Document:

Exhibit 10.14

 

INDEMNITY AGREEMENT

 

THIS AGREEMENT is made                , 2019

 

BETWEEN:

 

MILESTONE PHARMACEUTICALS INC., a corporation governed by the laws of the Province of Québec (the “Corporation”)

 

- and -

 

               , an individual principally resident in the City of         ,              

 

(the “Indemnified Party”)

 

RECITALS:

 

A.                                    The Indemnified Party is or has been a duly elected or appointed director or officer of the Corporation or, at the request of the Corporation, a duly elected or appointed director or officer of an Other Entity (as defined below);

 

B.                                    The Corporation considers it desirable and in the best interests of the Corporation to enter into this Agreement to set out the circumstances and manner in which the Indemnified Party may be indemnified in respect of certain liabilities or expenses which the Indemnified Party may incur as a result of acting as a director or officer of the Corporation or Other Entity;

 

C.                                    The Indemnified Party has agreed to serve or to continue to serve as a director or officer of the Corporation or Other Entity subject to the Corporation providing the Indemnified Party with directors’ and officers’ liability insurance and an indemnity against certain liabilities and, in order to induce the Indemnified Party to serve and to continue to so serve, the Corporation has agreed to provide the indemnity in this Agreement;

 

D.                                    The by-laws of the Corporation contemplate that the Indemnified Party may be indemnified in certain circumstances.

 

THEREFORE, the Parties agree as follows:

 

ARTICLE 1
 DEFINITIONS AND PRINCIPLES OF INTERPRETATION

 

1.1                               Definitions

 

Whenever used in this Agreement, the following words and terms shall have the meanings set out below:

 

(a)                                 “Act” means the Business Corporations Act (Québec), as the same exists on the date of this Agreement or may hereafter be amended;

 

 

(b)                                 “Agreement” means this agreement, including all schedules, and all amendments or restatements as permitted, and references to “Article” or “Section” mean the specified Article or Section of this Agreement;

 

(c)                                  “Business Day” means any day, other than a Saturday or Sunday, on which Schedule I Canadian chartered banks in Montréal (Québec) are open for commercial banking business during normal banking hours;

 

(d)                                 “Claim” includes any civil, criminal, administrative or investigative or other proceeding of any nature or kind in which the Indemnified Party is involved because of the Indemnified Party’s association with the Corporation or Other Entity;

 

(e)                                  “Losses” includes all costs, charges, expenses, losses, damages, fees (including any legal, professional or advisory fees or disbursements), liabilities, amounts paid to settle or dispose of any Claim or satisfy any judgment, fines, penalties or liabilities, without limitation, and whether incurred alone or jointly with others, including any amounts which the Indemnified Party may reasonably suffer, sustain, incur or be required to pay in respect of the investigation, defence, settlement or appeal of or preparation for any Claim or in connection with any action to establish a right to indemnification under this Agreement, and for greater certainty, includes all taxes, interest, penalties and related outlays of the Indemnified Party arising from any indemnification of the Indemnified Party by the Corporation pursuant to this Agreement;

 

(f)                                   “Other Entity” means a Subsidiary and any other entity in respect of which the Indemnified Party was specifically requested by the Corporation to serve as a duly appointed director or officer or similar position of such Other Entity;

 

(g)                                  “Parties” means the Corporation and the Indemnified Party collectively and “Party” means any one of them; and

 

(h)                                 “Subsidiary” has the meaning set out in the Act.

 

1.2                               Certain Rules of Interpretation

 

In this Agreement:

 

(a)                                 Governing Law — This Agreement is a contract made under and shall be governed by and construed in accordance with the laws of the Province of Québec and the federal laws of Canada applicable in the Province of Québec.

 

(b)                                 Submission to Jurisdiction — Each Party submits to the exclusive jurisdiction of any Québec courts sitting in Montréal (Québec) in any action, application, reference or other proceeding arising out of or relating to this Agreement and consents to all claims in respect of any such action, application, reference or other proceeding being heard and determined in such Québec courts. Each of the Parties irrevocably waives, to the fullest extent it may effectively do so, the defence of an inconvenient forum to the maintenance of such action, application or proceeding.

 

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(c)                                  Headings — Headings of Articles and Sections are inserted for convenience of reference only and do not affect the construction or interpretation of this Agreement.

 

(d)                                 Number — Unless the context otherwise requires, words importing the singular include the plural and vice versa.

 

(e)                                  Severability — If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, the provision shall, as to that jurisdiction, be ineffective only to the extent of the restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other Parties or circumstances.

 

(f)                                   Entire Agreement — This Agreement constitutes the entire agreement between the Parties and sets out all the covenants, promises, warranties, representations, conditions and agreements between the Parties in connection with the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, pre-contractual or otherwise. There are no covenants, promises, warranties, representations, conditions or other agreements, whether oral or written, pre-contractual or otherwise, express, implied or collateral, between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement.

 

ARTICLE 2
 REPRESENTATIONS

 

2.1                               Representations of the Corporation

 

The Corporation represents and warrants to the Indemnified Party that:

 

(a)                                 Incorporation and Corporate Power — The Corporation is a corporation duly incorporated and existing under the laws of Canada and has all necessary corporate power, authority and capacity to enter into this Agreement, to carry out its obligations under this Agreement, to own its assets and to carry on its business as presently conducted.

 

(b)                                 Due Authorization — The execution and delivery of this Agreement and the performance of the obligations contemplated by this Agreement have been duly authorized by all necessary corporate action on behalf of the Corporation. This Agreement constitutes a valid and binding obligation of the Corporation enforceable against it in accordance with its terms.

 

(c)                                  No Conflict — The Corporation is not a party to, bound or affected by or subject to any:

 

(i)                                     indenture, mortgage, agreement, obligation or instrument;

 

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(ii)                                  charter or by-law; or

 

(iii)                               applicable law, statute, regulation, rule, order, ordinance, judgment, decree, licence or permit,

 

that would be violated, breached by, or under which default would occur or an encumbrance would be created as a result of the execution and delivery of this Agreement or the performance of any of the obligations provided for under this Agreement.

 

2.2                               Representations of the Indemnified Party

 

The Indemnified Party represents and warrants to the Corporation that the Indemnified Party is not an undischarged bankrupt.

 

ARTICLE 3
 INDEMNIFICATION BY CORPORATION AND 
 OBLIGATIONS OF INDEMNIFIED PARTY

 

3.1                               Indemnification

 

(a)                                 General Indemnity — Except in respect of an action by or on behalf of the Corporation or Other Entity to procure a judgment in its favour against the Indemnified Party, or except as otherwise provided in this Agreement, the Corporation agrees to indemnify and hold the Indemnified Party harmless, to the fullest extent permitted by law, including but not limited to the indemnity under the Act, from and against any and all Losses which the Indemnified Party may reasonably suffer, sustain, incur or be required to pay in respect of any Claim, provided that the indemnity provided for in this Section 3.1(a) will only be available if:

 

(i)                                     the Indemnified Party was acting honestly and in good faith with a view to the best interests of the Corporation or Other Entity, as the case may be; and

 

(ii)                                  in the case of a criminal or administrative action or proceeding that is enforced by monetary penalty, the Indemnified Party had reasonable grounds for believing that the Indemnified Party’s conduct was lawful.

 

(b)                                 Indemnity as of Right — Notwithstanding anything in this Agreement, the Indemnified Party is entitled to an indemnity from the Corporation in respect of all costs, charges and expenses reasonably incurred by the Indemnified Party in connection with the defence of any Claim, if the Indemnified Party:

 

(i)                                     was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the Indemnified Party ought to have done; and

 

(ii)                                  fulfils the conditions set out in Sections 3.1(a)(i) and (a)(ii) above.

 

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(c)                                  Derivative Claims — In respect of any action by or on behalf of the Corporation or Other Entity to procure a judgment in its favour against the Indemnified Party, in respect of which the Indemnified Party is made a party because of the Indemnified Party’s association with the Corporation or Other Entity, the Corporation shall make application, at its expense, for the approval of a court of competent jurisdiction to advance monies to the Indemnified Party for costs, charges and expenses reasonably incurred by the Indemnified Party in connection with such action and to indemnify and save harmless the Indemnified Party for such costs, charges and expenses of such action provided the Indemnified Party fulfils the conditions set out in Sections 3.1(a)(i) and (a)(ii) above and provided that such advance or indemnification is not prohibited under any applicable statute and provided the Indemnified Party shall repay such funds advanced if the Indemnified Party ultimately does not fulfil the conditions set out in Sections 3.1(a)(i) and (a)(ii) above.

 

(d)                                 Incidental Expenses — Except to the extent such costs, charges or expenses are paid by the Other Entity, the Corporation shall pay or reimburse the Indemnified Party for the Indemnified Party’s reasonable and necessary travel, lodging or accommodation costs, charges or expenses paid or incurred by or on behalf of the Indemnified Party in carrying out the Indemnified Party’s duties as a director or officer of the Corporation or Other Entity.

 

(e)                                  Specific Indemnity for Statutory Obligations — Without limiting the generality of the preceding Sections 3.1(a) through (d) of this Agreement, the Corporation agrees, to the extent permitted by law, to indemnify and save the Indemnified Party harmless from and against any and all costs, charges, expenses, fees, damages or liabilities arising by operation of statute and incurred by or imposed upon the Indemnified Party in relation to the affairs of the Corporation or Other Entity in the Indemnified Party’s capacity as a director or officer thereof, including but not limited to all statutory obligations to creditors, employees, suppliers, contractors, subcontractors, and any government or any agency or division of any government, whether federal, provincial, state, regional or municipal, provided that the indemnity provided for in this Section 3.1(e) will only be available if the Indemnified Party fulfils the conditions in Sections 3.1(a)(i) and (a)(ii) above.

 

(f)                                   Partial Indemnification — If the Indemnified Party is determined to be entitled under any provisions of this Agreement to indemnification by the Corporation for some or a portion of the Losses incurred in respect of any Claim but not for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnified Party for the portion thereof to which the Indemnified Party is determined by a court of competent jurisdiction to be so entitled.

 

(g)                                  Advance of Expenses — Subject to Section 3.1(c) of this Agreement, the Corporation may, at the request of the Indemnified Party, advance to the Indemnified Party sufficient funds, or arrange to pay on behalf of or reimburse the Indemnified Party for any costs, charges or expenses reasonably incurred by the Indemnified Party in investigating, defending, appealing, preparing for, providing evidence in or instructing and receiving the advice of the Indemnified Party’s  

 

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counsel or other professional advisors in regard to any Claim or other matter for  which the Indemnified Party may be entitled to an indemnity or reimbursement under this Agreement, and such amounts shall be treated as a non-interest bearing advance or loan to the Indemnified Party, pending approval of the Corporation and the Court (if required), to the payment thereof as an indemnity and provided that the Indemnified Party fulfils the conditions set out in Sections 3.1(a)(i) and (a)(ii) above. In the event it is ultimately determined by a court of competent jurisdiction that the Indemnified Party did not fulfil the conditions set out in Sections 3.1(a)(i) and (a)(ii) above, or that the Indemnified Party was not entitled to be fully so indemnified, such loan or advance, or the appropriate portion thereof shall, upon written notice of such determination being given by the Corporation to the Indemnified Party detailing the basis for such determination, be repayable on demand and shall bear interest from the date of such notice at the prime rate prescribed from time to time by The Toronto-Dominion Bank.

 

3.2                               Notice of Proceedings

 

The Indemnified Party shall, as a condition precedent to the Indemnified Party’s right to be indemnified under this Agreement, give notice in writing to the Corporation as soon as practicable upon being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing, threatening or continuing any Claim involving the Corporation, the Other Entity or the Indemnified Party which may result in a claim for indemnification under this Agreement, and the Corporation agrees to give the Indemnified Party notice in writing as soon as practicable upon it, or any Other Entity, being served with any statement of claim, writ, notice of motion, indictment, subpoena, investigation order or other document commencing or continuing any Claim involving the Indemnified Party. Such notice shall include a description of the Claim or threatened Claim, a summary of the facts giving rise to the Claim or threatened Claim and, if possible, an estimate of any potential liability arising under the Claim or threatened Claim. Failure by the Indemnified Party to so notify the Corporation of any Claim shall not relieve the Corporation from liability under this Agreement except to the extent that the failure materially prejudices the Corporation.

 

3.3                               Subrogation

 

Subrogation — The Corporation: Promptly after receiving written notice from the Indemnified Party of any Claim or threatened Claim (other than a Claim by or on behalf of the Corporation or Other Entity to procure a judgment in its favour against the Indemnified Party), the Corporation may, and upon the written request of the Indemnified Party shall, by notice in writing to the Indemnified Party, assume conduct of the defence thereof in a timely manner and retain counsel on behalf of the Indemnified Party who is reasonably satisfactory to the Indemnified Party, to represent the Indemnified Party in respect of the Claim. On delivery of such notice by the Corporation, the Corporation shall not be liable to the Indemnified Party under this Agreement for any fees and disbursements of counsel the Indemnified Party may subsequently incur with respect to the same matter. In the event the Corporation assumes conduct of the defence on behalf of the Indemnified Party, the Indemnified Party consents to the conduct thereof and of any action taken by the Corporation, in good faith, in connection therewith, and the Indemnified Party shall fully cooperate in such defence including, without limitation, the provision of documents, attending examinations for discovery, making affidavits, meeting with counsel, 

 

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testifying and divulging to the Corporation all information reasonably required to defend or prosecute the Claim.

 

3.4                               Separate Counsel

 

In connection with any Claim or other matter for which the Indemnified Party may be entitled to indemnity under this Agreement, the Indemnified Party shall have the right to employ separate counsel of the Indemnified Party’s choosing and to participate in the defence thereof but the fees and disbursements of such counsel shall be at the Indemnified Party’s expense unless employment of such other counsel has been authorized by the Corporation, in which event, the fees and disbursements of such counsel shall be paid by the Corporation.

 

3.5                               Settlement of Claim

 

No admission of liability shall be made by the Indemnified Party without the consent of the Corporation and the Corporation shall not be liable for any settlement of any Claim made without its consent. No admission of liability and no settlement of any Claim in a manner adverse to the Indemnified Party shall be made without the consent of the Indemnified Party, acting reasonably.

 

3.6                               Determination of Right to Indemnification

 

If the payment of an indemnity or the advancement of funds under this Agreement requires the approval of a court, under the provisions of the Act or otherwise, either the Corporation or the Indemnified Party may apply to a court of competent jurisdiction for an order approving such indemnity or the advancement of such funds by the Corporation pursuant to this Agreement.

 

3.7                               Other Rights and Remedies Unaffected

 

The indemnification and payment provided in this Agreement shall not derogate from or exclude any other rights to which the Indemnified Party may be entitled under any provision of the Act or otherwise at law, the articles or by-laws of the Corporation, the constating documents of any Other Entity, any applicable policy of insurance, guarantee or third-party indemnity, any vote of shareholders of the Corporation, or otherwise, both as to matters arising out of the Indemnified Party’s capacity as a director or officer of the Corporation or Other Entity, or as to matters arising out of any other capacity in which the Indemnified Party may act for or on behalf of the Corporation.

 

ARTICLE 4
 INSURANCE

 

4.1                               Liability Insurance

 

(a)                                 Insurance Policy — So long as the Indemnified Party is a director or officer of the Corporation or an Other Entity, the Corporation shall maintain at all times a directors’ and officers’ liability insurance with a responsible insurer, with a scope of coverage that is at least as broad, in all material respects, as the Corporation’s directors’ and officers’ liability insurance in place as of the date of this Agreement.

 

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(b)                                 Currency of Policy — The Corporation shall provide to the Indemnified Party a copy of each policy of insurance providing the coverages contemplated by this Section 4.1 promptly after such coverage is obtained, and shall promptly notify the  Indemnified Party if the insurer cancels or refuses to renew such coverage (or any part of such coverage).

 

(c)                                  Coverage — The Corporation shall not do any act or thing (including changing insurers) or fail to do any act or thing, that could cause or result in a denial of insurance coverage or of any claim under such coverage; without limiting the generality of the foregoing, the Corporation shall give prompt and proper notice to the insurer of any claim against the Indemnified Party.

 

(d)                                 Exclusion of Indemnity — Notwithstanding any other provision in this Agreement to the contrary, the Corporation shall not be obligated to indemnify the Indemnified Party under this Agreement for any Losses which have been paid to, by or on behalf of, the Indemnified Party under:

 

(i)                                     any applicable policy of insurance maintained by the Corporation; or

 

(ii)                                  in respect of an Other Entity, any applicable policy of insurance or other arrangements maintained or made available by the Other Entity for the benefit of its respective directors or officers and for greater certainty, the indemnity provided under this Agreement will only apply with respect to any Losses the Indemnified Party may suffer or incur which would not otherwise be paid or satisfied under such insurance or other arrangements maintained or made available by such Other Entity.

 

ARTICLE 5
 MISCELLANEOUS MATTERS

 

5.1                               Continuance

 

The Corporation shall give to the Indemnified Party 15 days’ notice of any application by the Corporation for a certificate of continuance in any jurisdiction, indicating the jurisdiction in which it is proposed that the Corporation will be continued and the proposed date of continuance. Upon receipt of such notice, the Indemnified Party may require the Corporation to agree to such amendments to this Agreement as the Indemnified Party, acting reasonably, considers necessary or desirable in order to provide the Indemnified Party with a comprehensive indemnity under the laws of the proposed jurisdiction of continuance.

 

5.2                               Corporation and Indemnified Party to Cooperate

 

The Corporation and the Indemnified Party shall, from time to time, provide such information and cooperate with the other, as the other may reasonably request, in respect of all matters under this Agreement.

 

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5.3                               Effective Time

 

This Agreement shall be deemed to have effect as and from the first date that the Indemnified Party became a director or officer of the Corporation or Other Entity.

 

5.4                               Insolvency

 

The liability of the Corporation under this Agreement shall not be affected, discharged, impaired, mitigated or released by reason of the discharge or release of the Indemnified Party in any bankruptcy, insolvency, receivership or other similar proceeding of creditors.

 

5.5                               Multiple Proceedings

 

No action or proceeding brought or instituted under this Agreement and no recovery pursuant thereto shall be a bar or defence to any further action or proceeding which may be brought under this Agreement.

 

ARTICLE 6
 GENERAL

 

6.1                               Term

 

This Agreement shall survive until three years after the Indemnified Party has ceased to act as a director or officer of the Corporation or Other Entity.

 

6.2                               Deeming Provision

 

The Indemnified Party shall be deemed to have acted or be acting at the specific request of the Corporation upon the Indemnified Party’s being appointed or elected as a director or officer of the Corporation or Other Entity.

 

6.3                               Assignment

 

Neither Party may assign this Agreement or any rights or obligations under this Agreement without the prior written consent of the other Party.

 

6.4                               Enurement

 

This Agreement enures to the benefit of and is binding upon the Parties and the heirs, attorneys, guardians, estate trustees, executors, trustees, administrators and permitted assigns of the Indemnified Party and the successors (including any successor by reason of amalgamation) and permitted assigns of the Corporation.

 

6.5                               Amendments

 

No amendment, supplement, modification or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by any Party, is binding unless executed in writing by the Party to be so bound. For greater certainty, the rights of the Indemnified Party under this Agreement shall not be prejudiced or impaired by permitting or consenting to any 

 

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assignment in bankruptcy, receivership, insolvency or any other creditor’s proceedings of or against the Corporation or by the winding-up or dissolution of the Corporation.

 

6.6                               Notices

 

Any notice, consent or approval required or permitted to be given in connection with this Agreement (in this Section referred to as a “Notice”) shall be in writing and shall be sufficiently given if delivered (whether in person, by courier service or other personal method of delivery), or if transmitted by facsimile or e-mail:

 

(a)                                 in the case of a Notice to the Indemnified Party at:

 

Fax:

E-mail:

 

(b)                                 in the case of a Notice to the Corporation at:

 

Milestone Pharmaceuticals Inc.

1111 Dr. Frederik-Philips Boulevard, Suite 420
 Montreal, Quebec
 H4M 2X6

 

Attention:                                         Joseph Oliveto
 E-mail:                                                        joliveto@milestonepharma.com

 

Any Notice delivered or transmitted to a Party as provided above shall be deemed to have been given and received on the day it is delivered or transmitted, provided that it is delivered or transmitted on a Business Day prior to 5:00 p.m. local time in the place of delivery or receipt. If the Notice is delivered or transmitted after 5:00 p.m. local time or if such day is not a Business Day, then the Notice shall be deemed to have been given and received on the next Business Day.

 

Any Party may, from time to time, change its address by giving Notice to the other Party in accordance with the provisions of this Section.

 

6.7                               Further Assurances

 

The Corporation and the Indemnified Party shall, with reasonable diligence, do all things and execute and deliver all such further documents or instruments as may be necessary or desirable for the purpose of assuring and conferring on the Indemnified Party the rights created or intended by this Agreement and giving effect to and carrying out intention or facilitating the performance of the terms of this Agreement, or evidencing any loan or advance made pursuant to Section 3.1(g) hereof.

 

6.8                               Independent Legal Advice

 

The Indemnified Party acknowledges that the Indemnified Party has been advised to obtain independent legal advice with respect to entering into this Agreement, that the Indemnified Party has obtained such independent legal advice or has expressly determined not to seek such advice, 

 

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and that the Indemnified Party is entering into this Agreement with full knowledge of the contents hereof, of the Indemnified Party’s own free will and with full capacity and authority to do so.

 

6.9                               Execution and Delivery

 

This Agreement may be executed by the Parties in counterparts and the counterparts may be executed and delivered by electronic means, with all counterparts together constituting one agreement.

 

6.10                        Language

 

The Parties confirm that it is their wish that this Agreement, as well as any other documents relating to this Agreement, including notices, schedules and authorizations have been and shall be drawn up in the English language only.  Les signataires confirment leur volonté que la présente convention, de même que tous les documents s’y rattachant, y compris tout avis, annexe et autorisation, soient rédigés en anglais seulement.

 

IN WITNESS OF WHICH the Parties have duly executed this Agreement.

 

	
 
    	
MILESTONE PHARMACEUTICALS INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
 
    	
 
    	
 
    
	
Witness   to signature of Indemnified Party
    	
 
    	
Indemnified Party
    

 

11Exhibit 4.1

 

NEITHER THIS SECURITY
NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

 

Original Issue Date: April 11, 2019

Fixed Conversion Price (subject to adjustment
herein): $0.85

 

Original Principal Amount: $2,750,000.00

 

10%
SENIOR SECURED

CONVERTIBLE
PROMISSORY NOTE

DUE
APRIL 11, 2020

 

THIS 10% SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE is a duly authorized and validly issued debt obligation of Avalanche International, Corp., a Nevada
corporation (the “Company” or the “Borrower”), having its principal place of business at
5940 S. Rainbow Blvd, Las Vegas, NV 89118, designated as its 10% Senior Secured Convertible Promissory Note due April 11, 2020
(the “Note”).

 

 FOR VALUE RECEIVED,
the Company promises to pay to                                 
or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal
sum of $2,750,000.00, Late Fees (as defined below), and any other sums due hereunder on April 11, 2020 (the “Maturity
Date”), or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest
to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions
hereof. This Note is subject to the following additional provisions: 

 

Section 1.        Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

 

    	 	 	 

    	 

    

 

“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or
any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case
or proceeding that is not dismissed within sixty (60) days after commencement; (c) the Company or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment; (e) the Company or
any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its
debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent
to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any
of the foregoing.

 

“Base
Share Price” shall have the meaning set forth in Section 5(c).

 

“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).

 

“Board
of Directors” means the Company’s board of directors.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which the New York Federal Reserve Bank is closed.

 

“Buy-In”
shall have the meaning set forth in Section 4(c)(v).

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of
in excess of fifty percent (50%) of the voting securities of the Company (other than by means of conversion of the Note), (b) the
Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than fifty-one
percent (51%) of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or
transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such
transaction own less than fifty-one percent (51%) of the aggregate voting power of the acquiring entity immediately after the transaction,
(d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which
is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by
those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was
approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the
Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses
(a) through (d) above.

 

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“Common
Stock” means the common stock, par value $0.001 per share, of the Company

 

“Conversion
Date” shall have the meaning set forth in Section 4(a).

 

“Conversion
Price” shall have the meaning set forth in Section 4(b).

 

“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the
terms hereof.

 

“Default
Redemption Amount” means the product of (i) 125% multiplied by (ii) the sum of (x) the aggregate principal amount outstanding
of this Note through and including the Default Redemption Payment Date; (y) all accrued but unpaid principal due on this Note,
including, but not limited to, as provided in the last sentence of Section 7(b) hereof, and (z) all other amounts owed under
this Note including, but not limited to, Late Fees and liquidated damages, all through and including the date all amounts herein
are paid in cash to the Holder.

 

“Dilutive
Issuance” shall have the meaning set forth in Section 5(c).

 

“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(c).

 

“DTC”
means the Depository Trust Company.

 

“DTC
Chill” shall have the meaning set forth in Section 7(a)(vii).

  

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

 

    	 	3	 

    	 

    

 

“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c)(i) there is an effective Registration
Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common
Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents may
be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined
by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer
Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the
Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized
but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the
Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving
of notice, would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of an Optional Redemption
or Mandatory Redemption (each as defined below), the shares issuable upon conversion in full of the Optional Redemption Amount
or Mandatory Redemption, as applicable) to the Holder would not violate the limitations set forth in Section 4 herein, (h) there
has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated, (i) the applicable Holder is not in possession of any information provided by the Company, any of its Subsidiaries,
or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public
information, (j) for each Trading Day in a period of 15 consecutive Trading Days prior to the applicable date in question, the
daily trading volume for the Common Stock on the principal Trading Market exceeds (i) $100,000 per Trading Day, and (k) for each
Trading Day in a period of 15 consecutive Trading Days prior to the applicable date in question, the price per share of the Common
Stock on the principal Trading Market closes at or higher than $1.00.

 

“Event
of Default” shall have the meaning set forth in Section 7(a).

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors, advisors or
independent contractors of the Company issued pursuant to a Company’s equity incentive plan and reserved for such purpose
or, provided it is scheduled to the Purchase Agreement, otherwise as compensation for services provided to the Company, (b) shares
of Common Stock issued for consideration other than cash pursuant to a merger, consolidation, acquisition, or similar business
combination approved by the Board of Directors; (c) shares of Common Stock issued pursuant to any equipment loan or leasing arrangement,
real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board of Directors;
(d) securities issued to Ault & Company, Inc.; or (e) shares of Common Stock with
respect to which the holders of a majority of the outstanding Notes issued in connection with all of the Transaction Documents
have waived their anti-dilution rights.

 

“Fixed
Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Late
Fees” shall have the meaning set forth in Section 2(b).

 

“Mandatory
Default Amount” means the payment of 135% of the outstanding principal amount of this Note, accrued and unpaid interest
hereon and the Make-Whole Amount, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in
respect of this Note.

 

    	 	4	 

    	 

    

 

“Mandatory
Redemption” shall have the meaning set forth in Section 6(c).

 

“Mandatory
Redemption Amount” means, with respect to such principal amount that is subject to a Mandatory Redemption in cash pursuant
to Section 6(c) herein, the sum of (i) 115% of the then outstanding principal amount of this Note which the Company elects to redeem
pursuant to an Optional Redemption plus (ii) all accrued but unpaid interest, the Make-Whole Amount and all liquidated damages
and other amounts due in respect of this Note.

 

“Mandatory
Redemption Date” shall have the meaning set forth in Section 6(c).

 

“Mandatory
Redemption Exercise Notice” shall have the meaning set forth in Section 6(c).

 

“Mandatory
Redemption Notice” shall have the meaning set forth in Section 6(c).

 

“Mandatory
Redemption Notice Date” shall have the meaning set forth in Section 6(c).

 

“Mandatory
Redemption Proceeds” shall have the meaning set forth in Section 6(c). “New York Courts” shall have
the meaning set forth in Section 8(d).

 

“Note
Register” shall have the meaning set forth in Section 2(c).

 

“Notice
of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original
Issue Date” means the date of the first issuance of the Note, regardless of any transfers of any Note and regardless
of the number of instruments which may be issued to evidence such Note.

 

“Optional
Redemption” shall have the meaning set forth in Section 6(a).

 

“Optional
Redemption Amount” means, if such Optional Redemption occurs in cash, the sum of (i) 105% of the then outstanding principal
amount of this Note which the Company elects to redeem pursuant to an Optional Redemption plus (ii) all accrued but unpaid interest,
the Make-Whole Amount, and all liquidated damages and other amounts then due in respect of this Note.

 

“Optional
Redemption Date” shall have the meaning set forth in Section 6(a).

 

“Optional
Redemption Notice” shall have the meaning set forth in Section 6(a).

 

“Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(a).

 

“Optional
Redemption Period” shall have the meaning set forth in Section 6(a).

 

“Permitted
Indebtedness” means the indebtedness evidenced by the Note.

 

    	 	5	 

    	 

    

 

“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien and
(c) Liens incurred in connection with Permitted Indebtedness.

 

“Pre-Notice”
shall have the meaning set forth in Section 6(c).

 

“Purchase
Agreement” means the Purchase Agreement, dated as of April 11, 2019, by and between the Company and the original Holder,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“Purchase
Rights” shall have the meaning set forth in Section 5(d).

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

 

“Subsequent
Financing” means any issuance by the Company or any of its Subsidiaries (as defined in the Purchase Agreement) of Common
Stock or Common Stock Equivalents (as defined in the Purchase Agreement) for cash consideration, Indebtedness (as defined in the
Purchase Agreement) or a combination of units thereof.

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).

 

“Variable
Rate Transaction” means a transaction in which the Company issues or sells Common Stock or Common Stock Equivalents either
(i) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices
of or quotations for the Common Stock at any time after the initial issuance of such debt or equity securities or (ii) with a conversion,
exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock (other than pursuant to terms and conditions applicable to such Common Stock Equivalents in
effect as of the date hereof and disclosed in filings of the Company with the Commission prior to the date hereof).

 

    	 	6	 

    	 

    

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Section 2.       Interest
and Amortization.

 

a)       Payment
of Interest in Cash or Kind. Subject to Section 2(b) and Section 7, the Company shall pay interest
to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of ten percent (10%)
per annum, payable monthly, which twelve (12) months’ interest amount shall be guaranteed and the remaining unpaid portion
thereof shall be accelerated and payable in connection with any conversion of this Note (the “Make-Whole Amount”).
All interest payments hereunder shall be payable, in the Company’s discretion, in cash, or subject to satisfaction of the
Equity Conditions, in Common Stock at the Fixed Conversion Price. Any interest payment paid in cash shall equal to the sum of the
then outstanding principal amount of this Note and any interest and Make-Whole Amount due multiplied by one hundred and five percent
(105%). Accrued and unpaid interest and the Make-Whole Amount shall be due and payable on each Conversion Date, each Amortization
Payment Date (as defined herein), on the Maturity Date, or as otherwise set forth herein.

 

b)       Late
Fee. Upon the occurrence and during the continuance of an Event of Default, the Company shall pay a late fee in cash (at a
five percent (5%) premium) or in shares of Common Stock at the Fixed Conversion Price (subject to the satisfaction of the Equity
Conditions) to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at an interest rate equal
to the lesser of eighteen percent (18%) per annum or the maximum rate permitted by applicable law (the “Late Fees”)
which shall accrue daily from the date of the occurrence and during the continuance of such Event of Default hereunder through
and including the date of actual payment in full. Interest hereunder will be paid to the Person in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

 

    	 	7	 

    	 

    

 

c)       Interest
Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve (12) thirty (30) calendar day
periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together
with all accrued and unpaid interest, the Make-Whole Amount, liquidated damages and other amounts which may become due hereunder,
has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “Note Register”).

 

d)       Amortization.
Commencing on the first Trading Day of the fifth month following the Closing Date and continuing each month thereafter for a period
of eight months (each, an “Amortization Payment Date”), the Company shall redeem one-eighth (1/8th) of each
of the original principal amount of this Note, accrued but unpaid interest and the Make-Whole Amount in accordance with the Amortization
Payment Schedule set forth on Schedule 2(d) attached hereto (each, an “Amortization Payment”). Each Amortization
Payment shall, at the option of the Company, be made in whole or in part, in cash equal to the sum of the Amortization Payment
provided for in Schedule 2(d) attached hereto, or, subject to the Company complying with the Equity Conditions, in Common
Stock at a 20% discount to the lowest VWAP during the fifteen (15) Trading Days prior to the Amortization Payment Date (the “Amortization
Conversion Rate”); provided, however, that in no event may the Company make an Amortization Payment in Common Stock if
the closing price of the Common Stock on the Trading Day before the Amortization Payment Date is lower than $0.30 or if the price
of the Company’s Common Stock is trading below $0.30 on the Amortization Payment Date. Any Amortization Payment paid by the
Company in cash shall be subject to a five percent (5%) premium on such payment.

 

Notwithstanding
anything to the contrary contained in this Section 2(d), the Holder, at its option, shall be entitled to accelerate one Amortization
Payment each month and demand such payments in Common Stock pursuant to the then-current Amortization Conversion Rate. In the event
that the Holder elects to accelerate an Amortization Payment, such accelerated Amortization Payment shall be effected from the
last Amortization Payment then due at the time of such acceleration.

 

Section 3.         Registration
of Transfers and Exchanges.

 

a)       Different
Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

b)       Investment
Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in
the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.

 

    	 	8	 

    	 

    

 

c)       Reliance
on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company
may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.

 

Section 4.          Conversion.

 

(a)       Voluntary
Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible,
in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such
date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required,
nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To
effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire
principal amount of this Note, plus all accrued and unpaid interest thereon and the Make-Whole Amount, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).
The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.
In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of
manifest error. 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 may
be less than the amount stated on the face hereof.

 

(b)       Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $0.85 (the “Fixed Conversion Price”
or the “Conversion Price”). All such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock
during such measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 7 hereof and the Holder shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.

 

    	 	9	 

    	 

    

 

(c)       Mechanics
of Conversion.

 

i.               Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall
be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the
Conversion Price.

 

ii.                Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing
the Conversion Shares which, on or after the six (6)-month anniversary of the Original Issue Date shall be free of restrictive
legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number
of Conversion Shares being acquired upon the conversion of this Note and (B) a bank check in the amount of the Late Fee. Except
in the case of any certificate or certificates bearing a restrictive legend, all certificate or certificates required to be delivered
by the Company under this Section 4(c) shall be delivered electronically through the DTC or another established clearing
corporation performing similar functions. If the Conversion Date is prior to the six (6)-month anniversary of the Original Issue
Date, then the Conversion Shares shall bear a restrictive legend in the following form, as appropriate:

 

“THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT 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.”

 

    	 	10	 

    	 

    

 

iii.               Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to
the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event
the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return
to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv.               Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Note shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder
in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to
the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or,
if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate
or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading
Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share
Delivery Date until such certificates are delivered or Holder rescinds such conversion. Notwithstanding the foregoing, the maximum
amount of liquidated damages that must be paid by the Company pursuant to this Section 4(c)(iv) shall be an amount equal
to ten percent (10%) of the  aggregate principal amount being converted.  Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to Section 7 hereof for the Company’s failure
to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof
or under applicable law.

 

    	 	11	 

    	 

    

 

v.               Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in
an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating
to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number
of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B)
at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the
attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

    	 	12	 

    	 

    

 

vi.               Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock a number of shares of Common Stock at least equal to 200% of the Required Minimum (to be adjusted
monthly) for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Note), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon
the conversion of the then outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

vii.                Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to
any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.

 

viii.               Transfer
Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without
charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note
so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any
Notice of Conversion.

 

    	 	13	 

    	 

    

 

(d)   Holder’s
Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder
or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining,
unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder
or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether
this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal
amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion
shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned
by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination
as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of
the following: (i) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (ii) a more
recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease
the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of
this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st
day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained
herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this Note.

 

    	 	14	 

    	 

    

 

Section 5.          Certain
Adjustments.

 

(a)       Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment
of interest on, the Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event
of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares
of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(b)       Lower
Priced Transaction. So long as this Note remains outstanding or the Holder holds any Conversion Shares, and excluding any Exempt
Issuances, the Company shall not enter into any financing transaction pursuant to which the Company sells its securities at a price
lower than the Fixed Conversion Price (subject to adjustment in accordance with Section 4(b) and Section 5(a) above)
without the written consent of the Holder.

 

(c)       Most
Favored Nation Status. So long as this Note remains outstanding or the Holder holds any Conversion Shares, in the event that
the Company issues or sells any notes, if the Holder then reasonably believes that the terms and conditions appurtenant to such
issuance or sale provide anti-dilution or other full-ratchet protective provisions to such investors that were not granted to the
Holder hereunder, upon notice to the Company by Holder within five (5) Trading Days after the Company’s disclosure of such
issuance or sale, the Company shall amend the terms of the Note, so as to give Holder the benefit of such anti-dilution or other
full-ratchet protective provisions. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section
5(c) with respect to an Exempt Issuance.

 

(d)       Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time while the Note
is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion
of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
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 shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right
to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

    	 	15	 

    	 

    

 

(e)       Pro
Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Note (without regard to any limitations on exercise hereof, including without limitation,
the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution
to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

(f)       Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued
and outstanding.

 

(g)       Notice
to the Holder.

 

i.       Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the
Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.

 

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ii.       Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address
as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously
file such notice with the SEC pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during
the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as
may otherwise be expressly set forth herein.

 

Section 6.         Optional
Redemption; Mandatory Redemption.

 

a)       Optional
Redemption at Election of Company. Subject to the provisions of this Section 6(a), at any time after the Original Issue
Date, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice
is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem
some or all of the then outstanding principal amount of this Note for cash for an amount equal to the Optional Redemption Amount
on the tenth (10th) Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”,
such ten (10)-Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional
Redemption”). The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through
the date all amounts owing thereon are due and paid in full.

 

    	 	17	 

    	 

    

 

b)       Optional
Redemption Procedure. The payment of cash pursuant to an Optional Redemption shall be payable on the Optional Redemption Date.
If any portion of the payment pursuant to an Optional Redemption shall not be paid by the Company by the applicable due date, interest
shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until
such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption
Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to
invalidate such Optional Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional Redemption,
the Company shall have no further right to exercise such Optional Redemption. Notwithstanding anything to the contrary in this
Section 6, the Company’s determination to redeem in cash shall be applied ratably among the Holders of Notes. The
Holder may elect to convert the outstanding principal amount of this Note pursuant to Section 4 prior to actual payment in cash
for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

 

 c)       Mandatory
Redemption at Election of Holder. Subject to the provisions of this Section 6, if, at any time while this Note is outstanding,
the Company shall effect a Subsequent Financing, the Holder shall have the right to require the Company to first use 50% of the
net proceeds of such Subsequent Financing (such dollar amount, the “Mandatory Redemption Proceeds”) to redeem
all or a portion of this Note for an amount in cash equal to the Mandatory Redemption Amount (a “Mandatory Redemption”).
The Company shall deliver notice to the Holder of the Subsequent Financing at least five (5) Trading Days prior to the closing
of the Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review
the details of such financing (such additional notice, a “Mandatory Redemption Notice” and the date such Mandatory
Redemption Notice is deemed delivered hereunder, the “Mandatory Redemption Notice Date”). If the Holder exercises
its right herein to require a Mandatory Redemption by delivering written notice to the Company within five (5) Trading Days of
the Mandatory Redemption Notice Date (“Mandatory Redemption Exercise Notice”), the Company shall effect the
Mandatory Redemption and pay the Mandatory Redemption Amount to the Holder on or prior to the second (2nd) Trading Day following
the consummation of the Subsequent Financing (“Mandatory Redemption Date”). The Company’s payment of
the Mandatory Redemption Proceeds shall be applied ratably to all of the holders of the then outstanding Notes which exercise
the right to require a Mandatory Redemption on the basis of their (or their predecessor’s) initial purchases of Notes pursuant
to the Purchase Agreement. Notwithstanding the foregoing, this Section 6 shall not apply with respect to an Exempt Issuance, except
that no Variable Rate Transaction shall be an Exempt Issuance. 

 

    	 	18	 

    	 

    

 

d)       Mandatory
Redemption Procedure. The payment of cash pursuant to a Mandatory Redemption shall be payable in full on the Mandatory Redemption
Date. If any portion of the payment pursuant to a Mandatory Redemption shall not be paid by the Company by the applicable due date,
interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable
law until such amount is paid in full. Notwithstanding anything to the contrary in this Section 6, in addition to, and without
limiting any other rights hereunder and under the other Transaction Documents, the Holder may elect, by written notice to the Company
at any time following the Mandatory Redemption Notice Date through the date of actual payment in full in cash of the Mandatory
Redemption Amount, to rescind such Mandatory Redemption. Notwithstanding anything to the contrary in this Section 6, the Mandatory
Redemption Proceeds shall be applied ratably among the Holders of Notes. The Company covenants and agrees that it will honor all
Notices of Conversion tendered from the date of delivery of the Mandatory Redemption Exercise Notice through the date all amounts
owing thereon are due and paid in full, provided that any such Notice of Conversion shall first apply to any portion of the Note
that is not subject to the Mandatory Redemption unless the Notice of Conversion expressly states that it shall apply to a portion
of the Note that is subject to the Mandatory Redemption.

 

Section 7.         Events
of Default.

 

a)       “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):

 

i.       any
default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a
Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is
not cured within three (3) Trading Days;

 

ii.       the
Company shall fail to observe or perform any other covenant or agreement contained in the Note (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below),
including, but not limited to, a breach of Section 8(l), which failure is not cured, if possible to cure, within the earlier
to occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and
(B) ten (10) Trading Days after the Company has become or should have become aware of such failure;

 

iii.       a
default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

 

    	 	19	 

    	 

    

 

iv.       any
representation or warranty made in this Note or any other Transaction Documents, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;

 

v.       the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;

 

vi.       the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

vii.       the
Common Stock shall no longer be eligible for listing or quotation for trading on the OTC Pink operated by OTC Markets Group, Inc.
and shall not become eligible to resume listing or quotation for trading thereon or on the OTC Pink operated by OTC Markets Group,
Inc. within five (5) Trading Days, or the transfer of shares of Common Stock through the DTC System is no longer available or “chilled”
(“DTC Chill”) and the Company has not cured such DTC Chill within thirty (30) Trading Days from receipt of notice
that a DTC Chill has occurred;

 

viii.       the
Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of fifty percent
(50%) of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change
of Control Transaction;

 

ix.       the
Company shall fail for any reason to deliver certificates representing the Conversion Shares via DWAC to the Holder prior to the
second (2nd) Trading Day after a Conversion Date pursuant to Section 4(c), or the Company shall provide
at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests
for conversions of the Note in accordance with the terms hereof;

 

x.       the
Company fails to file the Registration Statement within ninety (90) days of the Closing Date or fails to cause the Registration
Statement to become effective within one hundred and fifty (150) days of the Closing Date (the “Effective Date”);

 

    	 	20	 

    	 

    

 

xi.       the
Company fails to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act such that it is not
in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) after the Effective Date;

 

xii.       if
the Borrower or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian
or liquidator of it or any of its properties; (ii) admit in writing its inability to pay its debts as they mature; (iii) make a
general assignment for the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute of any other jurisdiction or foreign country; or (v) file a voluntary petition in bankruptcy, or
a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of
a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance
of or for the purpose of effecting any of the foregoing;

 

xiii.       if
any order, judgment or decree shall be entered, without the application, approval or consent of the Borrower or any Significant
Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Borrower
or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Borrower or any Subsidiary, or of all or any
substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty
(60) days;

 

xiv.       the
occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Borrower or
any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the
aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within forty-five (45) days after
the date thereof;

 

xv.       the
Company shall fail to maintain a sufficient number of reserved shares pursuant to Section 4(c)(vi) hereof and the Purchase
Agreement; or

 

xvi.       any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of forty-five (45) calendar days.

 

    	 	21	 

    	 

    

 

b)       Remedies
Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of
Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest and the Make-Whole Amount,
liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s
election, immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that
results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal
to the lesser of 1.5% per month (18% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of
the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with
such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such
time, if any, as the Holder receives full payment pursuant to this Section 7(b). No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon. Alternatively, at the election of the Holder, the Holder
may require the Company to redeem the Note then held by such Holder in amount equal to the Default Redemption Amount. The Mandatory
Default Amount or Default Redemption Amount, whether payable in cash or in shares, shall be due and payable or issuable, as the
case may be, within five (5) Trading Days of the date on which the notice for the payment therefor is provided by a Holder (the
“Default Payment Date”). If the Company fails to pay in full the Mandatory Default Amount or Default Redemption
Amount, as applicable, hereunder on the date such amount is due in accordance with this Section 7(b) (whether in cash or
shares of Common Stock), the Company will pay interest thereon at a rate equal to the lesser of 1.5% per month (18% per annum)
or the maximum rate permitted by applicable law, accruing from such date until the Mandatory Default Amount or Default Redemption
Amount, as applicable, plus all such interest thereon, is paid in full.

 

Section 8.         Miscellaneous.

 

a)       Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, electronically, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number, email address
or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 8(a).
Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered
personally, electronically, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder
at the facsimile number, email address or address of the Holder appearing on the books of the Company, or if no such facsimile
number, email address or address appears on the books of the Company, at the principal place of business of such Holder, as set
forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service
or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

    	 	22	 

    	 

    

  

b)       Absolute
Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued but unpaid interest and the Make-Whole
Amount, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is
a direct debt obligation of the Company. This Note ranks pari passu with all other Notes now or hereafter issued pursuant
to the Transaction Documents.

 

c)       Lost
or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

d)       Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict
of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof 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 applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated
hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.

 

    	 	23	 

    	 

    

  

e)       Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other
occasion. Any waiver by the Company or the Holder must be in writing.

 

f)       Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and
the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has been enacted.

 

g)       Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The
Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that,
in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all information and documentation to the Holder that
is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this
Note.

 

    	 	24	 

    	 

    

 

h)       Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.

 

i)       Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit
or affect any of the provisions hereof.

 

j)       Secured
Obligation. The obligations of the Company under this Note are secured by all assets of the Company and each Subsidiary pursuant
to the Security Agreement, dated as of April 11, 2019 between the Company, the Subsidiaries of the Company and the Secured Parties
(as defined therein).

 

k)       Payment
of Legal Fees. All costs of collection associated with the Purchase Agreement and this Note, including up to $25,000 in legal
fees and due diligence, shall be paid by the Borrower.

 

l)       Use
of Proceeds. The Company shall use the proceeds from the sale of this Note for the satisfaction of at least $2,600,000 of existing
amounts owed to DPW Holdings, Inc. pursuant to various outstanding invoices.

 

*********************

 

(Signature Pages
Follow)

 

    	 	25	 

    	 

    

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

 

	 	
        AVALANCHE INTERNATIONAL,
        CORP.

         

         

         

	 	
        By:__________________________________________

        Name: Philip Mansour

        Title: Chief Executive Officer

         

         

        Facsimile No. for delivery of Notices: _______________

        

 

    	 	26	 

    	 

    

 

ANNEX A 

 

NOTICE OF CONVERSION

 

The undersigned hereby
elects to convert principal under the 10% Senior Secured Convertible Promissory Note due April 11, 2020 of Avalanche International,
Corp., a Nevada corporation (the “Company”), into shares of common stock, par value $0.001 per share, of the
Company (the “Common Stock”) according to the conditions hereof, as of the date written below. If shares of
Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of
this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the
Exchange Act.

 

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

 

Conversion Information

 

Date to Effect Conversion:      _____________________________________________________

 

Outstanding Principal:                    ______________________________________________________________

 

Outstanding Interest:              _____________________________________________________

 

Principal Amount of Note to be Converted:     _________________________________________

 

Interest Amount of Note to be Converted:      _________________________________________

Conversion Price Calculations:

 

Total Shares of Common Stock to be Issued:

 

Outstanding Principal After Conversion:
       _________________________________________

 

Outstanding Interest After Conversion:                    ________________________________________________

 

    	 	27	 

    	 

    

 

	
        DWAC Instructions

         

        Broker:

         

        DTC#:

         

        Account:

         

        Account Name:

         

        
	
        Physical Delivery

         

        

        Issue to:

         

        Address:

         

         

         

 

 

	Entity Name:	 	 
	 	 	 
	Signatory Name:	 	 
	 	 	 
	Title:	 	 
	 	 	 
	Signature:	 	 

 

    	 	28	 

    	 

    

 

Schedule 2(d)

 

Amortization Schedule

 

 

 

 

 

 

 

 

29

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