unit of the Capital Stock or equity interests distributed in such Spin-Off over the ten (10) consecutive Trading
Day period (the “Spin-Off Valuation Period”) beginning on, and including, such Ex-Dividend Date (such average
to be determined as if references to Common Stock in the definitions of Last Reported Sale Price, Trading Day and Market Disruption
Event were instead references to such Capital Stock or equity interests); and (y) the number of shares or units of such Capital
Stock or equity interests distributed per share of Common Stock in such Spin-Off; and



 


		SP =	the average of the Last Reported Sale Prices per share
of Common Stock for each Trading Day in the Spin-Off Valuation Period.



 






    - 30 -


     


    

 


The adjustment to the Conversion
Rate pursuant to this Section 8(G)(i)(3)(b) will be calculated as of the Close of Business on the last Trading Day of the
Spin-Off Valuation Period but will be given effect immediately after the Open of Business on the Ex-Dividend Date for the Spin-Off,
with retroactive effect. If a Note is converted and the Conversion Date occurs during the Spin-Off Valuation Period, then, notwithstanding
anything to the contrary in this Note, the Company will, if necessary, delay the settlement of such conversion until the second
(2nd) Business Day after the last day of the Spin-Off Valuation Period.


 


To the extent any dividend or
distribution of the type set forth in this Section 8(G)(i)(3)(b) is declared but not made or paid, the Conversion Rate will
be readjusted to the Conversion Rate that would then be in effect had the adjustment been made on the basis of only the dividend
or distribution, if any, actually made or paid.


 


(4) Cash
Dividends or Distributions. If any cash dividend or distribution is made to all or substantially all holders of Common Stock,
then the Conversion Rate will be increased based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the Open
of Business on the Ex-Dividend Date for such dividend or distribution;



 


		CR1 =	the Conversion Rate in effect immediately after the Open
of Business on such Ex-Dividend Date;



 


		SP =	the Last Reported Sale Price per share of Common Stock
on the Trading Day immediately before such Ex-Dividend Date; and



 


		D =	the cash amount distributed per share of Common Stock in
such dividend or distribution;



 


provided, however,
that if D is equal to or greater than SP, then, in lieu of the foregoing adjustment to the Conversion Rate, the Holder
will receive, for each $1,000 Principal Amount of this Note held by the Holder on the record date for such dividend or distribution,
at the same time and on the same terms as holders of Common Stock, the amount of cash that such Holder would have received if such
Holder had owned, on such record date, a number of shares of Common Stock equal to the Conversion Rate in effect on such record
date.


 






    - 31 -


     


    

 


To the extent such dividend or
distribution is declared but not made or paid, the Conversion Rate will be readjusted to the Conversion Rate that would then be
in effect had the adjustment been made on the basis of only the dividend or distribution, if any, actually made or paid.


 


(5) Tender
Offers or Exchange Offers. If the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange
offer for shares of Common Stock (other than solely pursuant to an odd-lot tender offer pursuant to Rule 13e-4(h)(5) under the
Exchange Act), and the value (determined as of the Expiration Time by the Board of Directors in good faith) of the cash and other
consideration paid per share of Common Stock in such tender or exchange offer exceeds the Last Reported Sale Price per share of
Common Stock on the Trading Day immediately after the last date (the “Expiration Date”) on which tenders or
exchanges may be made pursuant to such tender or exchange offer (as it may be amended), then the Conversion Rate will be increased
based on the following formula:


 





 


where:


 


		CR0 =	the Conversion Rate in effect immediately before the time
(the “Expiration Time”) such tender or exchange offer expires;



 


		CR1 =	the Conversion Rate in effect immediately after the Expiration
Time;



 


		AC =	the aggregate value (determined as of the Expiration Time
by the Board of Directors in good faith) of all cash and other consideration paid for shares of Common Stock purchased or exchanged
in such tender or exchange offer;



 


		OS0 =	the number of shares of Common Stock outstanding immediately
before the Expiration Time (including all shares of Common Stock accepted for purchase or exchange in such tender or exchange
offer);



 


		OS1 =	the number of shares of Common Stock outstanding immediately
after the Expiration Time (excluding all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer);
and



 


		SP =	the average of the Last Reported Sale Prices per share
of Common Stock over the ten (10) consecutive Trading Day period (the “Tender/Exchange Offer Valuation Period”)
beginning on, and including, the Trading Day immediately after the Expiration Date;



 






    - 32 -


     


    

 


provided, however,
that the Conversion Rate will in no event be adjusted down pursuant to this Section 8(G)(i)(5), except to the extent provided
in the immediately following paragraph. The adjustment to the Conversion Rate pursuant to this Section 8(G)(i)(5) will be
calculated as of the Close of Business on the last Trading Day of the Tender/Exchange Offer Valuation Period but will be given
effect immediately after the Expiration Time, with retroactive effect. If a Note is converted and the Conversion Date occurs on
the Expiration Date or during the Tender/Exchange Offer Valuation Period, then, notwithstanding anything to the contrary in this
Note, the Company will, if necessary, delay the settlement of such conversion until the second (2nd) Business Day after the last
day of the Tender/Exchange Offer Valuation Period.


 


To the extent such tender or exchange
offer is announced but not consummated (including as a result of the Company being precluded from consummating such tender or exchange
offer under applicable law), or any purchases or exchanges of shares of Common Stock in such tender or exchange offer are rescinded,
the Conversion Rate will be readjusted to the Conversion Rate that would then be in effect had the adjustment been made on the
basis of only the purchases or exchanges of shares of Common Stock, if any, actually made, and not rescinded, in such tender or
exchange offer.


 


(ii) No
Adjustments in Certain Cases.


 


(1) Where
the Holder Participates in the Transaction or Event Without Conversion. Notwithstanding anything to the contrary in Section
8(G)(i), the Company will not be obligated to adjust the Conversion Rate on account of a transaction or other event otherwise
requiring an adjustment pursuant to Section 8(G)(i) (other than a stock split or combination of the type set forth in Section
8(G)(i)(1) or a tender or exchange offer of the type set forth in Section 8(G)(i)(5)) if the Holder participates, at
the same time and on the same terms as holders of Common Stock, and solely by virtue of being the Holder of this Note, in such
transaction or event without having to convert this Note and as if the Holder held a number of shares of Common Stock equal to
the product of (i) the Conversion Rate in effect on the related record date; and (ii) the aggregate Principal Amount (expressed
in thousands) of this Note held by this Holder on such date.


 


(2) Certain
Events. The Company will not be required to adjust the Conversion Rate except as provided in Section 8(G), Section
8(H) or Section 8(I). Without limiting the foregoing, the Company will not be obligated to adjust the Conversion Rate
on account of:


 


(a) except
as otherwise provided in Section 8(G), the sale of shares of Common Stock for a purchase price that is less than the market
price per share of Common Stock or less than the Conversion Price;


 


(b) the
issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest
payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any
such plan;


 






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(c) the
issuance of any shares of Common Stock, restricted stock, or options or rights to purchase shares of Common Stock pursuant to any
present or future employee, director or consultant benefit plan or program of, or assumed by, the Company or any of its Subsidiaries;


 


(d) the
issuance of any shares of Common Stock pursuant to any option, warrant, right or convertible or exchangeable security of the Company
outstanding as of the Issue Date (other than an adjustment pursuant to Section 8(G)(i)(3)(a) in connection with the separation
of rights under the Company’s stockholder rights plan existing, if any, as of the Issue Date);


 


(e) solely
a change in the par value of the Common Stock; or


 


(f) accrued
and unpaid interest on this Note.


 


(iii) Adjustments
Not Yet Effective. Notwithstanding anything to the contrary in this Note, if:


 


(1) this
Note is to be converted;


 


(2) the
record date, effective date or Expiration Time for any event that requires an adjustment to the Conversion Rate pursuant to Section
8(G)(i) has occurred on or before the Conversion Date for such conversion, but an adjustment to the Conversion Rate for such
event has not yet become effective as of such Conversion Date;


 


(3) the
Conversion Consideration due upon such conversion includes any whole shares of Common Stock; and


 


(4) such
shares are not entitled to participate in such event (because they were not held on the related record date or otherwise),


 


then, solely for purposes of
such conversion, the Company will, without duplication, give effect to such adjustment on such Conversion Date. In such case, if
the date on which the Company is otherwise required to deliver the consideration due upon such conversion is before the first date
on which the amount of such adjustment can be determined, then the Company will delay the settlement of such conversion until the
second (2nd) Business Day after such first date.


 


(iv) Conversion
Rate Adjustments where the Converting Holder Participates in the Relevant Transaction or Event. Notwithstanding anything to
the contrary in this Note, if:


 


(1) a
Conversion Rate adjustment for any dividend or distribution becomes effective on any Ex-Dividend Date pursuant to Section 8(G)(i);


 






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(2) a
Note is to be converted;


 


(3) the
Conversion Date for such conversion occurs on or after such Ex-Dividend Date and on or before the related record date;


 


(4) the
Conversion Consideration due upon such conversion includes any whole shares of Common Stock based on a Conversion Rate that is
adjusted for such dividend or distribution; and


 


(5) such
shares would be entitled to participate in such dividend or distribution (including pursuant to Section 8(C)(ii)),


 


then (x) such Conversion Rate
adjustment will not be given effect for such conversion; (y) the shares of Common Stock issuable upon such conversion based on
such unadjusted Conversion Rate will not be entitled to participate in such dividend or distribution; and (z) there will be added,
to the Conversion Consideration otherwise due upon such conversion, the same kind and amount of consideration that would have been
delivered in such dividend or distribution with respect to such shares of Common Stock had such shares been entitled to participate
in such dividend or distribution.


 


(v) Stockholder
Rights Plans. If any shares of Common Stock are to be issued upon conversion of any Note and, at the time of such conversion,
the Company has in effect any stockholder rights plan, then the Holder of such Note will be entitled to receive, in addition to,
and concurrently with the delivery of, the Conversion Consideration otherwise payable under this Note upon such conversion, the
rights set forth in such stockholder rights plan, unless such rights have separated from the Common Stock at such time, in which
case, and only in such case, the Conversion Rate will be adjusted pursuant to Section 8(G)(i)(3)(a) on account of such separation
as if, at the time of such separation, the Company had made a distribution of the type referred to in such Section to all holders
of the Common Stock, subject to readjustment in accordance with such Section if such rights expire, terminate or are redeemed.


 


(vi) Limitation
on Effecting Transactions Resulting in Certain Adjustments. The Company will not engage in or be a party to any transaction
or event that would require the Conversion Rate to be adjusted pursuant to Section 8(G)(i), Section 8(H) or Section
8(I) to an amount that would result in the Conversion Price per share of Common Stock being less than the par value per share
of Common Stock.


 


(vii) Equitable
Adjustments to Prices. Whenever any provision of this Note requires the Company to calculate the average of the Last Reported
Sale Prices, or any function thereof, over a period of multiple days (including to calculate an adjustment to the Conversion Rate),
the Company will make proportionate adjustments, if any, to such calculations to account for any adjustment to the Conversion Rate
pursuant to Section 8(G)(i) that becomes effective, or any event requiring such an adjustment to the Conversion Rate where
the Ex-Dividend Date or effective date, as applicable, of such event occurs, at any time during such period.


 






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(viii) Calculation
of Number of Outstanding Shares of Common Stock. For purposes of this Section 8(G), the number of shares of Common Stock
outstanding at any time will (i) include shares issuable in respect of scrip certificates issued in lieu of fractions of shares
of Common Stock; and (ii) exclude shares of Common Stock held in the Company’s treasury (unless the Company pays any dividend
or makes any distribution on shares of Common Stock held in its treasury).


 


(ix) Calculations.
All calculations with respect to the Conversion Rate and adjustments thereto will be made to the nearest 1/10,000th of a share
of Common Stock (with 5/100,000ths rounded upward).


 


(x) Notice
of Conversion Rate Adjustments. Upon the effectiveness of any adjustment to the Conversion Rate pursuant to Section 8(G)(i),
the Company will promptly send notice to the Holder containing (i) a brief description of the transaction or other event on account
of which such adjustment was made; (ii) the Conversion Rate in effect immediately after such adjustment; and (iii) the effective
time of such adjustment.


 


(H) Voluntary
Adjustments.


 


(i) Generally.
To the extent permitted by law and applicable stock exchange rules, the Company, from time to time, may (but is not required to)
increase the Conversion Rate by any amount if (i) the Board of Directors determines in good faith that such increase is either
(x) in the best interest of the Company; or (y) advisable to avoid or diminish any income tax imposed on holders of Common Stock
or rights to purchase Common Stock as a result of any dividend or distribution of shares (or rights to acquire shares) of Common
Stock or any similar event; and (ii) such increase is irrevocable during such period. The Company and the Holder agree that any
such voluntary adjustment to the Conversion Rate and any conversion of any portion of the Note based upon any such voluntary adjustment
shall not constitute material non-public information with respect to the Company.


 


(ii) Notice
of Voluntary Increases. If the Board of Directors determines to increase the Conversion Rate pursuant to Section 8(H)(i),
then, no later than the first Business Day following such determination, the Company will send notice to the Holder of such increase,
the amount thereof and the period during which such increase will be in effect.


 


(I) Adjustments
to the Conversion Rate in Connection with an Event of Default. If an Event of Default occurs and the Conversion Date for the
conversion of a Note occurs during the related Event of Default Conversion Period, then, subject to Section 8(K), the Conversion
Rate applicable to such conversion will be increased by a number of shares equal to the Event of Default Additional Shares.


 


(J) Effect
of Certain Recapitalizations, Reclassifications, Consolidations, Mergers and Sales.


 


(i) Generally.
If there occurs:


 


(1) recapitalization,
reclassification or change of the Common Stock (other than (x) changes solely resulting from a subdivision or combination of the
Common Stock, (y) a change only in par value or from par value to no par value or no par value to par value and (z) stock splits
and stock combinations that do not involve the issuance of any other series or class of securities);


 






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(2) consolidation,
merger, combination or binding or statutory share exchange involving the Company;


 


(3) sale,
lease or other transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any
Person; or


 


(4) other
similar event,


 


and, in each case, as a result
of such occurrence, the Common Stock is converted into, or is exchanged for, or represents solely the right to receive, other securities
or other property (including cash or any combination of the foregoing) (such an event, a “Common Stock Change Event,”
and such other securities or other property, the “Reference Property,” and the amount and kind of Reference
Property that a holder of one (1) share of Common Stock would be entitled to receive on account of such Common Stock Change Event
(without giving effect to any arrangement not to issue fractional shares of securities or other property), a “Reference
Property Unit”), then, notwithstanding anything to the contrary in this Note, at the effective time of such Common Stock
Change Event, (x) the Conversion Consideration due upon conversion of any Note will be determined in the same manner as if each
reference to any number of shares of Common Stock in this Section 8 (or in any related definitions) were instead a reference
to the same number of Reference Property Units; (y) for purposes of Section 8(A), each reference to any number of shares
of Common Stock in such Section (or in any related definitions) will instead be deemed to be a reference to the same number of
Reference Property Units; and (z) for purposes of the definition of “Fundamental Change,” the term “Common Stock”
and “common equity” will be deemed to mean the common equity, if any, forming part of such Reference Property. For
these purposes, (I) the Daily VWAP of any Reference Property Unit or portion thereof that consists of a class of common equity
securities will be determined by reference to the definition of “Daily VWAP,” substituting, if applicable, the Bloomberg
page for such class of securities in such definition; and (II) the Daily VWAP of any Reference Property Unit or portion thereof
that does not consist of a class of common equity securities, and the Last Reported Sale Price of any Reference Property Unit or
portion thereof that does not consist of a class of securities, will be the fair value of such Reference Property Unit or portion
thereof, as applicable, determined in good faith by the Company (or, in the case of cash denominated in U.S. dollars, the face
amount thereof).


 


If the Reference Property consists
of more than a single type of consideration to be determined based in part upon any form of stockholder election, then the composition
of the Reference Property Unit will be deemed to be the weighted average of the types and amounts of consideration actually received,
per share of Common Stock, by the holders of Common Stock. The Company will notify the Holder of such weighted average as soon
as practicable after such determination is made.


 






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At or before the effective date
of such Common Stock Change Event, the Company and the resulting, surviving or transferee Person (if not the Company) of such Common
Stock Change Event (the “Successor Person”) will execute and deliver such instruments or agreements that (x)
provides for subsequent conversions of this Note in the manner set forth in this Section 8(J); (y) provides for subsequent
adjustments to the Conversion Rate pursuant to Section 8(G), Section 8(H) and Section 8(I) in a manner consistent
with this Section 8(J); and (z) contains such other provisions as the Company reasonably determines are appropriate to preserve
the economic interests of the Holder and to give effect to the provisions of this Section 8(J). If the Reference Property
includes shares of stock or other securities or assets of a Person other than the Successor Person, then such other Person will
also execute such instruments or agreements and such instruments or agreements will contain such additional provisions the Company
reasonably determines are appropriate to preserve the economic interests of the Holder.


 


(ii) Notice
of Common Stock Change Events. As soon as practicable after learning the anticipated or actual effective date of any Common
Stock Change Event, the Company will provide written notice to the Holder of such Common Stock Change Event, including a brief
description of such Common Stock Change Event, its anticipated effective date and a brief description of the anticipated change
in the conversion right of this Note.


 


(iii) Compliance
Covenant. The Company will not become a party to any Common Stock Change Event unless its terms are consistent with this Section
8(J).


 


(K) Limitations
on Conversions.


 


(i) Beneficial
Ownership Limitation. Notwithstanding anything to the contrary contained herein, the Company shall not effect the conversion
of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note, pursuant to the terms
and conditions of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after
giving effect to such conversion, the Holder together with the other Attribution Parties collectively would beneficially own in
excess of 4.99% (the "Maximum Percentage") of the number of shares of Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially
owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and
all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of this Note with respect to which
the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, unconverted portion of this Note beneficially owned by the Holder or any of the other Attribution
Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including,
without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other
Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 8(K)(i).
For purposes of this Section 8(K)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act. For purposes of this Note, in determining the number of outstanding shares of Common Stock the Holder may acquire upon the
conversion of this Note without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on
Form 8-K or other public filing with the Commission, as the case may be, (y) a more recent public announcement by the Company or
(3) any other written notice by the Company or the Transfer Agent (as defined in the Securities Purchase Agreement) setting forth
the number of shares of Common Stock outstanding (the "Reported Outstanding Share Number"). If the Company receives
a conversion notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported
Outstanding Share Number, the Company shall promptly notify the Holder in writing of the number of shares of Common Stock then
outstanding and, to the extent that such conversion notice would otherwise cause the Holder's beneficial ownership, as determined
pursuant to this Section 8(K)(i), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number
of conversion shares to be issued pursuant to such conversion notice. For any reason at any time, upon the written or oral request
of the Holder, the Company shall within one (1) Trading Day confirm in writing or by electronic mail to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder and any other Attribution
Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of
Common Stock to the Holder upon conversion of this Note results in the Holder and the other Attribution Parties being deemed to
beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined
under Section 13(d) of the Exchange Act), the number of shares so issued by which the Holder's and the other Attribution Parties'
aggregate beneficial ownership exceeds the Maximum Percentage (the "Excess Shares") shall be deemed null and void
and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Upon
delivery of a written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage
will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Notes that
is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of
this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including
for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior inability to convert this Note pursuant to this
paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination
of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 8(K)(i) to the extent necessary to correct this paragraph or any portion of this paragraph
which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 8(K)(i)
or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in
this paragraph may not be waived and shall apply to a successor holder of this Note.


 






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(ii) Stock
Exchange Limitations. Notwithstanding anything to the contrary in this Note, until the Requisite Stockholder Approval is obtained,
in no event will the number of shares of Common Stock issuable upon conversion or otherwise pursuant to this Note, including pursuant
to Section 8(I), together with all other shares, if any, theretofore issued upon conversion of this Note, including any
portion constituting an Early Redemption Payment, exceed [insert # representing one share less share than 20% of the outstanding
shares] shares in the aggregate. If any one or more shares of Common Stock are not delivered upon conversion of this Note
as a result of the operation of the preceding sentence (such shares, the “Withheld Shares”), then on the Conversion
Settlement Date for such conversion, the Company will pay to the Holder, in addition to the Conversion Consideration otherwise
due upon such conversion, cash in an amount equal to the product of (x) the number of such Withheld Shares; and (y) the Daily VWAP
per share of Common Stock on the Conversion Date for such conversion.


 


Section
9. Affirmative and Negative Covenants.


 


(A) Stay,
Extension and Usury Laws. To the extent that it may lawfully do so, the Company (A) agrees that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law (wherever
or whenever enacted or in force) that may affect the covenants or the performance of this Note; and (B) expressly waives all benefits
or advantages of any such law and agrees that it will not, by resort to any such law, hinder, delay or impede the execution of
any power granted to the Holder by this Note, but will suffer and permit the execution of every such power as though no such law
has been enacted.


 


(B) Corporate
Existence. Subject to Section 9(A), the Company will cause to preserve and keep in full force and effect:


 


(i) its
corporate existence and the corporate existence of its Subsidiaries in accordance with the organizational documents of the Company
or its Subsidiaries, as applicable; and


 


(ii) the
material rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries;


 


provided, however, that the
Company need not preserve or keep in full force and effect any such license or franchise if the Board of Directors determines in
good faith that (x) the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole; and (y) the loss thereof is not, individually or in the aggregate, materially adverse to the Holder.


 


(C) Ranking.
All payments due under this Note shall rank (i) pari passu with all Other Notes for so long as such Other Notes are secured indebtedness
of the Company and, except as set forth in clause (ii) of this paragraph, all unsecured indebtedness of the Company, (ii) effectively
senior to all unsecured indebtedness of the Company (including any Other Notes that are not at such time secured indebtedness of
the Company) to the extent of the value of the Collateral securing the Notes for so long as the Collateral so secures the Notes
in accordance with the terms hereof, (iii) senior to any Subordinated Indebtedness, and (iv) effectively junior to all indebtedness
in respect of a Traditional Working Capital Facility to the extent of the value of the Cash, Cash Equivalents, accounts receivable,
accounts and inventory of the Company and its Subsidiaries securing such indebtedness.


 






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(D) Indebtedness;
Amendments to Indebtedness. The Company shall not and shall not permit any Subsidiary to: (a) create, incur, assume, guarantee
or be or remain liable with respect to any Indebtedness, other than Permitted Indebtedness; (b) prepay any Indebtedness except
for (i) by the conversion of Indebtedness into equity securities and the payment of cash in lieu of fractional shares in connection
with such conversion, or (ii) a refinancing of the entire amount of such Indebtedness which does not impose materially more burdensome
terms upon the Company or its Subsidiaries than exist in such Indebtedness prior to such refinancing, but with a maturity date
which is later than one hundred eighty-one (181) days following the Maturity Date; or (c) amend or modify any documents or notes
evidencing any Indebtedness in any manner which shortens the maturity date or any amortization, redemption or interest payment
date thereof or otherwise imposes materially more burdensome terms upon the Company or its Subsidiaries than exist in such Indebtedness
prior to such amendment or modification without the prior written consent of Holder.


 


(E) Liens.
The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens.


 


(F)  Investments.
The Company shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries
so to do, other than Permitted Investments.


 


(G) Distributions.
The Company shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other equity
interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements provided under plans
approved by the Board of Directors, or (b) except with respect to the Company’s Series B Preferred Stock outstanding as of
the Issue Date, declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest, except
that a Subsidiary or Certus may pay dividends or make distributions to the Company or a parent company that is a direct or indirect
wholly owned Subsidiary of the Company), or (c) lend money to any employees, officers or directors (except as permitted under clauses
(F) or (G) of the definition of Permitted Investment), or guarantee the payment of any such loans granted by a third party in excess
of fifty thousand dollars ($50,000) in the aggregate or (d) waive, release or forgive any Indebtedness owed by any employees, officers
or directors in excess of fifty thousand dollars $50,000 in the aggregate.


 


(H) Transfers.
Except for Permitted Transfers and Permitted Investments, the Company shall not, and shall not allow any Subsidiary to, voluntarily
or involuntarily transfer, sell, lease, license, lend or in any other manner convey any equitable, beneficial or legal interest
in any material portion of its assets.


 






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(I)  Taxes.
The Company and its Subsidiaries shall pay when due all taxes, fees or other charges of any nature whatsoever (together with any
related interest or penalties) now or hereafter imposed or assessed against the Company and its Subsidiaries or their respective
assets or upon their ownership, possession, use, operation or disposition thereof or upon their rents, receipts or earnings arising
therefrom. The Company and its Subsidiaries shall file on or before the due date therefor all personal property tax returns. Notwithstanding
the foregoing, the Company and its Subsidiaries may contest, in good faith and by appropriate proceedings, taxes for which they
maintain adequate reserves therefor in accordance with GAAP.


 


(J) Minimum
Liquidity. The Company shall have at all times liquidity calculated as unrestricted, unencumbered Cash and Cash Equivalents
in one or more deposit accounts located in the United States and subject to a Control Agreement (as defined in the Security Agreement)
in favor of the Collateral Agent in a minimum amount equal to four million dollars ($4,000,000).


 


(K) Change
in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated
to be conducted by the Company and each of its Subsidiaries on the Issue Date or any business substantially related or incidental
thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its
or their corporate structure or purpose.


 


(L) Maintenance
of Properties, Etc. The Company shall maintain and preserve, and the Company shall cause each of its Subsidiaries to maintain
and preserve, all of its material properties which are necessary or useful (as determined by the Company in good faith) in the
proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times in
all material respects with the provisions of all leases to which it is a party as lessee or under which it occupies property, so
as to prevent any loss or forfeiture thereof or thereunder.


 


(M) Maintenance
of Intellectual Property. The Company will take, and the Company shall cause each of its Subsidiaries to maintain and preserve,
all of its material all action necessary or advisable to maintain all of the Intellectual Property Rights (as defined in the Securities
Purchase Agreement) of the Company or such Subsidiary that are necessary or material (as determined by the Company in good faith)
to the conduct of its business in full force and effect.


 


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


 


(O) Transactions
with Affiliates. Neither the Company nor any of its Subsidiaries shall not enter into, renew, extend or be a party to, any
transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of
property or assets of any kind or the rendering of services of any kind) with any affiliate, except transactions for fair consideration
and on terms no less favorable to it than would be obtainable in a comparable arm’s length transaction with a Person that
is not an affiliate thereof.


 






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(P) Restricted
Issuances. The Company shall not, directly or indirectly, without the prior written consent of the holders of a majority in
aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase
Agreement and the Notes) or (ii) issue any other securities or incur any Indebtedness that would cause a breach or Default under
the Notes or that by its terms would prohibit or restrict the performance of any of the Company’s obligations under the Notes,
including without limitation, the payment of interest and principal thereon.


 


(Q) Independent
Investigation. At the request of the Holder at any time when an Event of Default has occurred and is continuing, the Company
shall hire an independent, reputable investment bank selected by the Company and approved by the Holder to investigate as to whether
any breach of this Note has occurred (the “Independent Investigator”). If the Independent Investigator determines
that such breach of this Note has occurred, the Independent Investigator shall notify the Company of such breach and the Company
shall deliver written notice to the Holder of such breach. In connection with such investigation, the Independent Investigator
may, during normal business hours and upon signing a confidentiality agreement in a form reasonably acceptable to the Company,
inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries
and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its accountants
(including the accountants’ work papers) and any books of account, records, reports and other papers not contractually required
of the Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent
Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall
furnish the Independent Investigator with such financial and operating data and other information with respect to the business
and properties of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent
Investigator to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect
thereto to, the Company’s officers, directors, key employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the
Company and any Subsidiaries; provided that the Company’s chief financial officer and chief executive officer shall also
be invited to attend any discussion with a key employee or the independent public accountants), all at such reasonable times, upon
reasonable notice, and as often as may be reasonably requested.


 


(R) Upon
delivery by the Company to the Holder (or receipt by the Company from the Holder) 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 on or prior to 9:00 am, New York city
time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information
on a 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 the Holder explicitly in writing in such notice (or
immediately upon receipt of notice from the Holder, as applicable), and in the absence of any such written indication in such notice
(or notification from the Company immediately upon receipt of notice from the Holder), the Holder shall be entitled to presume
that information contained in the notice does not constitute material, non-public information relating to the Company or any of
its Subsidiaries. Nothing contained in this Section 9(R) shall limit any obligations of the Company, or any rights of the
Holder, under the Securities Purchase Agreement.


 






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(S) The
Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the Holder shall have no obligation
to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while
in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that
explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure
agreement, the Company acknowledges that the Holder may freely trade in any securities issued by the Company, may possess and use
any information provided by the Company in connection with such trading activity, and may disclose any such information to any
third party.


 


Section
10. Successors.


 


The Company will not
consolidate with or merge with or into, or (directly, or indirectly through one or more of its Subsidiaries) sell, lease or otherwise
transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, to another Person, other than the Holder or any of its Affiliates (a “Business Combination Event”),
unless:


 


(A) the
resulting, surviving or transferee Person either (x) is the Company or (y) if not the Company, is a corporation (the “Successor
Corporation”) duly organized and existing under the laws of the United States of America, any State thereof or the District
of Columbia that expressly assumes (by executing and delivering to the Holder, at or before the effective time of such Business
Combination Event, a supplement to this instrument) all of the Company’s obligations under this Note; and


 


(B) immediately
after giving effect to such Business Combination Event, no Default or Event of Default will have occurred and be continuing.


 


At the effective time
of any Business Combination Event, the Successor Corporation (if not the Company) will succeed to, and may exercise every right
and power of, the Company under this Note with the same effect as if such Successor Corporation had been named as the Company in
this Note, and, except in the case of a lease, the predecessor Company will be discharged from its obligations under this Note.


 


Section
11. Defaults and Remedies


 


(A) Events
of Default. “Event of Default” means the occurrence of any of the following:


 


(i) a
default in the payment when due of the Principal Amount, Maturity Principal Amount, Fundamental Change Repurchase Price, Company
Redemption Price or Early Redemption Payment of this Note;


 






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(ii) a
default for two (2) Business Days in the payment when due of interest on this Note;


 


(iii) a
default in the Company’s obligation to convert this Note in accordance with Section 8 upon the exercise of the conversion
right with respect thereto or upon Forced Conversion;


 


(iv) a
default in the Company’s obligation to deliver a Fundamental Change Notice pursuant to Section 6(C), and such default
continues for three (3) Business Days;


 


(v) a
materially false or inaccurate certification (including a false or inaccurate deemed certification) by the Company (A) that the
Equity Conditions are satisfied, (B) that there has been no failure of the Equity Conditions, or (C) as to whether any Event of
Default has occurred;


 


(vi) a
default in any of the Company’s obligations or agreements under this Note or the Transaction Documents (in each case, other
than a default set forth in clause (i), (ii) or (iii) of this Section 11(A)), or a breach of any representation
or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality,
which may not be breached in any respect) of the Securities Purchase Agreement; provided, however, that if such default
or breach can be cured, then such default or breach will not be an Event of Default unless the Company has failed to cure such
default within ten (10) days after its occurrence;


 


(vii) any
provision of any Transaction Document at any time for any reason (other than pursuant to the express terms thereof) ceases to be
valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof is contested, directly
or indirectly, by the Company or any of its Subsidiaries, or a proceeding is commenced by the Company or any of its Subsidiaries
or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof;


 


(viii) a
breach of any representation or warranty in any material respect (other than representations or warranties subject to material
adverse effect or materiality, which may not be breached in any respect) of any Transaction Document;


 


(ix) at
any time, this Note or any shares of Common Stock issuable upon conversion of this Note are not Freely Tradable;


 


(x) any
breach or default by the Company under Section 4(s) of the Securities Purchase Agreement;


 


(xi) the
Company fails to comply with Section 9(J) of this Note.


 


(xii) the
suspension from trading or failure of the Common Stock to be trading or listed on an Eligible Exchange for a period of ten (10)
consecutive Trading Days;


 


(xiii) any
breach or default by the Company under any Transaction Document except, in the case of a breach of a covenant or other term or
condition that is curable, only if such breach remains uncured for a period of ten (10) consecutive days;


 






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(xiv) a
default by the Company or any of its Subsidiaries with respect to any Indebtedness of at least two hundred fifty thousand dollars
($250,000) (or its foreign currency equivalent) in the aggregate of the Company or any of its Subsidiaries, whether such Indebtedness
exists as of the Issue Date or is thereafter created, subject to the lapse of any applicable notice or cure period provided therein;
provided, however that for the avoidance of doubt this Section 11(A)(xiv) shall not apply to Capital Leases;


 


(xv) one
or more final judgments, orders or awards (or any settlement of any litigation or other proceeding that, if breached, could result
in a judgment, order or award) for the payment of at least two hundred fifty thousand dollars ($250,000) (or its foreign currency
equivalent) in the aggregate (excluding any amounts covered by insurance pursuant to which the insurer has been notified and has
not denied coverage), is rendered against the Company or any of its Subsidiaries and remains unsatisfied and (i) enforcement proceedings
shall have been commenced by any creditor upon any such judgment, order, award or settlement or (ii) there shall be a period of
ten (10) consecutive Trading Days after entry thereof during which (A) a stay of enforcement thereof is not in effect or (B) the
same is not vacated, discharged, stayed or bonded pending appeal;


 


(xvi) (A)
the Company fails to timely file its quarterly reports on Form 10-Q or its annual reports on Form 10-K with the Commission in the
manner and within the time periods required by the Exchange Act, or (B) the Company withdraws or restates any such quarterly report
or annual report previously filed with the Commission in a manner that results in (A) the Company failing for any reason to satisfy
the requirements of Rule 144(c)(1) under the Securities Act, including, without limitation, the failure to satisfy the current
public information requirement under Rule 144(c) or (B) if the Company is or becomes an issuer as described in Rule 144(i)(1)(i),
the Company failing to satisfy any condition set forth in Rule 144(i)(2);


 


(xvii) any
Security Document shall for any reason fail or cease to create a separate valid and perfected and, except to the extent permitted
by the terms hereof or thereof, first priority Lien on the Collateral in favor of the Collateral Agent or any material provision
of any Security Document shall at any time for any reason cease to be valid and binding on or enforceable against the Company or
the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company
or any governmental authority having jurisdiction over the Company, seeking to establish the invalidity or unenforceability thereof;


 


(xviii) any
material damage to, or loss, theft or destruction of, any material portion of the Collateral (provided that any damage, loss, theft
or destruction of the Collateral that reduces the value of such Collateral by $250,000 or more shall be deemed to be material),
whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty
which causes, for more than sixty (60) consecutive days, the cessation or substantial curtailment of revenue producing activities
at any facility of the Company or any Subsidiary, if any such event or circumstance could reasonably be expected have a Material
Adverse Effect (as defined in the Securities Purchase Agreement). For clarity, an Event of Default under this Section 11(A)(xviii)
will not require any curtailment of revenue;


 






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(xix) the
Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion
or exercise (as the case may be) of any Securities (as defined in the Securities Purchase Agreement) acquired by the Holder under
the Securities Purchase Agreement (including this Note) as and when required by such Securities or the Securities Purchase Agreement,
unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for at least five
(5) Trading Days;


 


(xx) the
Company or any of its Significant Subsidiaries, pursuant to or within the meaning of any Bankruptcy Law, either:


 


(1) commences
a voluntary case or proceeding;


 


(2) consents
to the entry of an order for relief against it in an involuntary case or proceeding;


 


(3) consents
to the appointment of a custodian of it or for any substantial part of its property;


 


(4) makes
a general assignment for the benefit of its creditors;


 


(5) takes
any comparable action under any foreign Bankruptcy Law; or


 


(6) generally
is not paying its debts as they become due; or


 


(xxi) a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that either:


 


(1) is
for relief against Company or any of its Significant Subsidiaries in an involuntary case or proceeding;


 


(2) appoints
a custodian of the Company or any of its Significant Subsidiaries, or for any substantial part of the property of the Company or
any of its Significant Subsidiaries;


 


(3) orders
the winding up or liquidation of the Company or any of its Significant Subsidiaries; or


 


(4) grants
any similar relief under any foreign Bankruptcy Law,


 


and, in each case under this Section
11(A)(xxi), such order or decree remains unstayed and in effect for at least thirty (30) days.


 






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(B) Acceleration.


 


(i) Automatic
Acceleration in Certain Circumstances. If an Event of Default set forth in Section 11(A) (xx) or (xxi) occurs
with respect to the Company (and not solely with respect to a Significant Subsidiary of the Company), then the then outstanding
portion of the Maturity Principal Amount of, and all accrued and unpaid interest on, this Note will immediately become due and
payable without any further action or notice by any Person.


 


(ii) Optional
Acceleration. If an Event of Default (other than an Event of Default set forth in Section 11(A) (xx) or (xxi)
with respect to the Company and not solely with respect to a Subsidiary of the Company) occurs and is continuing, then the Holder,
by notice to the Company, may declare this Note to become due and payable immediately for cash in an amount equal to the Event
of Default Acceleration Amount.


 


(C) Notice
of Events of Default. Promptly, but in no event later than two (2) Business Days after an Event of Default, the Company will
provide written notice of such Event of Default (an “Event of Default Notice”) to the Holder, which Event of
Default Notice shall include (i) a reasonable description of the applicable Event of Default, (ii) a certification as to whether,
in the opinion of the Company, such Event of Default is capable of being cured and, if applicable, a reasonable description of
any existing plans of the Company to cure such Event of Default and (iii) a certification as to the date the Event of Default occurred
and, if cured on or prior to the date of such Event of Default Notice, the date of such cure.


 


Section
12. Ranking.


 


The indebtedness represented
by this Note will constitute the senior secured obligations of the Company; provided, that upon the consummation of a Traditional
Working Capital Facility, indebtedness represented by this Note will be secured on a second priority basis to the liens securing
the Indebtedness in respect of such Traditional Working Capital Facility over the Cash, Cash Equivalents, accounts receivable,
accounts and inventory of the Company and its Subsidiaries securing such Traditional Working Capital Facility and will constitute
the junior secured obligations of the Company.


 


Section
13. Replacement Notes.


 


If the Holder of this
Note claims that this Note has been mutilated, lost, destroyed or wrongfully taken, then the Company will issue, execute and deliver
a replacement Note upon surrender to the Company of such mutilated Note, or upon delivery to the Company of evidence of such loss,
destruction or wrongful taking reasonably satisfactory to the Company. In the case of a lost, destroyed or wrongfully taken Note,
the Company may require the Holder to provide such security or an indemnity that is reasonably satisfactory to the Company to protect
the Company from any loss that it may suffer if this Note is replaced.


 






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Section
14. Notices.


 


Any notice or communication
to the Company will be deemed to have been duly given if in writing and delivered in person or by first class mail (registered
or certified, return receipt requested), facsimile transmission, electronic transmission (including e-mail) or other similar means
of unsecured electronic communication or overnight air courier guaranteeing next day delivery, or to the other’s address,
which initially is as follows:


 


Workhorse Group Inc.


100 Commerce Drive


Loveland, Ohio 45140


Attention: Chief Financial Officer


Email address: greg.ackerson@workhorse.com


 


The Company, by notice
to the Holder, may designate additional or different addresses for subsequent notices or communications.


 


Any notice or communication
to the Holder will be by email to its email address, which initially are as set forth in the Securities Purchase Agreement. The
Holder, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.


 


If a notice or communication
is mailed in the manner provided above within the time prescribed, it will be deemed to have been duly given, whether or not the
addressee receives it.


 


Section
15. Successors.


 


All agreements of the
Company in this Note will bind its successors.


 


Section
16. Severability.


 


If any provision of
this Note is invalid, illegal or unenforceable, then the validity, legality and enforceability of the remaining provisions of this
Note will not in any way be affected or impaired thereby.


 


Section
17. Headings, Etc.


 


The headings of the
Sections of this Note have been inserted for convenience of reference only, are not to be considered a part of this Note and will
in no way modify or restrict any of the terms or provisions of this Note.


 


Section
18. Amendments


 


This Note may not be
amended or modified unless in writing by the Company and the Required Holders (as defined in the Securities Purchase Agreement),
and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to
benefit.


 






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Section
19. Governing Law; Waiver of Jury Trial.


 


THE INTERNAL LAW OF
THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS NOTE. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.


 


Section
20. Submission to Jurisdiction.


 


The Company (A) agrees
that any suit, action or proceeding against it arising out of or relating to this Note may be instituted in any U.S. federal court
with applicable subject matter jurisdiction sitting in The City of New York; (B) waives, to the fullest extent permitted by applicable
law, (i) any objection that it may now or hereafter have to the laying of venue of any such suit, action or proceeding; and (ii)
any claim that it may now or hereafter have that any such suit, action or proceeding in such a court has been brought in an inconvenient
forum; and (C) submits to the nonexclusive jurisdiction of such courts in any such suit, action or proceeding.


 


Section
21. Enforcement Fees.


 


The Company agrees
to pay all costs and expenses of the Holder incurred as a result of enforcement of this Note and the collection of any amounts
owed to the Holder hereunder (whether in cash, Common Stock or otherwise), including, without limitation, reasonable attorneys’
fees and expenses.


 


Section
22. Collateral Agent.


 


(A) Appointment;
Authorization.  The Holder hereby irrevocably appoints, designates and authorizes HT Investments MA, LLC as collateral agent
to take such action on its behalf under the provisions of this Note and each Security Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of each Security Document, together with such powers as are reasonably
incidental thereto. The provisions of this Section 22 are solely for the benefit of the Collateral Agent, and the Company
shall not have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term
“agent” herein or in any Security Document (or any other similar term) with reference to the Collateral Agent is not
intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law.
Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship
between contracting parties. Notwithstanding any provision to the contrary contained elsewhere in this Note, any Security Document
or any other agreement, instrument or document related hereto or thereto, the Collateral Agent shall not have any duty or responsibility
except those expressly set forth herein, and no implied covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Note, any Security Document or any other agreement, instrument or document related hereto or thereto or
otherwise exist against the Collateral Agent.


 


(B) Delegation
of Duties. The Collateral Agent may perform any and all of its duties and exercise its rights and powers hereunder or under
any Security Document by or through any one or more sub-agents appointed by the Collateral Agent. The Collateral Agent and any
such sub-agent may perform any and all of its duties and exercise its rights and powers by or through its Affiliates, partners,
directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives, or the partners, directors,
officers, employees, agents, trustees, administrators, managers, advisors and representatives of any of its Affiliates (collectively,
the “Related Parties”). The exculpatory provisions of this Section 22 shall apply to any such sub-agent
and to the Related Parties of the Collateral Agent and any such sub-agent. The Collateral Agent shall not be responsible for the
negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and
non-appealable judgment that the Collateral Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.


 






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(C) Exculpatory
Provisions. 


 


(i) The
Collateral Agent shall not have any duties or obligations except those expressly set forth in the Security Documents, and its duties
shall be administrative in nature. Without limiting the generality of the foregoing, the Collateral Agent: (i) shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing; (ii)
shall not have any duty to take any discretionary action or exercise any discretionary powers; and (iii) shall not, except as expressly
set forth in the Security Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information
relating to the Company or any of its Affiliates that is communicated to or obtained by the Collateral Agent or any of its Affiliates
in any capacity.


 


(ii) The
Collateral Agent shall not be liable for any action taken or not taken by it in the absence of its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment. The Collateral Agent shall
be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of
Default is given to the Collateral Agent in writing by the Company.


 


(iii) The
Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (a) any statement, warranty or representation
made in or in connection with this Note, any Security Document or any other agreement, instrument or document related hereto or
thereto, (b) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith
or therewith, (c) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Default or Event of Default, (d) the validity, enforceability, effectiveness or genuineness
of this Note, any Security Document or any other agreement, instrument or document related hereto or thereto, or (e) any failure
of the Company or any other party to this Note, any Security Agreement or any other agreement, instrument or document related hereto
or thereto to perform its obligations hereunder or thereunder. The Collateral Agent shall not be under any obligation to ascertain
or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Note, any Security
Document or any other agreement, instrument or document related hereto or thereto, or to inspect the properties, books or records
of the Company or any Affiliate of the Company.


 






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(D) Reliance
by Collateral Agent. The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message,
Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise
authenticated by the proper Person. The Collateral Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent
may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action
taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.


 


(E) Successor
Agent. The Collateral Agent may resign as the Collateral Agent at any time upon ten (10) days’ prior notice to the Holder
and each Other Holder and the Company. If the Collateral Agent resigns under this Note, the Holder and each Other Holder shall
appoint a successor agent. If no successor agent is appointed prior to the effective date of the resignation of the Collateral
Agent, the Collateral Agent may appoint a successor Collateral Agent on behalf of the Holder and each Other Holder after consulting
with the Holder and each other Holder. Upon the acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the term “the Collateral Agent”
shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as the Collateral Agent shall be
terminated. After the Collateral Agent’s resignation hereunder as the Collateral Agent, the provisions of this Section
22 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was the Collateral
Agent. If no successor agent has accepted appointment as the Collateral Agent by the date which is thirty (30) days following a
retiring Collateral Agent’s notice of resignation, a retiring Collateral Agent’s resignation shall nevertheless thereupon
become effective and the Holder, together with each Other Holder, shall perform all of the duties of the Collateral Agent hereunder
until such time as the Holder and each Other Holder shall appoint a successor agent as provided for above.


 


(F) Non-Reliance
on the Collateral Agent. The Holder acknowledges that it has, independently and without reliance upon the Collateral Agent
or any of its Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Note. The Holder also acknowledges that it will, independently and without reliance upon the Collateral
Agent or any of its Related Parties and based on such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based upon this Note, any Security Document or any related
agreement or any document furnished hereunder or thereunder.


 


(G) Collateral
Matters. The Holder irrevocably authorizes the Collateral Agent to release any Lien granted to or held by the Collateral Agent
under any Security Document (i) when all Obligations (as defined in the Security Agreement) have been paid in full or a Traditional
Working Capital Facility is consummated; (ii) constituting property sold or to be sold or disposed of as part of or in connection
with any sale or other disposition permitted under this Note and each other agreement, instrument or document related hereto (it
being agreed and understood that the Collateral Agent may conclusively rely without further inquiry on a certificate of an officer
of the Company as to the sale or other disposition of property being made in compliance with this Note and each other agreement,
instrument or document related hereto); or (iii) if approved, authorized or ratified in writing by the Holder and each Other Holder.
The Collateral Agent shall have the right, in accordance with the Security Documents to sell, lease or otherwise dispose of any
Collateral (as defined in the Security Agreement) for cash, credit or any combination thereof, and the Collateral Agent may purchase
any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may credit
bid and setoff the amount of such price against the Obligations.


 






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(H) Reimbursement
by Holder and Other Holders.  To the extent that the Company for any reason fails to indefeasibly pay any amount required under 
Sections 4(e) or 9(k) of the Securities Purchase Agreement to be paid by it to the Collateral Agent (or any sub-agent thereof)
or any Related Party of the Collateral Agent (or any sub-agent thereof), the Holder hereby agrees, jointly and severally with each
Other Holder, to pay to the Collateral Agent (or any such sub-agent) or such Related Party of the Collateral Agent (or any sub-agent
thereof), as the case may be, such unpaid amount.


 


(I) Marshaling;
Payments Set Aside. Neither the Collateral Agent nor the Holder shall be under any obligation to marshal any assets in favor
of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes
a payment or payments to the Collateral Agent, or the Collateral Agent enforces its Liens or exercises its rights of set-off, and
such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Collateral Agent
in its discretion) to be repaid to a trustee, receiver or any other party in connection with any bankruptcy, insolvency or similar
proceeding, or otherwise, then (i) to the extent of such recovery, the obligation hereunder or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or set-off had not occurred and (ii) the Holder agrees to pay to the Collateral Agent upon demand its share of the total amount
so recovered from or repaid by the Collateral Agent to the extent paid to the Holder.


 


* * *


 




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CONVERSION NOTICE


 


Workhorse
Group Inc.


 


Senior Secured Convertible Note due 2023


 


Subject to the terms of this Note, by
executing and delivering this Conversion Notice, the undersigned Holder of this Note directs the Company to convert the following
Principal Amount of this Note: $_________________,000 in accordance with the following details.


 


		o	Check if the Conversion Date occurs during an Event of
Default Conversion Period.



 


	Shares of Common Stock to be delivered:	 
	 	 
	 	 
	Accrued interest amount:	 
	 	 
	 	 
	DTC Participant Number:	 
	 	 
	 	 
	DTC Participant Name:	 
	 	 


 


	Date:	 	 	 
	 	 	 	(Legal Name of Holder)


 


	 	By:	            
	 	 	Name:	 
	 	 	 	Title:	 


 




     


     


    

 


		o	Check if the Conversion Rate is at a rate other than is
otherwise currently applicable (counter signature by the Company is not required unless a Conversion Rate other than the currently
applicable Conversion Rate is requested).



 


Requested Conversion Rate: 


 


___________________________________


 


	Date:	 	 	 


 


	 	Workhorse Group Inc.
	 	 
	 	By:	            
	 	 	Name:	 
	 	 	 	Title: