Document:

Exhibit 10.1

 

Execution Version

 

CONSENT AGREEMENT

 

This Consent Agreement (the “Agreement”), dated as of May 22, 2017 (the “Effective Date”), is entered into by and among (i) the holders of the Notes listed on Schedule 1 hereto (together with their respective permitted successors and assigns, the “Initial Consenting Holders”), which hold a majority of each of the GEI Notes and the GAG Notes, (ii) GenOn Energy, Inc., on behalf of itself and each of its direct and indirect subsidiaries, (collectively, “GenOn”), and (iii) NRG Energy, Inc., on behalf of itself and each of its wholly-owned direct and indirect subsidiaries, as of the date hereof, other than GenOn (collectively, “NRG”).  Each of NRG, GenOn and the Initial Consenting Holders is also sometimes referred to herein as a “Party” and collectively as the “Parties.”  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in Schedule 2 attached hereto.

 

1.                                     Agreement in Principle; Summary Term Sheet.  The undersigned Parties hereby affirm their agreement in principle regarding the reorganization of GenOn’s capital structure (the “Restructuring”) and the settlement of certain claims and causes of action against NRG (the “Settlement”) pursuant to the terms set forth in the summary term sheet attached hereto as Exhibit A (the “Summary Term Sheet”), subject to, among other things, the full prior approval of the board of directors of GenOn, the independent governance committee of GenOn, and the board of directors of NRG, and satisfactory legal documentation.  The Summary Term Sheet is hereby incorporated by reference as if fully set forth in this Agreement.

 

2.                                     Covenants of the Parties.  For so long as this Agreement has not been terminated in accordance with its terms, each Party agrees and covenants severally (but not jointly) that it shall:

 

a.                                      use commercially reasonable efforts and work in good faith to consummate the Restructuring and the Settlement, including, without limitation, to enter into a restructuring support agreement in form and substance reasonably satisfactory to the Parties (the “Agreed RSA”) pursuant to which the Parties will agree to support a chapter 11 plan (the “Agreed Plan”) to implement the Restructuring and the Settlement, with each of the Agreed RSA and the Agreed Plan incorporating the terms of the Summary Term Sheet; and

 

b.                                      not, directly or indirectly, support or consent to any reorganization, restructuring, recapitalization, refinancing or other transaction for GenOn that is materially inconsistent with the Summary Term Sheet; provided, however, that, for the avoidance of doubt, the size and final terms of the financing are subject to continuing discussion with GenOn.  Notwithstanding anything to the contrary herein, nothing in this Agreement shall (i) restrict the legal and financial advisors of any Party in any manner, including without limitation, from communicating with legal or financial advisors for another Party or other holders of the Notes in any respect, (ii) be deemed or construed as a waiver of attorney-client privilege or constrain the right, ability, and obligation of counsel to any Party to act in accordance with the rules of professional responsibility, or (iii) constrain any Party from acting in accordance with its fiduciary duties.  For the avoidance of doubt, nothing in this Agreement shall limit the rights of any holder of Notes to initiate, prosecute, appear, or participate as a party in interest in any litigation opposing the any refinancing proposal affecting GEI, GAG or their subsidiaries, so

 

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long as such appearance, initiation, prosecution or participation and the positions advocated in connection therewith are not inconsistent with this Agreement or the Summary Term Sheet.

 

3.                                     Consent Fee.  By its execution and delivery of this Agreement, each Initial Consenting Holder shall have earned a pro rata share of the early consent/participation fee on the terms set forth in the Summary Term Sheet (the “Consent Fee”), with respect to its holdings of GEI Notes and GAG Notes set forth on its signature page hereto as of the date hereof (the “Consent Fee Notes”), subject to consummation of the Restructuring.  The Consent Fee shall be paid to each Initial Consenting Holder and each Permitted Transferee on the effective date of the Agreed Plan with respect to the Consent Fee Notes it holds as of such date, provided that all necessary court approvals have been obtained and such Initial Consenting Holder or Permitted Transferee has not breached any material provision of this Agreement or the Agreed RSA.  For the avoidance of doubt, any Initial Consenting Holder or Permitted Transferee that does not execute the Agreed RSA shall have waived its right to receive the Consent Fee with respect to its Consent Fee Notes.  The deadline and conditions for payment of the Consent Fee (but not the amount or participation therein by an Initial Consenting Holder) may be extended, waived, or modified, as applicable, by GenOn in its sole discretion.

 

4.                                     Representations and Warranties.

 

a.                                      Each Party (solely on its own behalf and not on behalf of any other Party) represents and warrants on a several (but not joint) basis to each other Party, that, as of the date hereof, and subject to the terms hereof: (i) this Agreement constitutes the legally valid and binding obligation of such Party, as applicable, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability; and (ii) such Party does not have actual knowledge of the occurrence of any event that, due to any fiduciary or similar duty to any other person, would prevent it from taking any action required of it under this Agreement.

 

b.                                      Each Initial Consenting Holder (solely on its own behalf and not on behalf of any other Initial Consenting Holder) represents and warrants on a several (but not joint) basis to each other Party, that, as of the date hereof: (i) such Party (A) either (1) is the sole beneficial owner of the principal amount of Notes set forth on its signature page to this Agreement, or (2) has investment or voting discretion with respect to the principal amount of Notes set forth on its signature page to this Agreement and has the power and authority to bind the beneficial owner(s) of such Notes to the terms of this Agreement, and (B) has full power and authority to act on behalf of, vote, and consent to matters concerning such Notes and to dispose of, exchange, assign, and transfer such Notes, including the power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and (ii) such Party has made no assignment, sale, participation, grant, conveyance, pledge, or other transfer of, and has not entered into any other agreement to assign, sell, use, participate, grant, convey, pledge, or otherwise transfer, in whole or in part, any portion of its right, title, or interests in any Notes that are subject to this Agreement that conflict with the representations and warranties of such Party herein or would render such Party otherwise unable to comply with this Agreement and perform its obligations hereunder.

 

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5.                                     Transfers of Claims.  Each Initial Consenting Holder (each, a “Transferor”) agrees that, so long as this Agreement has not been terminated in accordance with its terms, it shall not sell, loan, issue, pledge, hypothecate, assign, transfer, or otherwise dispose of (including by participation) (the “Transfer”), directly or indirectly, in whole or in part, any Notes, or any option thereon or any right or interest therein, to any affiliated or unaffiliated party, including any party in which it may hold a direct or indirect beneficial interest (each, an “Intended Transferee”), unless: (a) the Intended Transferee is a Party to this Agreement; or (b) if the Intended Transferee is not a Party to this Agreement, prior to the effectiveness of the Transfer, such Intended Transferee delivers to the Transferor, counsel to GenOn, counsel to NRG, and counsel for the Ad Hoc Group an executed copy of a transfer agreement in the form of Exhibit B attached hereto (a “Transfer Agreement”) (it being understood that any Transfer shall not be effective as against GenOn until notification of such Transfer and a copy of the executed Transfer Agreement is received by counsel to GenOn, in each case, on the terms set forth herein).

 

An Intended Transferee that satisfies the foregoing requirements is a “Permitted Transferee,” and such Transfer, a “Permitted Transfer.”  Upon the consummation of a Permitted Transfer, the Permitted Transferee shall be deemed to be an Initial Consenting Holder hereunder with respect to the Notes purchased from an Initial Consenting Holder (the “Purchased Notes”) and shall become subject to all obligations and covenants of the Parties hereunder with respect to the Purchased Notes and, to the extent the transferee is already a beneficial owner of Notes, with respect to all such Notes, which shall be set forth in the applicable Transfer Agreement (the “Additional Notes”).  Upon the consummation of a Transfer in accordance with the terms of this Agreement, the Transferor shall be deemed to relinquish its rights and be released from its obligations under this Agreement solely with respect to the applicable Purchased Notes.  For the avoidance of doubt, subject to Section 3 hereof, a Permitted Transferee shall be entitled to the Consent Fee with respect to any Consent Fee Notes it has purchased, but such entitlement shall not extend to any Additional Notes by virtue of the Transfer of Consent Fee Notes.  For the avoidance of doubt, any Transferor that is a member of the Steering Committee shall retain all its rights to backstop the Financing described in the Summary Term Sheet and such rights shall not accompany any Transfer.  Each Party agrees that any Transfer or purported Transfer that is not a Permitted Transfer shall be void ab initio.

 

For the avoidance of doubt, this Agreement shall in no way be construed to preclude any Party from acquiring additional Notes or any other claims against or interests in GEI or GAG; provided, that any Notes acquired shall, upon acquisition, automatically be deemed to be subject to all the terms of this Agreement and, provided, further, that each Party agrees that, within three business days of such acquisition, it shall deliver an Acquisition Notice in the form of Exhibit C attached hereto to counsel for GenOn and the Ad Hoc Group.

 

Notwithstanding the foregoing, a Qualified Marketmaker that acquires any Notes subject to this Agreement with the purpose and intent of acting as a Qualified Marketmaker for such Notes, shall not be required to execute and deliver to counsel a Transfer Agreement or Acquisition Notice in respect of such Notes if such Qualified Marketmaker subsequently makes a Permitted Transfer of such Notes (by purchase, sale, participation or otherwise) within three (3) business days of its acquisition to a Permitted Transferee (including, for the avoidance of doubt, the requirement that such transferee execute and deliver a Transfer Agreement concurrent with or

 

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prior to the Transfer from such Qualified Marketmaker).  To the extent an Initial Consenting Holder is acting solely in its capacity as a Qualified Marketmaker, it may Transfer (by purchase, sale, participation or otherwise) any right, title or interest in Notes that the Qualified Marketmaker acquires in such  capacity from a holder of Notes who is not an Initial Consenting Holder without the requirement that the transferee be a Permitted Transferee.

 

For purposes of this Agreement, “Qualified Marketmaker” means an entity that (i) holds itself out to the public or the applicable private markets as standing ready in the ordinary course of its business to purchase from customers and sell to customers debt securities such as the Notes or enter with customers into long and short positions in debt securities such as the Notes, in its capacity as a dealer or market maker in such debt securities and (ii) is in fact regularly in the business of making a market in debt securities.

 

6.                                      Termination.  This Agreement shall terminate, and all obligations of the Parties shall immediately terminate and be of no further force and effect, upon the earliest to occur of:

 

a.              11:59 p.m. on May 26, 2017 (the “Termination Time”);

 

b.              the execution and delivery of the Agreed RSA; or

 

c.               delivery of written notice of termination (which may be by electronic mail) to all Parties from NRG; provided that NRG shall be entitled to deliver such notice only for so long as Initial Consenting Holders representing less than a majority of each of the GEI Notes and the GAG Notes have executed this Agreement.

 

GenOn shall have the right to terminate this Agreement at any time, solely as to GenOn, upon delivery of written notice of such termination (which may be by electronic mail) to all Parties and, upon such delivery, the obligations of GenOn shall immediately terminate and be of no further force and effect; provided that such termination as to GenOn shall not effect a termination of this Agreement as between the Initial Consenting Holders and NRG.

 

7.                                      Amendments; Execution.  Except as otherwise provided herein, this Agreement may not be modified, amended, or supplemented without prior written agreement signed by GenOn, NRG, Supermajority GEI Consenting Holders and Supermajority GAG Consenting Holders.  This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed and delivered by facsimile or electronic mail of an executed counterpart of a signature page in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.  Notwithstanding the foregoing, the Termination Time may be extended by electronic mail exchanged by counsel to NRG, GenOn and the Ad Hoc Group; provided that counsel to the Ad Hoc Group has received email confirmations of the extension from Supermajority GEI Consenting Holders and Supermajority GAG Consenting Holders.

 

8.                                      No Solicitation.  Notwithstanding anything to the contrary, this Agreement is not and shall not be deemed to be (a) a solicitation of consents to the Agreed Plan or any other chapter 11 plan or (b) an offer for the issuance, purchase, sale, exchange, hypothecation, or other

 

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transfer of securities or a solicitation of an offer to purchase or otherwise acquire securities for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended.

 

9.                                      No Third Party Beneficiaries; Relationship Among the Parties.  Unless otherwise expressly stated herein, this Agreement shall be solely for the benefit of the Parties and no other person or entity shall be a third party beneficiary hereof.  Nothing herein shall be deemed or construed to create a partnership, joint venture or other association between or among any of the Parties.  Each Party agrees and understands that no Party has any fiduciary duty or other duty of trust or confidence (except to the extent expressly set forth in this Agreement) in any form to any other Party or any third party arising from or relating to this Agreement.

 

10.                               Entire Agreement.  This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements (oral and written) and all other prior negotiations.

 

11.                               Governing Law; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts made and to be performed in such state, without giving effect to the conflicts of law principles thereof (except for section 5-1401 of the New York General Obligations Law).  Any action brought in connection with this Agreement shall be brought in the federal or state courts located in the Borough of Manhattan in the City of New York, and the Parties hereby irrevocably consent to the jurisdiction of such courts and waive any objections as to venue or inconvenient forum. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

12.                               No Monetary Liability.  For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall GenOn or NRG incur any liability to any Party in connection with the execution of this Agreement and the other Parties to this Agreement expressly waive any right to seek damages from GenOn or NRG in connection herewith.  Notwithstanding the foregoing, GenOn and NRG shall keep confidential and shall not disclose to any other person any information regarding any Initial Consenting Holder’s or its affiliates’ holdings of Notes, or any Permitted Transferee’s or its affiliates’ holdings of Notes, without such Initial Consenting Holder’s or Permitted Transferee’s prior written consent.

 

13.                               Notices.  All notices hereunder shall be in writing and shall be deemed duly given only upon receipt by electronic mail, facsimile, courier, nationally recognized overnight delivery service or by registered or certified mail (return receipt requested) to the addresses or facsimile numbers set forth on each Party’s signature page hereto (or at such other addresses or facsimile numbers as shall be specified by like notice); notices hereunder must be given to each Party and counsel to the Ad Hoc Group in order to be effective.  Notices to counsel for the Ad Hoc Group shall be delivered to the following addresses and facsimile numbers:

 

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

 

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Attn.:                 Keith H. Wofford

Stephen Moeller-Sally

Marc B. Roitman

Email:            keith.wofford@ropesgray.com

ssally@ropesgray.com

marc.roitman@ropesgray.com

Fax:                       212.596.9090

 

Any notice given by courier, national recognized overnight delivery service, or registered or certified mail shall be effective when received at the address provided in this Section 12.  Any notice given by facsimile shall be effective upon oral or machine confirmation of transmission.  Any notice given by electronic mail shall be effective upon receipt.

 

14.                               Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

 

[signature pages follow]

 

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The undersigned Parties hereby execute this Agreement as of the date first set forth above:

 

	
GENON ENERGY, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Mark A. McFarland
    	
 
    
	
Name:
    	
Mark A. McFarland
    	
 
    
	
Title:
    	
Chief Executive Officer
    	
 
    
				

 

Notice address:

 

GenOn Energy, Inc.

804 Carnegie Center

Princeton, NJ 08540

Attn:       Mac McFarland, Chief Executive Officer

Email:    mac@genon.com

 

with copies (which shall not constitute notice) to:

 

Kirkland & Ellis LLP
 300 North LaSalle Street
 Chicago, IL 60654
 Attn:       David R. Seligman, P.C. and Steven N. Serajeddini
 Email:    david.seligman@kirkland.com

steven.serajeddini@kirkland.com

 

 

	
NRG ENERGY, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Kirkland Andrews
    	
 
    
	
Name:
    	
Kirkland Andrews
    	
 
    
	
Title:
    	
Chief Financial Officer
    	
 
    

 

Notice address:

 

NRG Energy, Inc.

804 Carnegie Center

Princeton, NJ 08540-6213

Attn.:  Brian Curci, General Counsel

Email:  brian.curci@nrg.com

 

with copies (which shall not constitute notice) to:

 

Baker Botts LLP

2001 Ross Avenue

Dallas, Texas 75201

Attn.:      C. Luckey McDowell and Ian E. Roberts

Email:    luckey.mcdowell@bakerbotts.com

ian.roberts@bakerbotts.com

 

-and-

 

Baker Botts LLP

30 Rockefeller Plaza No. 4340

New York, NY 10112

Attn.:      Emanuel C. Grillo

Email: emanuel.grillo@bakerbotts.com

 

 

[NAME OF INITIAL CONSENTING HOLDER]

 

	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title
    	
 
    

 

Notice address:

 

 

 

 

Name of contact person:

 

Telephone number:

 

E-mail address:

 

Facsimile number:

 

	
Principal amount of Notes held:
    
	
 
    
	
$                  of 2017 Notes.
    
	
 
    
	
$                  of 2018 Notes.
    
	
 
    
	
$                  of 2020 Notes.
    
	
 
    
	
$                  of 2021 Notes.
    
	
 
    
	
$                  of 2031 Notes.
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

 

 

SCHEDULE 1

 

INITIAL CONSENTING HOLDERS

 

[List Initial Consenting Holders here]

 

 

SCHEDULE 2

ADDITIONAL DEFINITIONS

 

“2017 Notes” means the 7.875% Senior Notes due 2017 issued by GEI.

 

“2018 Notes” means the 9.50% Senior Notes due 2018 issued by GEI.

 

“2020 Notes” means the 9.875% Senior Notes due 2020 issued by GEI.

 

“2021 Notes” means the 8.50% Senior Notes due 2021 issued by GAG.

 

“2031 Notes” means the 9.125% Senior Notes due 2031.

 

“Ad Hoc Group” means the ad hoc group of holders of GEI Notes and GAG Notes represented by Ropes & Gray LLP and Ducera Partners.

 

“GAG” means GenOn Americas Generation, LLC.

 

“GAG Notes” means, collectively, the 2021 Notes and the 2031 Notes.

 

“GEI” means GenOn Energy, Inc.

 

“GEI Notes” means, collectively, the 2017 Notes, the 2018 Notes and the 2020 Notes.

 

“Notes” means, collectively, the GEI Notes and the GAG Notes.

 

“Noteholders” has the meaning given in the recitals.

 

“Steering Committee” means the steering committee of the Ad Hoc Group, which is comprised of Benefit Street Partners, Brigade Capital Management, LP, Franklin Mutual Advisers, J.P. Morgan Asset Management, PGIM, Solus Alternative Asset Management LP, Sound Point Capital Management, L.P., and York Capital Management.

 

“Supermajority GAG Consenting Holders” means, at any relevant time, Initial Consenting Holders holding no less than two-thirds of the GAG Notes held by all Initial Consenting Holders.

 

“Supermajority GEI Consenting Holders” means, at any relevant time, Initial Consenting Holders holding no less than two-thirds of the GEI Notes held by all Initial Consenting Holders.

 

 

Exhibit A

 

The Summary Term Sheet

 

 

Exhibit B

 

Form of Transfer Agreement

 

 

Transfer Agreement

 

Reference is made to the Consent Agreement dated as of May 22, 2017 (the “Agreement”)(1), by and among [Please insert Transferor’s Name] (the “Transferor”), and the other Parties signatory thereto.

 

The undersigned (the “Transferee”) hereby acknowledges that it has reviewed the Agreement and hereby agrees to be bound by the terms and conditions thereof binding on the Initial Consenting Holders to the same extent the Transferor was thereby bound, without modification and shall be deemed a Party to the Agreement.  The Transferee hereby affirms the representations and warranties in Section 4 of the Agreement, including with respect to its holdings of Notes set forth below.

 

The Transferee acknowledges and agrees that any Transfer of Notes from the Transferor is null and void if it does not comply with the Agreement and is not effective unless and until an executed copy of this Transfer Agreement is delivered to the Transferor and counsel to the Ad Hoc Group in accordance with Section 12 of the Agreement.

 

The Transferee hereby represents and warrants that it has correctly identified the portion of the Purchased Notes representing Consent Fee Notes.

 

	
Series
    	
 
    	
Purchased
   Consent Fee
   Notes
    	
 
    	
Other
   Purchased
   Notes
    	
 
    	
Additional
   Notes
    	
 
    	
Total
   Notes
    	
 
    
	
2017 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
2018 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
2020 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
2021 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
2031 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
TOTAL
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    

 

Date:  [             ], 2017

 

[Signature page follows]

 

(1)  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

 

	
[Please   insert Transferee’s Name]
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Notice address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Name of contact person:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Telephone number:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
E-mail address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Facsimile number:
    	
 
    	
 
    
					

 

[Signature page to Transfer Agreement]

 

 

Exhibit C

 

Form of Acquisition Notice

 

 

Acquisition Notice

 

Reference is made to the Consent Agreement dated as of May 22, 2017 (the “Agreement”)(2), by and among [Please insert Acquiror’s Name] (the “Acquiror”), and the other Parties signatory thereto.

 

The Acquiror hereby gives notice that on [                 ], 2017 it acquired (the “Acquisition”) the Notes set forth below (the “Acquired Notes”).  The Acquiror represents and warrants that it is an Initial Consenting Holder bound by the Agreement and that it has correctly identified the portion of the Acquired Notes representing Consent Fee Notes.

 

	
Series
    	
 
    	
Acquired
   Consent Fee Notes
    	
 
    	
Other Acquired
   Notes
    	
 
    	
Total
   Acquired Notes
    
	
2017 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    
	
2018 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    
	
2020 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    
	
2021 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    
	
2031 Notes
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    
	
TOTAL
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    

 

This notice must be delivered to counsel to the Ad Hoc Group in accordance with Section 12 of the Agreement within three business days of the Acquisition.

 

Date:  [             ], 2017

 

[Signature page follows]

 

(2)  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

 

[Please insert Acquiror’s Name]

 

	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    
	
Notice address:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name of contact person:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Telephone number:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
E-mail address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Facsimile number:
    	
 
    	
 
    
							

 

[Signature page to Acquisition Notice]Exhibit 10.1

  

NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	Principal Amount: $75,000.00	Issue Date: May 16, 2017

 

12% CONVERTIBLE NOTE

 

FOR
VALUE RECEIVED, NIGHTFOOD HOLDINGS, INC., a Nevada corporation (“Borrower” or “Company”), hereby
promises to pay to the order of EMA FINANCIAL, LLC, a Delaware limited liability company, or its registered assigns (the
“Holder”), on May 16, 2018, (subject to extension as set forth below, the “Maturity Date”), the sum of
$75,000.00 as set forth herein, together with interest on the unpaid principal balance hereof at the rate of twelve (12%) per annum
(the “Interest Rate”) from the date of issuance hereof until this Note plus any and all amounts due hereunder are paid
in full, and any additional amounts set forth herein, including without limitation any Additional Principal (as defined herein).
Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the rate of twenty-four (24%) per annum from the due date thereof
until the same is paid (“Default Interest”). All payments due hereunder shall be made in lawful money of the United
States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on
any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the
term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city
of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein,
and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement entered into by
and between the Company and Holder dated on or about the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”). The Holder may, by written notice to the Borrower at least five (5) days before the Maturity Date (as may have
been previously extended), extend the Maturity Date to up to one (1) year following the date of the original Maturity Date hereunder.

 

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This Note
is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1.          Conversion
Right. The Holder shall have the right, in its sole and absolute discretion, at any time from time to time, to convert all
or any part of the outstanding amount due under this Note into fully paid and non-assessable shares of Common Stock, as such Common
Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock
shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided
herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert
any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security
of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation
13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however,
that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’
prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or
such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock
to be issued upon each Conversion of this Note (“Conversion Shares”) shall be determined by dividing the Conversion
Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion,
in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means
resulting in, or reasonably expected to result in, notice) to the Borrower before 11:59 p.m., New York, New York time on such
conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any Conversion
of this Note, the sum of (1) the principal amount of this Note to be converted in such Conversion, plus (2) accrued and
unpaid interest, if any, on such principal amount being converted at the interest rates provided in this Note to the Conversion
Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2), plus (4) any Additional Principal
for such Conversion, plus (5) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.2(c)
and 1.4(g) hereof.

 

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1.2.          Conversion Price.

 

a)       Calculation
of Conversion Price. The conversion price hereunder (the “Conversion Price”) shall
equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding
the Closing Date, and (ii) 50% of either the lowest sale price for the Common Stock on the Principal Market during the twenty
(20) consecutive Trading Days immediately preceding the Conversion Date or the closing bid price, whichever is lower, provided,
however, if the Company’s share price at any time loses the bid (ex: 0.0001 on the ask with zero market makers on the
bid on level 2), then the Conversion Price may, in the Holder’s sole and absolute discretion, be reduced to a fixed conversion
price of 0.00001 (if lower than the conversion price otherwise), and provided, that if on the date of delivery of the Conversion
Shares to the Holder, or any date thereafter while Conversion Shares are held by the Holder, the closing bid price per share of
Common Stock on the Principal Market on the Trading Day on which the Common Shares are traded is less than the sale price per
share of Common Stock on the Principal Market on the Trading Day used to calculate the Conversion Price hereunder, then such Conversion
Price shall be automatically reduced such that the Conversion Price shall be recalculated using the new low closing bid price
(“Adjusted Conversion Price”) and shall replace the Conversion Price above, and Holder shall be issued a number of
additional shares such that the aggregate number of shares Holder receives is based upon the Adjusted Conversion Price, and provided,
further, that the Conversion Price shall be subject to Section 1.2(b) below. For the purpose of clarity, any shares required
to be issued as a result of an Adjusted Conversion Price shall be deemed to be “Conversion Shares” under this Note.
If an Event of Default under Section 3.9 of the Note has occurred, Holder, in its sole discretion, may elect to use a Conversion
Price which shall equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day
immediately preceding the Closing Date; (ii) 50% of either the lowest sale price or the closing bid price, whichever is lower
for the Common Stock on the Principal Market during any Trading Day in which the Event of Default has not been cured. If such
Common Stock is not traded on the OTCBB, OTCQB, NASDAQ or NYSE, then such sale price shall be the sale price of such security
on the principal securities exchange or trading market where such security is listed or traded or, if no sale price of such security
is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that
are listed in the “pink sheets” by the National Quotation Bureau, Inc. If such sale price cannot be calculated for
such security on such date in the manner provided above, such price shall be the fair market value as mutually determined by the
Borrower and the Holder. If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while
this Note remains outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading
restrictions, or if the closing sale price at any time falls below $0.15995 (as appropriately and equitably adjusted for stock
splits, stock dividends, stock contributions and similar events), then such 50% figure specified in clause 1.2(a)(ii) above shall
be reduced to 35%. In the event that the shares of the Borrower’s Common Stock are not deliverable via DWAC following the
conversion of any amount hereunder, an additional 5% discount will be attributed to the Conversion Price. Additionally, the Borrower
acknowledges that it will take all reasonable steps necessary or appropriate, including providing a board of directors resolution
authorizing the issuance of common stock to Holder . So long as the requested sale may be made pursuant to Rule 144, the Company
agrees to accept an opinion of counsel to the Holder confirming the rights of the Holder to sell shares of Common Stock issuable
or issued to Holder on conversion of this Note pursuant to Rule 144 as promulgated by the SEC (“Rule 144”), as such
Rule 144 may be in effect from time to time, which opinion will be issued at the Company’s expense and the conversion dollar
amount will be reduced by $750.00 to cover the cost of such legal opinion. “Trading Day” shall mean any day on which
the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded. Additionally, if the Company ceases to be a reporting company pursuant to the 1934
Act or if the Note cannot be converted into free trading shares after 181 days from the issuance date, an additional 15% discount
will be attributed to the Conversion Price for any and all Conversions submitted thereafter.

 

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b)       If
at any time the Conversion Price as determined hereunder for any Conversion would be less than the par value of the Common Stock,
then the Conversion Price hereunder shall equal such par value for such Conversion and the Conversion Amount for such Conversion
shall be increased to include Additional Principal, where “Additional Principal” means such additional amount to be
added to the Conversion Amount to the extent necessary to cause the number of Conversion Shares issuable upon such Conversion to
equal the same number of Conversion Shares as would have been issued had the Conversion Price not been subject to the minimum price
set forth in this Section 1.2(b).

 

c)       Without
in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (as defined below)
the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver
such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued
or, at the option of the Holder, shall be added to the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note. The Borrower agrees that the right to convert this Note is a valuable right to the Holder. The damages
resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if not impossible to quantify.
Accordingly the parties acknowledge that the liquidated damages provision contained in this Section are justified.

 

1.3.          Authorized
Shares. The Borrower covenants that the Borrower will at all times while this Note is outstanding reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion or adjustment of this Note. The Borrower is required at all times to have authorized and reserved seven
(7) times the number of shares that is actually issuable upon full conversion or adjustment of this Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved Amount”). Initially, the Company will instruct the Transfer
Agent to reserve eight million one hundred thousand (8,100,000) shares of common stock in the name of the Holder for issuance upon
conversion hereof. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.
In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number
of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at
the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized
and reserved, free from preemptive rights, for conversion of this Note in full. The Borrower (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees
that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue
the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

 

    	4 

     

    

  

If, at any time
the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4.          Method
of Conversion.

 

a)       Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time and from time
to time after the Issue Date, by submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means
of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time).

 

b)       Book
Entry upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this
Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the
face hereof.

 

c)       Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities
or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are
to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

d)       Delivery
of Common Stock upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4 or upon an event triggering the calculation of an Adjusted Conversion Price, the Borrower shall issue and deliver or cause
to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within
three (3) business days after such receipt or such an event (the “Deadline”) (and, solely in the case of conversion
of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

 

    	5 

     

    

  

e)       Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a duly and properly executed Notice of Conversion or upon
an event triggering the calculation of an Adjusted Conversion Price, the Holder shall be deemed to be the holder of record of the
Common Stock issuable upon such conversion or as a result of an Adjusted Conversion Price, the outstanding principal amount and
the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion or adjustment, and, unless the
Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted
shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion as provided herein or upon an event triggering the calculation
of an Adjusted Conversion Price, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of
any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received
by the Borrower before 11:59 p.m., New York, New York time, on such date.

 

f)         Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion or upon an event triggering the calculation of an Adjusted Conversion Price to the Holder by crediting
the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

g)       Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion or adjustment
of this Note is not delivered by the Deadline, the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common Stock to the Holder. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued or, at the option of the Holder, shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the
right to convert and/or receive shares in the event of an adjustment is a valuable right to the Holder. The damages resulting from
a failure, attempt to frustrate, or interference with such conversion or adjustment right are difficult if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

    	6 

     

    

  

h)       The
Borrower acknowledges that it will take all reasonable steps necessary or appropriate, including accepting an opinion of counsel
to Holder confirming the rights of Holder to sell shares of Common Stock issued to Holder on conversion or adjustment of the Note
pursuant to Rule 144 as promulgated by the SEC (“Rule 144"), as such Rule may be in effect from time to time. So long
as the requested sale may be made pursuant to Rule 144 the Borrower agrees to accept an opinion of counsel to the Holder which
opinion will be issued at the Borrower’s expense.

 

i)         Charges
and Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without
charge to the Holder for any issuance fee, transfer tax, legal opinion and related charges, postage/mailing charge or any other
expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance
of the Common Stock to Holder, as well as any and all other fees and charges required by the Transfer Agent as a condition to effectuate
such issuance. That notwithstanding, the Holder may in the interest of securing issuance and/or delivery of Common Stock before
the Deadline, at any time from time to time, in its sole discretion elect to pay any such fees or charges upfront, and Company
agrees that any such fees or charges as noted in this Section that are paid by the Holder (whether from the Company’s delays,
outright refusal to pay, Holder’s interest in securing issuance and/or delivery of Common Stock before the Deadline, or otherwise),
will be at Company’s expense, and the conversion amount will automatically be reduced by that dollar amount to cover the
cost of the fees or charges as noted in this Section.

 

1.5.          Restricted
Securities. The shares of Common Stock issuable upon conversion or adjustment of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its
transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to
Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Any legend set
forth on any stock certificate evidencing any Conversion Shares shall be removed and the Borrower shall issue to the Holder a
new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an
opinion of counsel form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be
reasonably acceptable to the Company, or (ii) in the case of the Common Stock issued or issuable upon conversion of this
Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or
otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date
that can then be immediately sold.

 

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1.6.          Effect
of Certain Events.

 

a)       Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more
than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be
deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder
upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III)
or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.

 

b)       Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen
(15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event
or sale of assets (during which time, for clarification, the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

c)       Adjustment
Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder
been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. Such assets shall be held in escrow
by the Company pending any such conversion.

 

    	8 

     

    

  

d)       Purchase
Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights
to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of
any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

e)       Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any securities convertible
into or exercisable for Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues,
in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion
Price (and each sale or bid price used in determining the Conversion Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

f)         Notice
of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described
in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish
to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number
of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion
of the Note.

 

1.7.          Revocation.
If any Conversion Shares are not received by the Deadline, the Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible after the Maturity Date hereof until this Note is repaid or
converted in full.

 

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1.8.          Prepayment.
Notwithstanding anything to the contrary contained in this Note, subject to the terms of this Section, at any time during
the period beginning on the Issue Date and ending on the date which is six (6) months following the Issue Date (“Prepayment
Termination Date”), Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice
to the Holder of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full, in accordance
with this Section. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the
Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note,
and (2) the date of prepayment which shall be not more than ten (10) Trading Days from the date of the Optional Prepayment Notice.
On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower
at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the
Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to the Prepayment
Factor (as defined below), multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount
due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section. After the Prepayment Termination Date, the Borrower shall have
no right to prepay this Note. For purposes hereof, the “Prepayment Factor” shall equal one hundred and fifty percent
(150%), provided that such Prepayment factor shall equal one hundred and thirty five percent (135%) if the Optional Prepayment
Date occurs on or before the date which is ninety (90) days following the Issue Date hereof.

 

ARTICLE II. CERTAIN COVENANTS

 

2.1.          Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or
other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares
of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its
capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s
disinterested directors.

 

2.2.          Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities
or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants,
rights or options to purchase or acquire any such shares.

 

2.3.          Borrowings;
Liens. Notwithstanding section 4(m) of the Purchase Agreement, so long as the Borrower shall have any obligation under this
Note, the Borrower shall not (i) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence
or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, or (b) indebtedness
to trade creditors or financial institutions incurred in the ordinary course of business, or (ii) enter into, create or incur
any liens, claims or encumbrances of any kind, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom, securing any indebtedness occurring after the date hereof.

 

    	10 

     

    

  

2.4.          Sale
of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5.          Advances
and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances in existence
or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof.

 

2.6.          Charter.
So long as the Borrower shall have any obligations under this Note, the Borrower shall not amend its charter documents, including
without limitation its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights
of the Holder.

 

2.7.         Transfer
Agent. The Borrower shall not change its transfer agent without the prior written consent of the Holder. Any resignation by
the transfer agent without a replacement transfer agent consented to by the Holder prior to such replacement taking effect shall
constitute an Event of Default hereunder.

 

ARTICLE III. EVENTS OF DEFAULT

 

Any one
or more of the following events which shall occur and/or be continuing shall constitute an event of default (each, an “Event
of Default”):

 

3.1.          Failure
to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.

 

3.2.          Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so at any time following the execution hereof or) upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate
for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent
from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for
any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for five (5) business days after the Holder shall have delivered a Notice of Conversion. It
is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of
this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process
a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the
Holder.

 

    	11 

     

    

  

3.3.         Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of seven (7) days
after written notice thereof to the Borrower from the Holder.

 

3.4.         Breach
of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have)
a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5.         Receiver
or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed.

 

3.6.         Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000.00, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7.         Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the
Borrower.

 

3.8.          Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, or OTCQB,
or an equivalent replacement exchange, NASDAQ, the NYSE or AMEX.

 

3.9.          Failure
to Comply with the Exchange Act. The Borrower shall fail to comply in any material respect with the reporting requirements
of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10.        Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

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

  

    	12 

     

    

 

3.12.        Maintenance
of Assets. The failure by Borrower, during the term of this Note, to maintain any material intellectual property rights, personal,
real property or other assets which are necessary to conduct its business (whether now or in the future).

 

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

 

3.14.       Reverse
Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15.       Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.16.      Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements”
means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the
Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other
Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

    	13 

     

    

  

Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable
and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum
(as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE
SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER,
AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation
of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon
when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8,
3.9, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such
Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified in the remaining sections
of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section
3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction
of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date
of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to
in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z)
shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be
prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant
to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date
as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event
arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion
Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first
occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”)
and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all
of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

If the Borrower fails to pay
the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have
the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized
shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares
of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect. The Holder may still
convert any amounts due hereunder, including without limitation the Default Sum, until such time as this Note has been repaid in
full.

 

3.17.      Inside
Information. The Borrower or its officers, directors, and/or affiliates attempt to transmit, convey, disclose, or any actual
transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information
concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing
of a Form 8-K pursuant to Regulation FD on that same date.

 

3.18       Bid
Price. The Borrower shall lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero
market makers on the “Bid” per Level 2) and/or a market (including the OTC Pink, OTCQB or an equivalent replacement
exchange).

 

ARTICLE IV. MISCELLANEOUS

 

4.1.         Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

 

    	14 

     

    

 

4.2.         Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile or email, with accurate confirmation generated by the transmitting
facsimile machine or computer, at the address, email or number designated in the Purchase Agreement (if delivered on a business
day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.

 

4.3.         Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4.         Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with
a bona fide margin account or other lending arrangement.

 

4.5.        Cost
of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.

 

4.6.         Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts
of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by
either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or
state courts of New York or in the federal courts located in the State and county of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall
be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of
this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking
other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to
realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the
Holder. This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to
any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar
rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute, any other document or agreement
to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine
Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether or not such other
document or agreement was delivered together herewith or was executed apart from this Note.

  

    	15 

     

    

 

4.7.         Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower
and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8.         Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1) Trading Day after any such receipt or delivery, publicly disclose
such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that
a notice contains material, nonpublic information relating to the Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be
allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the
Company or its Subsidiaries.

 

4.9.         Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or
winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower
shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.9.

 

    	16 

     

    

  

4.10.       Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic
loss and without any bond or other security being required.

 

4.11.       Usury.
This Note shall be subject to the anti-usury limitations contained in the Purchase Agreement.

 

(Remainder of Page intentionally
left blank)

 

    	17 

     

    

  

IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Issue Date first set forth above.

 

	NIGHTFOOD HOLDINGS, INC.
	 	 	 
	By:	/s/ Sean Folkson	 
		Name: Sean Folkson	 
	 	 Title:
CEO	 

 

    	18 

     

    

  

EXHIBIT A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects
to convert principal under the 12% Convertible Note of NIGHTFOOD HOLDINGS, INC., a Nevada corporation (the Company”),
into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the
date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.

 

By the delivery
of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does
not exceed the amounts specified under Section 1.1 of this Note, as determined in accordance with Section 13(d) of the Exchange
Act.

 

The undersigned
agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer
of the aforesaid shares of Common Stock pursuant to any prospectus.

 

Conversion calculations:

Issue Date of Note:_____________________________

Date
to Effect Conversion: _______________________

 

Conversion Price:__________________________________

 

Principal Amount of
Note to be Converted: ___________________________

Less applicable fees under the Note: ________________________________

Amount of Note to be Converted:__________________________________

 

Interest Accrued
on Account of Conversion at Issue: ____________________________________________________________

 

Additional Principal on Account of Conversion

Pursuant to Section 1.2(b) of the Note: ______________________________

 

Number of shares of Common Stock to be issued: _____________________

 

___________________________________________________________

Remaining Balance of
Note*:_____________________________________

Signature:___________________________________________________

 

Name:______________________________________________________

 

Address for Delivery
of Common Stock Certificates: ____________________

__________________________________________________________

___________________________________________________________

 

Or

 

DWAC Instructions:

Broker No:_______________

Account No:______________

 

*Sum provided does not include
accrued interest

 

 

19

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