Document:

EX-10.113

 Exhibit 10.113 

PURCHASE AGREEMENT 

PURCHASE AGREEMENT (this “Agreement”), dated as of
[            ], 2014, by and among Smith & Wesson Holding Corporation, a Nevada corporation with headquarters located at 2100 Roosevelt Avenue, Springfield, Massachusetts
01104 (the “Company”), and [Investor Name] (including any other persons or entities purchasing Purchased Notes (as defined below) hereunder for whom the undersigned Investor holds contractual and investment authority, the
“Investor”). This Agreement, the Indenture (as defined below), the Notes, the Other Agreements (as defined below) and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated
by this Agreement are collectively referred to herein as the “Transaction Documents”. 
 WHEREAS: 

A. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the Securities and Exchange Commission (the
“SEC”) under the Securities Act. 
 B. The Investor is, as of the date hereof, a Person (as defined in
Section 2(b)) capable of effecting the Purchase (as defined below) in accordance with the terms hereof. 
 C. The Company has
authorized the issuance of Senior Notes Due 2018 (as amended or modified from time to time, collectively, the “Notes”), which shall be issued pursuant to and by the provisions of an indenture to be dated on or about the Closing Date
(as defined below) (the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), in substantially the form attached hereto as Exhibit A. 

D. Upon the terms and conditions stated in this Agreement, the Investor will purchase for cash (the “Purchase”) the principal
amount of the Notes specified herein. 
 NOW, THEREFORE, in consideration of the promises and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 
  

	 	1.	Purchase of Notes. 

  

	 	(a)	Purchase of the Notes. 

 (i) Purchase. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 5 and 6 below, on the Closing Date (as defined below), the Investor hereby agrees to purchase from the Company, and the Company hereby agrees to issue and sell to the Investor, the
following principal amount of the Notes for the cash purchase price specified below: 
  

			
	 Principal Amount of Notes to be Purchased:
	  	$                                     
   

 (the “Purchased Notes”) 

 

			
	 Purchase Price for Purchased Notes:
	  	[    ]% of the principal amount of the Purchased Notes ($[    ]) (the “Purchase Price”).

 (ii) Closing. The date of the closing (the “Closing”) of the Purchase
shall be on or about [            ], 2014 (or such later date as is mutually agreed to by the Company and the Investor) (the “Closing Date”) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections 5 and 6 below. 
  

	 	(b)	Closing Deliverables. On the Closing Date the Company shall issue and deliver or cause to be delivered to the Investor the Purchased Notes; provided, however, that the parties acknowledge that the
issuance of the Purchased Notes to the Investor may be delayed due to procedures and mechanics within the system of the Depository Trust Company (the “DTC”) and that such delay will not be a default under this Agreement so long as
(A) the Company is using its reasonable best efforts to effect the issuance of one or more global notes representing the Purchased Notes, (B) such delay is no longer than three business days, and (C) interest shall accrue on such
Purchased Notes from the date of the Indenture. Substantially simultaneously with the Closing, the Company shall issue an aggregate principal amount of Notes that, together with notes issued to Other Investors (as defined below), is not less than
$[75,000,000]. 

  

	 	(c)	Sale of Additional Notes. Substantially simultaneously with the Closing, the Company may issue additional Notes pursuant to one or more agreements (the “Other Agreements”), subject to the terms
of the Indenture, with one or more other investors (the “Other Investors”), so long as the purchase price for any such additional Notes is not less than $[            ] per
$1,000 principal amount of Notes. 

  

	 	2.	Investor’s Representations and Warranties. 

 The Investor hereby makes the following
representations and warranties, each of which is and shall be true and correct on the date hereof and on the Closing Date, to the Company and Cowen and Company, LLC: 
  

	 	(a)	 Organization and Authorization. To the extent the Investor is not an individual or natural person, the Investor is duly and validly existing
under the jurisdiction of its organization and is qualified to do business in the jurisdiction specified below its address on Exhibit C. If the Investor that is signatory hereto is executing this Agreement or the other
Transaction Documents to which it is a party to effect the purchase of the Purchased Notes by one or more other persons or entities, (a) such signatory Investor has all requisite discretionary authority to enter into this Agreement and such
other 

  
 2 

	 	
Transaction Documents on behalf of, and bind, each such other person or entity that is purchasing Purchased Notes; (b) Exhibit C hereto is a true, correct and complete
list of (i) the name of each party acquiring (as beneficial owner) Purchased Notes hereunder, (ii) the principal amount of Purchased Notes being acquired by such Investor and (iii) the DTC Participant name of, DTC Participant contact
name for, and DTC Participation number of such Investor. 

  

	 	(b)	No Public Sale or Distribution. The Investor is acquiring the Purchased Notes for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, the Investor does not agree to hold any of the Purchased Notes for any minimum or other specific term and
reserves the right to dispose of the Purchased Notes at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The Investor is acquiring the Purchased Notes hereunder in the ordinary course of
its business. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Purchased Notes. The Investor understands that no public market exists for the Notes, and that there
is no likelihood that a public market will ever develop for the Notes. As used in this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, and a government or any department or agency thereof. 

  

	 	(c)	Accredited Investor Status. The Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D and a “qualified institutional buyer” within the meaning of Rule
144A under the Securities Act. 

  

	 	(d)	No Affiliate Status. The Investor is not, and has not been during the consecutive three month period preceding the date hereof, a director, officer or “affiliate” within the meaning of Rule 144
promulgated under the Securities Act of the Company. 

  

	 	(e)	Investment Experience. The Investor understands that the acquisition of the Purchased Notes involves substantial risk. The Investor has experience as an investor in this type of securities and acknowledges that
the Investor is able to fend for itself, can bear the economic risk of its investment in the Purchased Notes and has such knowledge and experience in financial or business matters that the Investor is capable of evaluating the merits and risks of
this investment in the Purchased Notes and protecting its own interests in connection with this investment. 

  

	 	(f)	 Reliance on Exemptions. The Investor understands that the Notes are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and that the 

  
 3 

	 	
Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments, and understandings of the
Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Notes. 

  

	 	(g)	Information. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances, and operations of the Company and materials relating to the offer and the cash
purchase of the Notes that the Investor considers necessary or appropriate to make an informed investment decision with respect to the Purchase under this Agreement and that have been requested by the Investor, and has had the opportunity to review
the Company’s filings with the SEC, including, without limitation, all filings made pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Investor and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend, or affect the Investor’s right to rely
on the Company’s representations and warranties contained herein. The Investor understands that its investment in the Notes involves a high degree of risk. The Investor has sought such accounting, legal, and tax advice that it has considered
necessary to make an informed investment decision with respect to the cash purchase of the Notes. 

  

	 	(h)	Non-Reliance. No offering circular or prospectus will be provided to the Investor or prepared in connection with the Purchase, and the Company and Cowen and Company, LLC will not be providing the Investor with
any other material regarding the Notes or the Company prepared by the Company or any other person. The Investor has not relied, and may not rely, on any investigation that the Company or Cowen and Company, LLC or any person acting on their behalf
may conduct or have conducted with respect to the Notes or the Company; neither the Company nor Cowen and Company, LLC or any person acting on their behalf has made any representations to the Investor, express or implied, with respect thereto; and
the Investor will make its own investment decision regarding the Purchase based on its own knowledge (and information it may have or that is publicly available) with respect to the Company and the Notes. 

 

	 	(i)	No Governmental Review. The Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Notes or the
fairness or suitability of the investment in the Notes nor have such authorities passed upon or endorsed the merits of the offering of the Notes. 

  

	 	(j)	 Validity; Enforcement. This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Investor and shall
constitute the legal, valid, and binding obligations of the Investor enforceable 

  
 4 

	 	
against the Investor in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. 

  

	 	(k)	No Conflicts. The execution, delivery, and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration,
or cancellation of, any agreement, indenture, or instrument to which the Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, or decree (including federal and state securities laws) applicable to
the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights, or violations that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability
of the Investor to perform its obligations hereunder. 

  

	 	(l)	Consents. All consents, approvals, orders and authorizations required on the part of the Investor in connection with the execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated herein have been obtained and will be effective as of the Closing Date. 

  

	 	(m)	Residency. The Investor is a resident of that jurisdiction specified below its address on Exhibit C. 

  

	 	(n)	Certain Trading Activities. The Investor has not directly or indirectly engaged in any purchase, sale, or Short Sales (as defined below) involving the Company’s securities since the time that the Investor
was first contacted by Cowen and Company, LLC with respect to the transactions contemplated hereby. “Short Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and
all types of direct and indirect stock pledges, forward sales contracts, puts, options, calls, short sales, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or
foreign brokers. Notwithstanding the foregoing, in the case of an Investor that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of the Investor’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other portions of the Investor’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio
manager that had or has knowledge of the transactions contemplated herein. 

  
 5 

	 	(o)	Purchase Not on the Basis of any General Solicitation. The Investor agrees that it and each of its affiliates is not purchasing any of the Notes on the basis of any general solicitation or general advertising
within the meaning of Rule 502(c) of the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 

  

	 	3.	Representations and Warranties of the Company. 

 The Company hereby makes the following
representations and warranties, each of which is and shall be true and correct on the date hereof and on the Closing Date: 
  

	 	(a)	Incorporation. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and is qualified to do business in each jurisdiction in which the character
of its properties or the nature of its business requires such qualification, except where the failure to so qualify would not reasonably be expected to have a material adverse effect. The Company has the requisite corporate power and authority to
carry on its business as now conducted. 

  

	 	(b)	Subsidiaries. Each Subsidiary (as defined below) that is a corporation has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to own its properties and to conduct its business and is duly registered, qualified and authorized to transact business and is in good standing in each jurisdiction in which the conduct of its business or the
nature of its properties requires such registration, qualification or authorization, except where such failure to so qualify or register would not be reasonably be expected to have a material adverse effect on the Company. 

 

	 	(c)	 Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and perform its obligations
under the Transaction Documents, to issue the Notes in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Notes, have been duly authorized by the Company’s Board of Directors and (other than the filing with the SEC of a Form D, which filing shall be promptly made by the Company and in any case
within 15 days of the initial sale of the Notes) no further filing, consent, or authorization is required by the Company, its Board of Directors, or its stockholders. This Agreement and the other Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general

  
 6 

	 	
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. 

  

	 	(d)	Valid Issuance. The Purchased Notes have been duly authorized and, when executed by the Company and authenticated by the Trustee in accordance with the terms of the Indenture and delivered to and acquired by the
Investor in accordance with the terms of this Agreement, will constitute the valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture under which such Purchased Notes are to be issued. The issuance of
the Purchased Notes will not be subject to any preemptive, participation, rights of first refusal and other similar rights. 

  

	 	(e)	 SEC Documents; Financial Statements. During the two years up to and including the date hereof, the Company has filed all reports, schedules,
forms, statements, and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes, and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company has delivered to the Investor or its respective representatives true,
correct, and complete copies of each of the SEC Documents not available on the EDGAR system. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Investor that is not included in the SEC Documents, including, without limitation, information referred to
in Section 2(g) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in 

  
 7 

	 	
order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. 

 

	 	(f)	Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that constitutes or could reasonably be expected
to constitute material, nonpublic information, other than the information to be included in the 8-K Filing (as defined in Section 4(c)) or covered by a non-disclosure agreement. The Company
understands and confirms that the Investor will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Investor regarding the Company and its “Subsidiaries”
(which for purposes of this Agreement means any joint venture or entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest of 50% or more), their business, and the transactions contemplated hereby
furnished by or on behalf of the Company is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No event or circumstance has occurred with respect to the Company or any of its Subsidiaries or either of their respective businesses, properties, prospects, operations, or
financial conditions, which, under applicable law, rule, or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. 

 

	 	(g)	No Conflict. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (i) any provision of the Amended and Restated Articles of
Incorporation or Amended and Restated By-laws of the Company or (ii) any agreement or instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to the Company or its properties or assets,
except, in the case of clause (ii), as would not, individually or in the aggregate, be reasonably expected to have a material adverse effect. 

  

	 	(h)	No Registration. The offer and sale of the Notes in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(a)(2) thereof,
Regulation D thereunder and Regulation S thereunder; and it is not necessary to qualify the Indenture in respect of the Notes under the United States Trust Indenture Act of 1939, as amended. 

 

	 	(i)	 No Bad Actor Disqualification. Neither the Company nor affiliate thereof has engaged in conduct or is the subject of any disqualifying event
under Rule 506 of Regulation D that would disqualify the Company from relying on Rule 

  
 8 

	 	
506 of Regulation D as an exemption from registration of the Notes under the Securities Act. 

  

	 	4.	Covenants. 

  

	 	(a)	Best Efforts. Each party shall use its respective best efforts to satisfy each of the conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement. 

 

	 	(b)	Further Assurances. Each party agrees to cooperate with the other party and their respective officers, employees, attorneys, accountants and other agents, and, generally, do such other acts and things in good
faith as may be reasonable or appropriate to timely effectuate the intents and purposes of this Agreement and the consummation of the transactions contemplated hereby, including, but not limited to, taking any action to facilitate the filing any
document or the taking of any action to assist the other parties hereto in complying with the terms of Section 4 hereof. 

  

	 	(c)	Disclosure of Transactions and Other Material Information. As soon as practicable and in any event on or before 4:00 p.m., New York City Time, on the second business day following the date of this Agreement,
the Company shall file a Current Report on Form 8-K describing the material terms of the Purchase and a generic description of the expected use of proceeds therefrom (the “8-K Filing”). From and after the filing of the 8-K Filing
with the SEC, no Investor shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries, or any of its respective officers, directors, employees, or agents, that is not disclosed in the 8-K Filing
or any subsequent press release or filing on Form 8-K with the SEC in the manner described below or covered by a non-disclosure agreement. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees, and agents, in addition to any other remedy provided herein or in the Transaction Documents, the Investor shall have the right to make a public disclosure, in the form of a press release, public
advertisement, or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, or agents. No Investor shall have any liability to
the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders, or agents for any such disclosure. Without the prior written consent of the Investor, neither the Company nor any of its Subsidiaries or
affiliates shall disclose the name of the Investor in any filing, announcement, release, or otherwise, unless such disclosure is required by law, regulation, or The NASDAQ Global Select Market. 

  
 9 

	 	5.	Conditions to the Company’s Obligation to Issue. 

 The obligation of the Company
hereunder to issue the Purchased Notes to the Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may
be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof: 
  

	 	(a)	The Investor shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company. 

  

	 	(b)	The Investor shall have delivered to the Company the Purchase Price for the Purchased Notes, in each case in accordance with the written instructions of the Company. 

 

	 	(c)	The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Investor shall have performed, satisfied, and complied in all material respects with the covenants, agreements, and conditions required by this Agreement to be performed, satisfied, or complied
with by the Investor at or prior to the Closing Date. 

  

	 	6.	Conditions to the Investor’s Obligation to Purchase. 

 The obligation of the
Investor hereunder to purchase for cash, the Purchased Notes at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit
and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof: 
  

	 	(a)	The Company shall have executed and delivered to the Investor (i) each of the Transaction Documents and (ii) the Notes (for the account of the Investor as such Investor shall instruct) being purchased for cash
by the Investor at the Closing pursuant to this Agreement. 

  

	 	(b)	 The Company shall have delivered to the Investor a certificate of the Company, executed by the Chief Executive Officer or Chief Financial Officer of
the Company, dated the Closing Date, to the effect that the representations and warranties of the Company shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality, which
shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such
specified date), and the Company shall have performed, satisfied, and complied in all respects with the covenants, agreements, and conditions required by the Transaction Documents to be

  
 10 

	 	
performed, satisfied, or complied with by the Company at or prior to the Closing Date. 

  

	 	(c)	The Company shall have delivered to the Investor a certificate of the Company, dated the Closing Date, executed by the secretary of the Company certifying in such capacity and on behalf of the Company (i) as to the
incumbency and signature of the officer of the Company who executed any of the Transaction Documents; and (ii) as to the adoption of resolutions of the board of directors of the Company which are in full force and effect on the Closing Date,
authorizing (x) the execution and delivery of the Transaction Documents and (y) the performance of the obligations of the Company. 

  

	 	(d)	The Company shall have obtained Committee on Uniform Securities Identification Procedures numbers (“CUSIP numbers”) for each of the Purchased Notes. On the Closing Date, the Purchased Notes shall be
eligible for deposit at DTC and for DTC book-entry services. 

  

	 	(e)	The Purchased Notes, as of the Closing Date, satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act. 

  

	 	(f)	The Company shall have delivered to the Investor the opinion of Greenberg Traurig, LLP, dated as of the Closing Date, in substantially the form of Exhibit B attached hereto. 

 

	 	(g)	The Company shall have delivered to the Investor such other documents relating to the transactions contemplated by this Agreement as the Investor or its counsel may reasonably request. 

 

	 	7.	Termination. 

 In the event that the Closing shall not have occurred with respect to the
Investor on or before five business days from the date hereof due to the Company’s or the Investor’s failure to satisfy the conditions set forth in Sections 5 and 6 above (and the nonbreaching party’s failure to waive
such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party. 

 

	 	8.	Miscellaneous. 

  

	 	(a)	 Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement, and interpretation of this Agreement
shall be governed by the internal laws of the state of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the state of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the state of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the city of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any 

  
 11 

	 	
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action, or proceeding is brought in an inconvenient forum or that the venue of such suit, action, or proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action, or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.  

  

	 	(b)	Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a signature delivered by facsimile or other electronic transmission shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the
signature were an original signature. 

  

	 	(c)	Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. 

 

	 	(d)	Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. 

  

	 	(e)	 Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their
affiliates, and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein (other than the Other Agreements) contain the entire understanding of the parties with respect to
the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant, or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the parties hereto. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any provision of 

  
 12 

	 	
any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of the Purchased Notes, as the case may be. The
Company has not, directly or indirectly, made any agreements with the Investor relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. 

 

	 	(f)	Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided that confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after
deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 

If to the Company: 

Smith & Wesson Holding Corporation 

2100 Roosevelt Avenue 

Springfield, Massachusetts 01104 

Telephone: (413) 747-3302 

Facsimile: (413) 739-8528 

Attention: P. James Debney 

Copy to: 

Greenberg Traurig, LLP 

2375 East Camelback Rd., Ste. 700 

Phoenix, AZ 85016 

Telephone: (602) 445-8302 

Facsimile: (602) 445-8100 

Attention: Robert S. Kant, Esq. 

If to the Investor, to its address and facsimile number set forth on Exhibit C with copies to the Investor’s
representatives as set forth on Exhibit C or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five days
prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver, or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number, and an image of the first page of such transmission, or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from an overnight courier service in accordance with clause (i), (ii), or (iii) above, respectively. 

  
 13 

	 	(g)	Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no party may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other parties hereto. 

  

	 	(h)	No Third Party Beneficiaries. Unless otherwise expressly set forth herein, this Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person. 

  

	 	(i)	Survival. Unless this Agreement is terminated under Section 7, the representations and warranties of the Company and the Investor contained in Sections 2 and 3 and the agreements
and covenants set forth in Sections 4 and 8 shall survive the Closing and the delivery and execution of the Purchased Notes, as applicable. The Investor shall be responsible only for its own representations, warranties, agreements, and
covenants hereunder. 

  

	 	(j)	Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments, and
documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 

 

	 	(k)	No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any
party. 

  

	 	(l)	Remedies. The Investor shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which the Investor has been granted at any time under any other agreement or contract
and all of the rights which the Investor has under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security. 

  

	 	(m)	Costs and Expenses. The Investor and the Company shall each pay its own respective costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement,
including, but not limited to, attorneys’ fees. 

  
 14 

 [Signature Pages Follow] 

  
 15 

 IN WITNESS WHEREOF, the Investor and the Company have caused their respective signature
page to this Purchase Agreement to be duly executed as of the date first written above. 
  

			
	COMPANY:
	
	SMITH & WESSON HOLDING CORPORATION
		
	By:	 	 
		 	 Name:
 Title:

 
			
	HOLDER:
	
	[INVESTOR]
		
	By:	 	 
		 	 Name:
 Title:

 INDEX OF EXHIBITS 

 

			
	Exhibit A	  	Indenture
	Exhibit B	  	Form of Company Counsel Opinion
	Exhibit C	  	Purchasing Beneficial Owners

 EXHIBIT A 

Indenture 
 [Attached under
separate cover] 

 EXHIBIT B 

Form of Company Counsel Opinion 

[Attached under separate cover] 

 EXHIBIT C 

Purchasing Beneficial Owners 
  

							
	 Name and Address of
Beneficial Owner
	 	 DTC Participant Contact Name and
Phone Number
	 	 DTC Participant #
	  	 Principal Amount of 
Purchased Notes
(CUSIP
[    ])NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY

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: $16,000.00

Issue Date: January 31, 2014

Debt Settlement Price: $16,000.00 

CONVERTIBLE PROMISSORY NOTE 

Grid Petroleum Corporation,  a  Nevada  corporation (hereinafter  called  the “Borrower”),  hereby  promises  to  pay  to  the  order  of  Syndication Capital LLC, a Nevada corporation, or registered assigns (the “Holder”) the sum of $16,000.00 together with any interest as set forth herein, on August 1, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into Common free trading stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) 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 Las Vegas, Nevada 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 Debt Settlement Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Debt Settlement Agreement”). 

1

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 from time to time, and 

at any time during the period beginning on the date, which is one hundred eighty (180) days, 

following the dates listed for each invoice listed in Exhibit B.  The Maturity Dates for invoice #37 in the amount of $16,000.00, (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of 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 4.99% 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  Regulations 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 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 6:00 p.m., Las Vegas, Nevada time on 

such conversion date (the “Conversion Date”).  

2

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) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2

Conversion Price.

(a)

Calculation  of  Conversion  Price.    The  conversion  price

(the

“Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to 

equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower 

relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, 

combinations, recapitalization, reclassifications, extraordinary distributions and similar events). 

The "Conversion Price" shall mean par .00001 multiplied by the number of Common Stock converted at the time. 

(b) 

Conversion Price During Major Announcements.  Notwithstanding 

anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public 

announcement that it intends to consolidate or merge with any other corporation (other than a 

merger in which the Borrower is the surviving or continuing corporation and its capital stock is 

unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any 

person, group or entity (including the Borrower) publicly announces a tender offer to Purchase 

50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the 

announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement 

Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing 

through the Adjusted Conversion Price Termination Date (as defined below), be equal to the 

lower of (x) the Conversion Price which would have been applicable for a Conversion occurring 

on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From 

and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be 

determined as set forth in this Section 1.2(a).  For purposes hereof, “Adjusted Conversion Price 

Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative. 

1.3

Authorized Shares.  The Borrower covenants that during the period the

conversion right exists, the Borrower will 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 of this Note issued pursuant to the Debt Settlement Agreement.  The Borrower is required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”).  

3

The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Debt Settlement Agreement.  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 the Notes 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 the outstanding Notes.  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. 

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 from time to time after the Issue Date, by (A) 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 6:00 p.m., Las Vegas, Nevada time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower. 

(b) 

Surrender of Note 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 

4 

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, 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 (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 Debt Settlement Agreement. 

(e) 

Obligation of Borrower to Deliver Common Stock.  Upon receipt 

by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of 

record of the Common Stock issuable upon such conversion, the outstanding principal amount 

and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such 

conversion, 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, 

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 6:00 p.m., Las Vegas, Nevada 

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 to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. 

5 

(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 

of this Note is not delivered by the Deadline (other than a failure due to the circumstances 

described in Section 1.3 above, which failure shall be governed by such Section) the Borrower 

shall pay to the Holder $2,000 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 

(by written notice to the Borrower by the first day of the month following the month in which it 

has accrued), 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 is a valuable right to the Holder.  The damages resulting 

from a failure, attempt to frustrate, interference with such conversion 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. 

1.5 

Concerning the Shares.  The shares of Common Stock issuable upon 

conversion 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 Debt Settlement Agreement). 

Except as otherwise provided in the Debt Settlement Agreement (and subject to the removal provisions 

set forth below), until such time as the shares of Common Stock issuable upon conversion of this 

Note have been registered 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, each certificate for shares of Common Stock issuable upon conversion of this Note that has 

not been so included in an effective registration statement or that has not been sold pursuant to 

an effective registration statement or an exemption that permits removal of the legend, shall bear 

a legend substantially in the following form, as appropriate: 

“NEITHER    THE    ISSUANCE    AND    SALE    OF    THE    SECURITIES 

REPRESENTED  BY  THIS  CERTIFICATE  NOR  THE  SECURITIES  INTO 

WHICH    THESE    SECURITIES    ARE    EXERCISABLE    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 

6 

PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER   LOAN   OR   FINANCING   ARRANGEMENT   SECURED   BY   THE SECURITIES.” 

The legend set forth above 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, in 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 accepted 

by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock 

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.  In the event that the Company does not accept the opinion of counsel 

provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from 

registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of 

Default pursuant to Section 3.2 of the Note. 

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 

7 

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 the Holder shall be 

entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the 

Borrower) 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. 

(d) 

Adjustment Due to Dilutive Issuance.  If, at any time when any 

Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 

1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration 

or for a consideration per share (before deduction of reasonable expenses or commissions or 

underwriting discounts or allowances in connection therewith) less than the Conversion Price in 

effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a 

“Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be 

reduced to the amount of the consideration per share received by the Borrower in such Dilutive 

Issuance. 

The Borrower shall be deemed to have issued or sold shares of Common 

Stock if the Borrower in any manner issues or grants any warrants, rights or options (not 

including employee stock option plans), whether or not immediately exercisable, to subscribe for 

or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to Purchase Common Stock 

or Convertible Securities are hereinafter referred to as “Options”) and the price per share for 

which Common Stock is issuable upon the exercise of such Options is less than the Conversion 

Price then in effect, then the Conversion Price shall be equal to such price per share.  For 

purposes of the preceding sentence, the “price per share for which Common Stock is issuable 

upon the exercise of such Options” is determined by dividing (i) the total amount, if any, 

received or receivable by the Borrower as consideration for the issuance or granting of all such 

Options, plus the minimum aggregate amount of additional consideration, if any, payable to the 

Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities 

issuable upon the exercise of such Options, the minimum aggregate amount of additional 

consideration payable upon the conversion or exchange thereof at the time such Convertible 

Securities first become convertible or exchangeable, by (ii) the maximum total number of shares 

of Common Stock issuable upon the exercise of all such Options (assuming full conversion of 

8 

Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be 

made upon the actual issuance of such Common Stock upon the exercise of such Options or upon 

the conversion or exchange of Convertible Securities issuable upon exercise of such Options. 

Additionally, the Borrower shall be deemed to have issued or sold shares 

of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, 

whether or not immediately convertible (other than where the same are issuable upon the 

exercise of Options), and the price per share for which Common Stock is issuable upon such 

conversion or exchange is less than the Conversion Price then in effect, then the Conversion 

Price shall be equal to such price per share.  For the purposes of the preceding sentence, the 

“price per share for which Common Stock is issuable upon such conversion or exchange” is 

determined by dividing (i) the total amount, if any, received or receivable by the Borrower as 

consideration for the issuance or sale of all such Convertible Securities, plus the minimum 

aggregate amount of additional consideration, if any, payable to the Borrower upon the 

conversion or exchange thereof at the time such Convertible Securities first become convertible 

or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon 

the conversion or exchange of all such Convertible Securities.  No further adjustment to the 

Conversion Price will be made upon the actual issuance of such Common Stock upon conversion 

or exchange of such Convertible Securities. 

(e) 

Share Purchase Rights.  If, at any time when any Notes are issued and 

outstanding, the Borrower issues any convertible securities or rights to Common 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 Share Purchase Rights, the aggregate Share 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 Debt Settlement 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 Debt Settlement Rights. 

(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 

Trading Market Limitations.  Unless permitted by the applicable rules and 

regulations of the principal securities market on which the Common Stock is then listed or 

traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this 

Note and the other Notes issued pursuant to the Debt Settlement Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing 

Date (as defined in the Debt Settlement Agreement), subject to equitable adjustment from time to time 

9 

for stock splits, stock dividends, combinations, capital reorganizations and similar events relating 

to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has 

been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules 

or regulations of any stock exchange, interdealer quotation system or other self-regulatory 

organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability 

to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any 

further right to convert this Note, this will be considered an Event of Default under Section 3.3 

of the Note. 

1.8 

Status as Shareholder.  Upon submission of a Notice of Conversion by a 

Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued 

because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or 

Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the 

Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, 

excepting only the right to receive certificates for such shares of Common Stock and to any 

remedies provided herein or otherwise available at law or in equity to such Holder because of a 

failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, 

if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) 

business day after the expiration of the Deadline with respect to a conversion of any portion of 

this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder 

of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of 

this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon 

as practicable, return such unconverted Note to the Holder or, if the Note has not been 

surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In 

all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) 

the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required 

thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to 

have the Conversion Price with respect to subsequent conversions determined in accordance with 

Section 1.3) for the Borrower’s failure to convert this Note. 

1.9 

Prepayment.  Notwithstanding anything to the contrary contained in this 

Note, at any time during the period beginning on the Issue Date and ending on the date which is 

ninety (90) days following the issue date, the Borrower shall have the right, exercisable on not 

less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the 

outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. 

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 three 

(3) 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 

140%, 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 

10 

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 1.9. 

Notwithstanding anything to the contrary contained in this Note, at any time 

during the period beginning  on the date of the invoices listed on Exhibit B, which is ninety-one (91) days following the issue date and ending on the date of the invoices listed on Exhibit B, which is one hundred fifty (150) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any 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 three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Second 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 “Second Optional Prepayment Amount”) equal to 145%, 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 Second 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 1.9. 

Notwithstanding anything to the contrary contained in this Note, at any time 

during the period beginning  on the date of the invoices listed on Exhibit B, which is one hundred fifty-one (151) days following the issue date and ending on the date which is one hundred eighty (180) days following the issue date of the invoices listed on Exhibit B, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any 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 three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Third 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 “Third Optional Prepayment Amount”) equal to 150%, 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 Third 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 1.9. 

11 

After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment. 

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 Repurchase.  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.  So long as the Borrower shall have any obligation under this 

Note, the Borrower shall not, without the Holder’s written consent, 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, (b) indebtedness to 

trade creditors or financial institutions incurred in the ordinary course of business or (c) 

borrowings, the proceeds of which shall be used to repay this Note. 

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 (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $500,000. 

ARTICLE III.  EVENTS OF DEFAULT 

If any of the following events of default (each, an “Event of Default”) shall occur: 

12 

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) 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 three (3) 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. 

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 Debt Settlement Agreement and such breach continues for a period of ten (10) 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 Debt Settlement 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 Debt Settlement 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, and shall remain unvacated, unbonded or unstayed for a period of 

13 

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 Stock.  The Borrower shall fail to maintain the 

listing of the Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange. 

3.9 

Failure to Comply with the Exchange Act.  The Borrower shall fail to 

comply 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. 

3.12

Maintenance of Assets.

The failure by Borrower 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 Debt Settlement 

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 Debt Settlement 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. 

14 

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. 

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, 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 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, 

15 

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. 

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. 

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, 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, with accurate confirmation 

generated by the transmitting facsimile machine, at the address or number designated below (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.  The addresses for 

such communications shall be: 

If to the Borrower, to: 

Grid Petroleum Corporation

1155 Camino Del Mar #176

Del Mar, CA 92014

16 

If to the Holder: 

Syndication Capital LLC

1401 Camino Del Mar #202

Del Mar, CA 92014

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 Debt Settlement 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 Nevada without regard to principles of conflicts of 

laws.  Any action brought by either party against the other concerning the transactions 

contemplated by this Note shall be brought only in the state courts of Nevada or in the federal 

courts located in the state and county of Clark.  The parties to this Note hereby irrevocably 

waive any objection to jurisdiction and venue of any action instituted hereunder and shall not 

assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. 

The Borrower and Holder waive trial by jury.  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 or any other agreement delivered in connection herewith is invalid or unenforceable 

under any applicable statute or rule of law, then such provision shall be deemed inoperative to 

the extent that it may conflict therewith and shall be deemed modified to conform with such 

statute or rule of law.  

Any such provision which may prove invalid or unenforceable under any 

law shall not affect the validity or enforceability of any other provision of any agreement.   Each 

party hereby irrevocably waives personal service of process and consents to process being served 

in any suit, action or proceeding in connection with this Agreement or any other Transaction 

Document by mailing a copy thereof via registered or certified mail or overnight delivery (with 

evidence of delivery) to such party at the address in effect for notices to it under this Agreement 

and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. 

17

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

Debt Settlement Agreement.  By its acceptance of this Note, each party agrees to

be bound by the applicable terms of the Debt Settlement Agreement.

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. 

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. 

18

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this January 31, 2014

Grid Petroleum Corporation

By: James Powell 

James Powell

19 

EXHIBIT A 

NOTICE OF CONVERSION 

The undersigned hereby elects to convert $_________________ principal amount 

of the Note (defined below) into that number of shares of Common Stock to be issued pursuant 

to the conversion of the Note (“Common Stock”) as set forth below, of Grid Petroleum Corporation, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of January 31, 2014 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. 

Box Checked as to applicable instructions: 

[ ]

The Borrower shall electronically transmit the Common Stock issuable pursuant

to this Notice of Conversion to the account of the undersigned or its nominee with

DTC  through  its  Deposit  Withdrawal  Agent  Commission  system

(“DWAC

Transfer”).

Name of DTC Prime Broker: Account Number: 

[ 

] 

The  undersigned  hereby  requests  that  the  Borrower  issue  a  certificate  or 

certificates for the number of shares of Common Stock set forth below (which 

numbers are based on the Holder’s calculation attached hereto) in the name(s) 

specified immediately below or, if additional space is necessary, on an attachment 

hereto: 

Syndication Capital LLC

1401 Camino Del Mar #202

Del Mar, CA 92014

Attention: Certificate Delivery 

Date of Conversion:

_____________

Applicable Conversion Price:

$0.001

Number of Shares of Common Stock to be Issued 

Pursuant to Conversion of the Notes:

______________

Amount of Principal Balance Due remaining 

Under the Note after this conversion:

______________

By:_____________________________

Title:  President.

Date:  ______________ 

20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00233-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00233-of-00352.parquet"}]]