Document:

toca-ex101_331.htm

 

Exhibit 10.1

Tocagen Inc. 

Annual Incentive Plan

	
1.
	
Purpose

The Tocagen Inc. Annual Incentive Plan (the “Plan”) is designed to provide annual bonuses to individuals who make an important contribution to the success of Tocagen Inc. (the “Company”).  The Plan is intended to provide individuals with incentives and rewards for achieving outstanding performance and to enhance the ability of the Company to attract and retain highly talented individuals.

	
2.
	
Administration

The Plan will be administered by the Board of Directors of the Company (the “Board”) and the Compensation Committee of the Board (the “Committee”) (each, a “Plan Administrator”).  The Plan Administrator will have the sole discretion and authority to administer and interpret the Plan, and the decisions of the Plan Administrator will in every case be final and binding on all persons having an interest in the Plan.

Notwithstanding the foregoing, certain aspects of the Plan as it applies to any individual who holds a position with the Company below the Vice President level and is not an “officer” of the Company (within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and Rule 16a-1 thereunder) (a “Section 16 Officer”) may be administered by the Chief Executive Officer of the Company who is also a member of the Board (the “CEO”), as specifically provided in the Plan and subject to the Board’s delegation of such authority to the CEO, and in such event, the CEO will have the sole discretion and authority to administer and interpret such aspects of the Plan and be considered the Plan Administrator for such purposes, and the decisions of the CEO will in every case be final and binding on all such individuals.

	
3.
	
Plan Year

For purposes of the Plan, the Company’s fiscal year will be the “Plan Year”, and the Plan will first apply to the Plan Year commencing on January 1, 2017. 

	
4.
	
Eligibility

	
 
	
(a)
	
Participation

Each full time employee of the Company is eligible to participate in the Plan and shall be considered a “Participant” in the Plan; any employee who is not expressly classified by the Company as a “regular” employee, such as temporary or contract employee and intern, is not eligible to be a Participant.   Any other individual who provides services to the Company or an affiliate may become a Participant in the Plan if such individual is specifically so designated in writing by the Plan Administrator.  

1.

 

Unless otherwise specified by the Plan Administrator or expressly provided in a written agreement between a Participant and the Company, an individual who commences employment with the Company during the first three calendar quarters of a Plan Year may become a Participant for such Plan Year, commencing on the date such individual commences employment with the Company (provided such individual meets all other eligibility criteria for participation in the Plan); an individual who commences employment with the Company in the last calendar quarter of a Plan Year may not become a Participant until the Plan Year following the calendar year in which such individual commenced employment.  

(b)For each Plan Year, each Participant will be granted an award of a contingent right to a future payment under the Plan (an “Award”) for such Plan Year, the payment of which is contingent upon achievement of the applicable performance goals established by the Plan Administrator (as described in Section 5(b)).  

(c)Award Payments

Except as otherwise provided (i) in any other written plan or policy maintained by the Company, (ii) in a written agreement between a Participant and the Company, or (iii) by the Plan Administrator, in order to be eligible to receive payment of an Award for any Plan Year, a Participant must meet the following criteria: (A) continue to be a full-time employee of the Company from the date his or her participation in the Plan commences for such Plan Year through the date that Awards for such Plan Year are paid under the Plan; and (ii) comply with any rules of the Plan established by the Plan Administrator. 

	
5.
	
Method for Establishing and Determining Awards 

(a)Establishment of Target Awards

For each Plan Year, the Plan Administrator will establish the following for each Participant: (i) a target award opportunity under the Plan (“Target Award”), expressed either as a percentage of such Participant’s Base Salary or as a set dollar amount; (ii) the percentage of such Target Award attributable to corporate performance goals; and (iii) the percentage of such Target Award attributable to individual performance goals, as applicable.  The Plan Administrator will determine, in its sole discretion, at what time the Target Award is established and whether the Target Award is communicated to the Participant and is not obligated to treat all Plan Participants similarly.

Notwithstanding the foregoing, if a Participant’s employment agreement or offer letter agreement with the Company provides for a greater target award opportunity than such Participant’s Target Award for any Plan Year, then for purposes of the Plan, such greater target award opportunity will be deemed to be such Participant’s Target Award for such Plan Year.

For purposes of the Plan, “Base Salary” for a Participant means the total amount of base salary or base pay earned by such Participant during the applicable Plan Year while such individual is a Participant.  Base Salary does not include any bonuses, commissions or other incentive compensation, amounts received or otherwise recognized in connection with equity awards, expense reimbursements, relocation payments, overtime or shift differential payments, contributions made by the Company under any employee benefit plan, the value of any employee 

2.

 

benefits or perquisites paid for by the Company, or any other similar items of compensation.  Base Salary will be determined before any deductions for taxes or benefits and deferrals of compensation pursuant to any Company-sponsored plan.

(b)Establishment of Performance Goals

For each Plan Year, the Plan Administrator will establish the following for each Participant: (i) one or more performance goals (which may be corporate performance goals and/or individual performance goals) and (ii) the relative weights, if any, of such performance goals and (iii) such other terms and conditions of the Award, if any, the Plan Administrator determines appropriate in its discretion (and in accordance with the terms of the Plan).    The Plan Administrator will make such determinations under this Section 5(b) at the times and in the manner determined appropriate in its sole discretion and is not obligated to treat all Plan Participants similarly.

(c)Evaluation of Performance Results

Following the end of each Plan Year, the Plan Administrator will determine whether (and to what extent) the performance goals established for such Plan Year pursuant to Section 5(b) have been achieved, provided that the extent to which corporate performance goals are determined achieved will be made solely by the Board and/or the Committee.

(d)Determination of Actual Awards

For each Plan Year, the Plan Administrator will determine the amount of any actual Award for each Participant (which may be below, at or above such Participant’s Target Award) based on (i) the extent to which the performance goals established for such Plan Year pursuant to Section 5(b) have been achieved (and any relative weighting of such performance goals) and (ii) such Participant’s Target Award for such Plan Year.  Notwithstanding the foregoing, the Plan Administrator will have the discretion to reduce the amount of any actual Award below the amount calculated under the terms of the Plan and may take into consideration such other factors as it determines appropriate, in its sole discretion, in determining the amount of any actual Award for any Participant.  Awards will additionally be subject to any maximum limitation approved by the Plan Administrator for the applicable Plan Year.   

	
6.
	
Payment of Awards

Following, and subject to, the Plan Administrator’s determination of actual Awards for a Plan Year pursuant to Section 5(d), the Plan Administrator will approve the payment of Awards for such Plan Year.  The payment of Awards under the Plan will be made as soon as practicable after such certification and approval.  

All Awards under the Plan will be paid in the form of cash or, if approved by the Board or the Committee, a Stock Award (as defined in the Company’s 2017 Equity Incentive Plan), as determined by the Plan Administrator in its sole discretion.  The terms and conditions of any such Stock Award will be determined by the Plan Administrator in its sole discretion.  

3.

 

	
7.
	
Miscellaneous

(a)Withholding of Compensation.  The Company will deduct and withhold from any amounts payable to Participants under the Plan any amounts required to be deducted and withheld by the Company under the provisions of any applicable federal, state, local or foreign statute, law, regulation, ordinance or order.  The Company reserves the right to require a Participant to satisfy such deduction and withholding obligation in such manner as specified by the Company under applicable law, in the event that amounts payable to Participants under the Plan are not paid in the form of cash.

(b)Plan Funding.  The Plan will be unfunded.  Nothing contained in the Plan will be deemed to require the Company to deposit, invest or set aside amounts for the payment of any Awards under the Plan.

(c)Amendment or Termination of the Plan.  The Plan may be amended or terminated at any time by the Board or the Committee.

(d)No Guarantee of Continued Service.  The Plan will not confer any rights upon an employee to remain in service with the Company or any affiliate of the Company for any specific duration or interfere with or otherwise restrict in any way the rights of the Company or any affiliate of the Company to terminate an employee’s service with the Company (or affiliate, if applicable) for any reason, with or without cause or notice.

(e)No Assignment or Transfer.  None of the rights, benefits, obligations or duties under the Plan may be assigned or transferred by any individual employee or Participant.  Any purported assignment or transfer by any employee or Participant will be void.  Participation in the Plan does not give any individual any ownership, security, or other rights in any assets of the Company.

(f)Validity.  In the event any provision of the Plan is held invalid, void, or unenforceable, the same will not affect, in any respect whatsoever, the validity of any other provision of the Plan.

(g)Governing Documents.  Each Award under the Plan shall be governed by the provisions of the Plan as set forth herein.  This Plan contains the entire agreement between the Company and each Participant on this subject, and supersedes all prior bonus compensation plans or programs of the Company and all other previous oral or written statements regarding any such bonus compensation programs or plans.

(h)Clawback/Recovery.  All Awards and payouts under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Plan Administrator may impose such other clawback, recovery or recoupment provisions in an individual written agreement with the Participant as the Plan Administrator determines necessary or appropriate, including but not limited to a reacquisition right in respect of a previous payment under the Plan in Company common stock or cash upon the occurrence of an event constituting 

4.

 

“cause” as defined in the Company’s 2017 Equity Incentive Plan. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.

(i)Governing Law.  The rights and obligations of any employee under the Plan will be governed by and interpreted, construed and enforced in accordance with the laws of the State of California without regard to its or any other jurisdiction’s conflicts of laws principles.

 

5.Exhibit 10.1

 

THIS INSTRUMENT CONTAINS AN
AFFIDAVIT OF CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS BORROWER MAY HAVE AND ALLOWS THE HOLDER
TO OBTAIN A JUDGMENT AGAINST BORROWER WITHOUT ANY FURTHER NOTICE.

 

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: US$100,000.00	Issue Date: July 31, 2017

 

CONVERTIBLE PROMISSORY NOTE

 

FOR
VALUE RECEIVED, NIGHTFOOD HOLDINGS, INC., a Nevada corporation (hereinafter called the “Borrower” or “Company”),
hereby promises to pay to the order of LABRYS FUND, LP, a Delaware limited partnership, or registered assigns (the “Holder”)
the sum of US$100,000.00, together with any interest as set forth herein, on January 31, 2018 (the “Maturity Date”),
and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%) (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. In connection with the issuance of this convertible promissory note (the “Note”),
the Borrower shall, on the Issue Date, issue 400,650 shares of common stock (the “Returnable Shares”) to Holder as a
commitment fee, provided, however, the Returnable Shares must be returned to the Borrower’s treasury if the
Note is fully repaid and satisfied prior to the date which is one hundred eighty (180) days following the Issue Date, subject
further to the terms and conditions of this Note.

 

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 the lesser of (i) twenty-four percent (24%) per annum or (ii)
the maximum amount allowed by law from the due date thereof until the same is paid (the “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 stock, $0.0001 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 New York, New York are authorized or required
by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally
issued (the “Purchase Agreement”).

 

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

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion
Right. The Holder shall have the right, in its sole and absolute discretion, from time to time, and at any time on or following
the date that is 180 days after the Issue Date and ending on the later of (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 (as defined below) 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 (up to a maximum of 9.99%) 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 11:59
p.m., New York, New York 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 Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided
in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash,
plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses
(1) and/or (2), plus (4) any Additional Principal for such Conversions, plus (5) at the Holder’s option, any amounts owed
to the Holder pursuant to any other provision of this Note, all subject to the 4.99% (or up to 9.99% if increased as provided above)
limitation discussed above.

 

1.2 Conversion Price.

 

(a)       Calculation
of Conversion Price. Subject to the adjustments described herein, the conversion price (the “Conversion Price”)
shall equal the lesser of (i) 50% multiplied by the lowest Trading Price (as defined below) (representing a discount rate of
50%) during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the date of
this Note and (ii) the Alternate 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
“Alternate Conversion Price” shall mean 50% multiplied by the Market Price (as defined herein) (representing a
discount rate of 50%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during
the twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading
Price” means, for any security as of any date, the lesser of: (i) the lowest trade price on the OTC Pink, OTCQB,
or applicable trading market (the “OTC Market”) as reported by a reliable reporting service (“Reporting
Service”) designated by the Holder or, if the OTC Market is not the principal trading market for such security, the
trading price of such security on the principal securities exchange or trading market where such security is listed or traded
or, if no trading price of such security is available in any of the foregoing manners, the average of the trading prices of
any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc., or
(ii) the lowest closing bid price on the OTC Market as reported by a Reporting Service designated by the Holder or, if the
OTC Market is not the principal trading market for such security, the closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is
available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that
are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated
for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually
determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the
calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading
Day” shall mean any day on which the Common Stock is tradable for any period on the OTC Market or on the principal
securities exchange or other securities market on which the Common Stock is then being traded. The Borrower shall be
responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. In the event of any
dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest
error.

 

    	 	3	 

     

    

 

Each time, while this Note is
outstanding, the Borrower enters into a Section 3(a)(9) transaction (including but not limited to the issuance of new promissory
notes or of a replacement promissory note), or Section 3(a)(10) transaction, in which any 3rd party has the right to
convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater
than the Alternate Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Alternate
Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all applicable adjustments in this
Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9)
transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section
3(a)(10) transaction, in which any 3rd party has a look back period greater than the look back period in effect under the Note
at that time, then the Holder’s look back period shall automatically be adjusted to such greater number of days until this Note
is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Alternate Conversion Price and/or
adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event
that requires any adjustment described in the two immediately preceding sentences.

 

    	 	4	 

     

    

 

The Conversion Price is subject
to full ratchet anti-dilution in the event that the Company issues any common stock at a per share price lower than the Conversion
Price (each a “Dilutive Price”) then in effect, provided, however, that Holder shall have the sole discretion in deciding
whether to utilize such Dilutive Price instead of the Conversion Price otherwise in effect at the time of the respective conversion.

 

(b)       Adjustment
to Conversion Price. At any time after the Issue Date, (i) if in the case that the Borrower’s Common Stock is not
deliverable by DWAC (including if the Borrower’s transfer agent has a policy prohibiting or limiting delivery of shares of
the Borrower’s Common Stock specified in a Notice of Conversion), (ii) if the Borrower ceases to be a reporting company
pursuant or subject to the Exchange Act, (iii) if the Borrower loses a market (including the OTCBB, OTCQB or an equivalent
replacement exchange) for its Common Stock, (iv) if the Borrower fails to maintain its status as “DTC Eligible” for
any reason, (v) if the Conversion Price is less than one cent ($0.01), (vi) if the Note cannot be converted into free trading
shares on or after six months from the Issue Date, (vii) if at any time the Borrower does not maintain or replenish the
Reserved Amount (as defined herein) within three (3) business days of the request of the Holder, (viii) if the Borrower fails
to maintain the listing of the Common Stock on at least one of the OTC Markets or an equivalent replacement exchange, the
Nasdaq National Market, the Nasdaq Small Cap Market, the New York Stock Exchange, or the NYSE MKT, (ix) if the Borrower fails
to comply with the reporting requirements of the Exchange Act; the reporting requirements necessary to satisfy the
availability of Rule 144 to the Holder or its assigns, including but not limited to the timely fulfillment of its filing
requirements as a fully-reporting issuer registered with the SEC, the requirements for XBRL filings, the requirements for
disclosure of financial statements on its website, (x) if the Borrower effectuates a reverse split of its Common Stock
without twenty (20) days prior written notice to the Holder, (xi) if OTC Markets changes the Borrower’s designation to ‘No
Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark
Sign), (xii) the restatement of any financial statements filed by the Borrower with the SEC for any date or period from
two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the
rights of the Holder with respect to this Note or the Purchase Agreement, (xiii) any cessation of trading of the Common Stock
on at least one of the OTC Markets or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small Cap
Market, the New York Stock Exchange, or the NYSE MKT, and such cessation of trading shall continue for a period of five
consecutive (5) Trading Days, (xiv) the Borrower loses the “bid” price for its Common Stock ($0.0001 on the
“Ask” with zero market makers on the “Bid” per Level 2), (xv) if the Holder is notified in writing by the
Company or the Company’s transfer agent that the Company does not have the necessary amount of authorized and issuable shares
of Common Stock available to satisfy the issuance of Shares pursuant to a Conversion Notice, and/or (xvi) an event of default
occurs under Section 3.11 of the Note (regardless of whether the Holder has declared the Note in default or not), then the
Holder shall be entitled to increase, by 10% for each occurrence, cumulative or otherwise, the discount to the Conversion
Price shall apply for all future conversions under the Note. The Holder maintains the option and sole discretion to increase
by Five Thousand and No/100 United States Dollars ($5,000) per each occurrence described above (under Holder’s and Borrower’s
expectation that any principal amount increase will tack back to the Issue Date) the principal amount of the Note instead of
applying further discounts to the Conversion Price. Under no circumstances shall the principal amount exceed an additional
Twenty Five Thousand and No/100 United States Dollars ($25,000) or the Conversion Price be less than 30% multiplied by the
Market Price due to cumulative effect.

 

    	 	5	 

     

    

 

(c)       DTC
Chill. If in the case that the Borrower’s Common Stock is “chilled” for deposit into the DTC system and only eligible
for clearing deposit, then an additional 15% discount to the Conversion Price shall apply for all future conversions under all
Notes while the “chill” is in effect.

 

(d)       [Intentionally
Omitted]. 

 

(e)       Par
Value Adjustments. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share,
the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value
possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment, provided, however, that the
Holder, in its sole and absolute discretion, may elect to instead to set the Conversion Price to par value for such Conversion(s)
and the Conversion Amount for such Conversion(s) shall be increased to include Additional Principal, where “Additional Principal”
means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of Conversion Shares
issuable upon such Conversion(s) to equal the same number of Conversion Shares as would have been issued had the Conversion Price
not been set to par value pursuant to this Section 1.2(e).

 

(f)       Conversion
Price During Major Announcements. Notwithstanding anything contained in the preceding section 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. 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 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(d) to become operative.

 

    	 	6	 

     

    

 

(g)       Pro
Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 4.13.

 

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 Purchase Agreement. The Borrower is required at all
times to have authorized and reserved seven (7) times the number of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). Initially, the
Company will instruct the Transfer Agent to reserve 2,500,000 shares of common stock
in the name of the Holder for issuance upon conversion hereof. The Reserved Amount shall be increased from time to time in accordance
with the Borrower’s obligations pursuant to Section 3(d) of the Purchase 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. 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, and the then outstanding principal due under this Note shall increase by Fifteen Thousand and No/100
United States Dollars ($15,000).

 

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. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than
the initial Reserved Amount, regardless of any prior conversions, and the Reserved Amount will be increased by a factor of two
(2) each time the Borrower issues a Variable Security (as defined herein).

 

    	 	7	 

     

    

 

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 on or following
the date that is 180 days 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 11:59 p.m., New York, New York 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 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)       Book
Entry upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in
accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event
of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in
the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the
Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal
amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

    	 	8	 

     

    

 

(d)       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.

 

(e)       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 two (2) 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 Purchase Agreement.

 

(f)       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 11:59 p.m., New York, New York time, on such date.

 

    	 	9	 

     

    

 

(g) 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 commercially reasonable 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
At Custodian (“DWAC”) system.

 

(i) Failure to Deliver Common
Stock Prior to Delivery 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 until the Borrower issues and delivers a certificate to the Holder or credit the
Holder’s balance account with OTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion
of any Conversion Amount (under Holder’s and Borrower’s expectation that any damages will tack back to the Issue Date). 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,
and 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(i) are justified.

 

(j)       Rescindment
of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the
Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the
Borrower’s Common Stock requested in the Notice of Conversion within two (2) business days from the Conversion Date specified
therein, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock
issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to
deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the
Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, (vi) if, within three (3)
business days of the transmittal of the Notice of Conversion to the Borrower, the Common Stock has a closing bid which is 5%
or lower than that set forth in the Notice of Conversion, or (vii) if OTC Markets changes the Borrower’s designation to
‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or
‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, then
the Holder maintains the option and sole discretion to rescind the applicable Notice of Conversion (“Rescindment”)
pursuant to which such Conversion Shares were issuable with a “Notice of Rescindment.” This Note shall remain
convertible before and after the Maturity Date hereof until this Note is repaid or converted in full.

 

    	 	10	 

     

    

 

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 Purchase Agreement). Except as otherwise provided in the Purchase 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 PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

    	 	11	 

     

    

 

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 reasonably accepted by the Borrower 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 Borrower 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 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.

 

    	 	12	 

     

    

 

(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 this Note is 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, except for shares of Common Stock issued directly to vendors
or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors
or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such
shares), 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 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.

 

    	 	13	 

     

    

 

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

 

    	 	14	 

     

    

 

(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 [Intentionally Omitted].

 

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 third (3rd) 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, the Borrower may prepay the amounts outstanding hereunder pursuant to the following
terms and conditions:

 

(a)       At any
time during the period beginning on the Issue Date and ending on the date which is one hundred eighty (180) 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 in full by making a payment to the Holder of an amount in cash
equal to the sum of: (i) the then outstanding principal amount of this Note plus (ii) accrued and unpaid interest on
the unpaid principal amount of this Note plus (iii) Default Interest, if any, in accordance with Article III, plus
(iv) any Additional Principal, plus (v) at the Holder’s option, any amounts owed to the Holder pursuant to any other
provision of this Note, plus (vi) $750.00 (the “Returnable Share Fee”) to reimburse Holder for the fees
associated with the Returnable Shares.

 

    	 	15	 

     

    

 

(b)       At any time during the period
beginning on the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Borrower
may have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note, and subject
to the Holder’s written approval at such time, to prepay any amount outstanding under the Note (subject to a minimum $10,000.00
payment), provided, however, that all partial payments shall be applied first to all interest accrued under the Note at the time
of the respective partial payment, second to the principal under the Note, and third to the Returnable Share Fee and/or other applicable
amounts owed hereunder.

 

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

 

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 applicable prepayment amount 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.

 

Upon confirmation by Holder that
the prepayment has been received by the Holder and that all amounts outstanding under this Note are paid in full, the Holder shall
return the Returnable Shares back to the Company’s treasury. If the Borrower delivers an Optional Prepayment Notice and fails to
pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment
Date, then the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9 and the Holder shall no
longer be required to return the Returnable Shares to the Borrower under any circumstances.

 

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.

 

    	 	16	 

     

    

 

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

 

2.3 Borrowings; Liens.
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 financial institutions
or other lenders incurred in the ordinary course of business, (c) borrowings, the proceeds of which shall be used to repay this
Note, or (ii) enter into, create or incur any liens, claims or encumbrances of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, securing any indebtedness
occurring after the date hereof.

 

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 $100,000.

 

2.6 Section
3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction
or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section
3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10)
Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a
3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will
become immediately due and payable to the Holder at its election in the form of a cash payment or added to the balance of
this Note (under Holder’s and Borrower’s expectation that this amount will tack back to the Issue Date).

 

    	 	17	 

     

    

 

2.7 Preservation of Existence,
etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence,
rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or
minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

2.8 Non-circumvention.
The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation
or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue
or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required
to protect the rights of the Holder.

 

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

 

ARTICLE III. EVENTS OF DEFAULT

 

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

 

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. Any amount of principal on this Note which is not paid when due shall bear interest at the rate
of Twenty Four percent (24%) per annum from the due date thereof until the same is paid (“Default Interest”).

 

    	 	18	 

     

    

 

3.2 Conversion
and the Shares. The Borrower fails to reserve the Reserved Amount required for Holder at any time after the 60th
calendar day after the Issue Date, 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 two (2) 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 Purchase Agreement.

 

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

 

3.5 Receiver or Trustee.
The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors or commence proceedings for
its dissolution, 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 for the Borrower or for a substantial part of its property
or business without its consent and shall not be discharged within sixty (60) days after such appointment.

 

3.6 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, or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it
an involuntary petition for bankruptcy relief, all under federal or state laws as applicable or the Borrower admits in
writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for
bankruptcy relief, all under international, federal or state laws as applicable.

 

    	 	19	 

     

    

 

3.7Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.8Cessation 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.

 

3.9 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).

 

3.10 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 (as defined herein), 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 (2) the Holder
or any other third party, including, without limitation, promissory notes; provided, however, the term “Other Agreements”
shall not include 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.

 

3.11 Funding Window. The
Borrower agrees that it will not enter into a similar type financing transaction (e.g. convertible promissory note) with, or issue
a Variable Security to, any party other than the Holder for a period of thirty (30) Trading Days following the Issue Date without
written approval from the Holder. The Borrower agrees that this is a material term of the Note and any breach of this Section 3.11
will result in an Event of Default.

 

3.12 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 $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20)
days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

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

 

    	 	20	 

     

    

 

3.14 Bid Price. If the
Borrower loses the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid”
per Level 2) and/or a market (including the OTCBB, OTCQB or an equivalent replacement exchange) for its Common Stock.

 

3.15 Failure To Deliver Returnable
Shares. The Borrower fails to deliver the Returnable Shares to the Holder within three (3) business days of the Issue Date.

 

3.16 Market Capitalization.
The Borrower fails to maintain a market capitalization of at least $1,000,000 on any Trading Day, which shall be calculated by
multiplying (i) the closing bid price of the Borrower’s common stock on the Trading Day immediately preceding the respective date
of calculation by (ii) the total shares of the Borrower’s common stock issued and outstanding on the Trading Day immediately preceding
the respective date of calculation.

 

3.17 Maximum Conversion.
If at any time while this Note is outstanding, and assuming the beneficial ownership limitations contained in this Note did not
apply to this specific calculation, the Holder could convert the amounts outstanding under Note into more than 4.99% of the outstanding
shares of Common Stock of the Company as of the date of calculation (including any beneficial ownership associated with the Returnable
Shares held at the time of such calculation).

 

3.18 Prohibition
on Debt and Variable Securities. For a period of thirty (30) Trading Days following the Issue Date, the Issuer shall
not, without written consent of the Investor, issue any debt (including, but not limited to any loan, bond, note, debenture,
lien, mortgage, debt security, convertible security, or variable rate security), excluding debt that (i) is incurred by a
subsidiary or special purpose entity owned directly or indirectly in whole or in part by the Company for the purpose of
financing the purchase of the Company’s products and services in the ordinary course of the Company’s business, and (ii) is
not required to be reflected as a liability on the face of the Company’s consolidated balance sheet in accordance with U.S.
generally accepted accounting principles) or any Variable Security. A Variable Security shall mean any security issued by the
Issuer that (i) has or may have conversion rights of any kind, contingent, conditional or otherwise in which the number of
shares that may be issued pursuant to such conversion right varies with the market price of the common stock; (ii) is or may
become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred
stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only
becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition;
or (iii) was issued or may be issued in the future in exchange for or in connection with any contract, security, or
instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or
related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection
with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.

 

    	 	21	 

     

    

 

3.19 OTC Marketplace
Segments. If (i) the Common Stock of the Borrower or the Borrower itself has any notation on the OTC Markets Group website
(www.otcmarkets.com) other than “Current Information,” including but not limited to “Limited Information”
(Yield Sign) or “No Information” (Stop Sign), or if the Common Stock of the Borrower is shown only as quoted on the
“grey markets,” and (ii) by reason thereof, the Holder is unable to obtain a standard “144 legal opinion”
from an attorney reasonably acceptable to The Holder, its brokerage firm, and the Company’s transfer agent in order to facilitate
the Holder’s conversion of any of the Borrower’s obligations hereunder into shares of the Borrower’s Common Stock and thereupon
deposit such shares into the Holder’s brokerage account.

 

3.20 Dilutive Issuance.
If at any time while this Note is outstanding, the Company issues any of its common stock at a price per share price lower than
the Conversion Price then in effect.

 

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

 

3.22 DDQ. If any of the
information in the due diligence questionnaire, provided by the Borrower to the Holder on or around the Issue Date, is false or
misleading in any material respect.

 

3.23 Prior Notes. If at
any time on or after the Issue Date, the Borrower alters the conversion terms of any promissory note that was issued on or before
the day immediately prior to the Issue Date.

 

3.24 Failure to Comply with
the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not
limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of
the Exchange Act.

 

    	 	22	 

     

    

 

Upon the occurrence
of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,
3.16, 3.17, 3.18, 3.19, 3.20, 3.21, 3.22, 3.23 and/or 3.24, the Holder shall no longer be required to return the Returnable Shares
to the Borrower under any circumstances and 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 (i) 150% (EXCEPT WITH RESPECT OT SECTION 3.2, IN
WHICH CASE 150% SHALL BE REPLACED WITH 200%) 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) at the option of the Holder, 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 Trading Price for the Common Stock during the period beginning on the date of first occurrence
of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other
amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the
Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

This requirement by the Borrower
shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take
any other action. Additionally, if this Note is not paid at the Maturity Date, then the outstanding principal due under this Note
shall increase by Fifteen Thousand and No/ 100 United States Dollars ($15,000).

 

The Holder shall have the right
at any time to convert the Default Amount, in whole or in part, pursuant to the terms of this Note and at the Conversion Price
in effect at the time of conversion.

 

If the Holder shall commence
an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the
Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.

 

Holder’s
Right to Confession of Judgment. If on the 60th calendar day after the Issue Date, the Borrower has failed to reserve the
Reserved Amount required for Holder, and in addition to any other right or remedy of the Holder hereunder, under the related
transaction documents, or otherwise at law or in equity, the Borrower hereby irrevocably authorizes and empowers Holder or
its legal counsel, each as the Borrower’s attorney-in-fact, to appear ex parte and without notice to the Borrower to
confess judgment against the Borrower for the unpaid amount of this Note. The judgment shall set forth the amount then due
hereunder, plus attorney’s fees and cost of suit, and to release all errors, and waive all rights of appeal. The Borrower
waives the right to contest Holder’s rights under this section, including without limitation the right to any stay of
execution and the benefit of all exemption laws now or hereafter in effect. No single exercise of the foregoing right and
power to confess judgment will be deemed to exhaust such power, whether or not any such exercise shall be held by any court
to be invalid, voidable, or void, and such power shall continue undiminished and may be exercised from time to time as the
Holder may elect until all amounts owing on this Note have been paid in full.

 

    	 	23	 

     

    

 

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:

 

Nightfood Holdings, Inc.

520 White Plains Road, Suite 500

Tarrytown, NY
10591

E-mail: nightfood@nightfood.com

 

With a copy to (which copy shall not constitute notice):

 

Frank J. Hariton, Esq.

1065 Dobbs Ferry Road

White Plains, NY 10607

E-mail: hariton@sprvnet.com

 

    	 	24	 

     

    

 

If to the Holder:

 

Labrys Fund, LP

48 Parker Road

Wellesley, MA 02482

E-mail: admin@equiluxgroup.com

 

With a copy to (which copy shall not constitute notice):

 

Legal & Compliance, LLC

330 Clematis Street, Ste. 217

West Palm Beach, FL 33401

Attn: Chad Friend, Esq., LL.M.

E-mail: CFriend@LegalAndCompliance.com

 

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

 

4.4 Assignability. The
Holder may assign or transfer this Note to any transferee at its sole discretion. 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. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of
a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the
amount stated on the face hereof.

 

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

 

    	 	25	 

     

    

 

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. The parties hereby warrant and represent that the selection of Nevada law as governing under
this Note (i) has a reasonable nexus to each of the Parties and to the transactions contemplated by the Note; and (ii) does
not offend any public policy of Nevada, Massachusetts, or of any other state, federal, or other jurisdiction. Any action
brought by either party against the other arising out of or related to this Note, or any other agreements between the
parties, shall be commenced only in the state or federal courts of general jurisdiction located in the Commonwealth of
Massachusetts, except that all such disputes between the parties shall be subject to alternative dispute resolution through
binding arbitration at the Holder’s sole discretion and election (regardless of which party initiates the legal proceedings). 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 parties
agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a
compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or
filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. Both parties
agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.

 

If the Holder elects alternative dispute
resolution by arbitration, the arbitration proceedings shall be conducted in the Commonwealth of Massachusetts and administered
by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect
on the Issue Date, except as modified by this Note. The Holder’s election to arbitrate shall be made in writing, delivered to the
other party, and filed with the American Arbitration Association. The American Arbitration Association must receive the demand
for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute
of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American
Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings
for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s)
who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject
to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under
the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief
as expressly set forth in this Note. The award and decision of the arbitrator(s) shall be conclusive and binding on all parties,
and judgment upon the award may be entered in any court of competent jurisdiction. The Holder reserves the right, but shall have
no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator
fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished
its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition
to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.

 

    	 	26	 

     

    

 

THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

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 Note or any other related 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 Note 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.

 

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 Purchase Agreement.
By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

    	 	27	 

     

    

 

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 including, but not limited to, name changes,
recapitalizations, etc. as soon as possible under law.

 

4.10  Usury. If
Notwithstanding any provision in this Note or the related transaction documents to the contrary, the total liability for payments
of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions, or other sums
which may at any time be deemed to be interest, shall not exceed the limit imposed by the usury laws of the jurisdiction governing
this Note or any other applicable law. In the event the total liability of payments of interest and payments in the nature of
interest, including, without limitation, all charges, fees, exactions or other sums which may at any timebedeemedtobeinterest,shall,forany
reason whatsoever, result in an effective rate of interest, which for any month or other interest payment period exceeds the limit
imposed by the usury laws of the jurisdiction governing this Note, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice by, between, or to any party hereto, be applied to the reduction
of the outstanding principal balance due hereunder immediately upon receipt of such sums by the Holder hereof, with the same force
and effect as though the Company had specifically designated such excess sums to be so applied to the reduction of the principal
balance then outstanding, and the Holder hereof had agreed to accept such sums as a penalty-free payment of principal; provided,
however, that the Holder may, at any time and from time to time, elect, by notice in writing to the Company, to waive, reduce,
or limit the collection of any sums in excess of those lawfully collectible as interest, rather than accept such sums as a prepayment
of the principal balance then outstanding. It is the intention of the parties that the Company does not intend or expect to pay,
nor does the Holder intend or expect to charge or collect any interest under this Note greater than the highest non-usurious rate
of interest which may be charged under applicable law.

 

    	 	28	 

     

    

 

4.11 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. No provision of this Note shall alter or impair the obligation of the Borrower,
which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in
the form, herein prescribed.

 

4.12Severability. In
the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute
or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.

 

4.13Dispute
Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment
amount or Default Amount, Default Sum, Issue, Closing or Maturity Date, the closing bid price, or fair market value (as the
case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may
be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within
two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or
(ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such
dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) Business
Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the
Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the
Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable
investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the
Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside
accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the
investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the
results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable
error.

 

    	 	29	 

     

    

 

4.14 Terms of Future Financings.
So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term
more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided
to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term,
at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another
security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion
discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement
price per share, and warrant coverage.

 

4.15 [Intentionally
Omitted].

 

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

 

4.17 Right
of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing
from any 3rd party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to
provide such capital or financing to the Borrower on the same terms as each respective 3rd party’s terms. Should the Holder be
unwilling or unable to provide such capital or financing to the Borrower within 5 trading days from Holder’s receipt of written
notice of the offer (the “Offer Notice”) from the Borrower, then the Borrower may obtain such capital or financing from
that respective 3rd party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must
be completed within 30 days after the date of the Offer Notice. If the Borrower does not receive the capital or financing from
the respective 3rd party within 30 days after the date of the respective Offer Notice, then the Borrower must again offer the
capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated.The Offer
Notice must be sent via electronic mail to Admin@EquiluxGroup. com.

 

[signature page to follow]

 

    	 	30	 

     

    

 

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

 

	 	NIGHTFOOD HOLDINGS, INC.
	 	 	 
	 	By:	/s/ Sean Folkson
	 	Name: 	Sean Folkson
	 	Title: 	Chief Executive Officer

 

    	 	31	 

     

    

 

EXHIBIT A

NOTICE OF CONVERSION

 

The undersigned hereby elects to
convert $__________________principal amount of the Note (defined below) together with $________________________ of
accrued and unpaid interest thereto, totaling $___________________ 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 Nightfood Holdings, Inc., a
Nevada corporation (the “Borrower”), according to the conditions of the convertible note of the Borrower dated as
of July 31, 2017 (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 At Custodian 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:

 

Name: Labrys Fund, LP

Address:________________________________

 

	 	Date of Conversion:	 	 	 
	 	 	 	 	 
	 	Applicable Conversion Price:	 	$		 
	 	 	 	 	 	 
	 	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:	 	 	 	 
	 	 	 	 	 	 
	 	Accrued and unpaid interest remaining:	 	$		 
	 	 	 	 	 	 
	 	Default Amounts & Penalties remaining (if applicable):	 	$		 

 

	 	LABRYS FUND, LP	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title: 	Principal	 
	 	Date:	 	 

 

    	 	32	 

     

    

 

EXHIBIT
B

Affidavit
of Confession of Judgment

 

	COMMONWEALTH
    OF MASSACHUSETTS	 	 	 
	---------------------------------------------------------------X	 	 	 
	LABRYS
    FUND, LP,	 	 	 
	 	 	 	Index
    No.
	Plaintiff,    	 	 	 
	 	 	 	 
	 	 	 	AFFIDAVIT
    OF
	-
    against -	 	 	CONFESSION
    OF
	 	 	 	JUDGMENT
	NIGHTFOOD
    HOLDINGS, INC.,	 	 	 
	Defendant.    	 	 	 
	---------------------------------------------------------------X	 	 	 
	 	 	 	 
	COMMONWEALTH
    OF MASSACHUSETTS   )       	 	 	 
	)                ss.:   	 	 

 

Sean
Folkson, being duly sworn, hereby deposes and says:

 

1.
I am the Chief Executive Officer of defendant NIGHTFOOD HOLDINGS, INC. (“Borrower”). As such, I am fully
familiar with all the facts and circumstances recited herein on personal knowledge. Borrower has its principal place of
business at 520 White Plains Road, Suite 500, Tarrytown, NY 10591. On behalf of the Borrower, I hereby confess judgment in
favor of Labrys Fund, LP (“Labrys Fund”), residing at 48 Parker Road, Wellesley, MA 02482, in the amount of One
Hundred Thousand Dollars ($100,000.00), less any payments made on or after the date of this affidavit of confession of
judgment, plus interest at default interest rate of twenty four percent (24%) percent per annum on said amount and all other
applicable penalties under the Note (as defined herein). In no event shall interest payable hereunder exceed the maximum
permissible under applicable law.

 

2.
I hereby authorize the federal courts and/or state courts located in the Commonwealth of Massachusetts to enter
judgment against Borrower in the amount of in the amount of One Hundred Thousand Dollars ($100,000.00), less any payments
made on or after the date of this affidavit of confession of judgment, plus interest at default interest rate of twenty four
percent (24%) percent per annum on said amount and all other applicable penalties under the Note, plus the costs and
attorneys’ fees that are set forth below, less any payments made on or after the date of this affidavit of confession
of judgment, upon Borrower’s failure to reserve the Reserved Amount (as defined in the Note) required for Labrys Fund
on the 60th calendar day after the Issue Date, as provided in the convertible promissory note between of the parties, dated
July 31, 2017 (the “Note”).

 

    	 	33	 

     

    

 

3.
In order to secure these obligations, Borrower agreed to simultaneously deliver with the execution of the Note this Affidavit
of Confession of Judgment.

 

4.
The sums confessed pursuant to this affidavit of confession of judgment are justly due and owing to Labrys Fund under the
following circumstances: Borrower entered into the Note pursuant to which Borrower promised to pay to the order of Labrys
Fund the principal sum of One Hundred Thousand Dollars ($100,000.00) plus interest as provided for therein. The amounts
confessed by this affidavit represent a convertible promissory note investment by Labrys Fund in Borrower and arise out of
Borrower’s breach of its obligations under the Note.

 

5.
Borrower agrees to pay any and all costs and expenses incurred by Labrys Fund in enforcing the terms of this affidavit of
confession of judgment, including reasonable attorneys’ fees and expenses at the rate of $475.00 per hour that Labrys
Fund incurs or is billed for in connection with enforcing the terms of the affidavit of confession of judgment, entering any
Judgment, collecting upon said Judgment, and defending or prosecuting any appeals.

 

    	 	34	 

     

    

 

	 	NIGHTFOOD
    HOLDINGS, INC.
	 	 	 
	 	By:	/s/
    Sean Folkson
	 	Name: 	Sean
    Folkson
	 	Title	Chief
    Executive Office

 

    	 	35	 

     

    

  

	STATE OF NEW YORK               )	 	 
	ss.:   	 	 
	COUNTY OF WESTCHESTER    )	 	 

 

ACKNOWLEDGMENT

 

On
7/31, 2017 before me personally came Sean Folkson to me known, who, by me duly sworn, did depose and say that deponent
is an officer of NIGHTFOOD HOLDINGS, INC., the corporation described in, and which executed the foregoing affidavit of confession
of judgment, that deponent knows the seal of the corporation, that the seal affixed to the affidavit of confession of judgment
is the corporation’s seal, that it was affixed by order of the board of directors of corporation and that deponent signed deponent’s
name by like order.

	 	 	 	 
	 	 
		 
	Notary Public	 
	 	 
	SEAL:	 

 

 

[Signature
Page to Affidavit of Confession of Judgment]

 

36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00273-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00273-of-00352.parquet"}]]