Document:

Exhibit 10.2

 

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

 

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

 

	Principal
    Amount: US$107,500.00	Issue
    Date: December 26, 2017

 

CONVERTIBLE
PROMISSORY NOTE

 

FOR
VALUE RECEIVED, DRONE USA, INC., a Delaware corporation (hereinafter called the “Borrower” or “Company”),
hereby promises to pay to the order of LABRYS FUND, LP, a Delaware limited partnership, or registered assigns (the “Holder”)
the sum of US$107,500.00, together with any interest as set forth herein, on September 26, 2018 (the “Maturity Date”),
and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”)
per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. In connection with the issuance of this convertible promissory note (the “Note”),
the Borrower shall, on the Issue Date, issue 421,238 shares of common stock (the “Returnable Shares”) to Holder as
a commitment fee, provided, however, the Returnable Shares must be returned to the Borrower’s treasury if
the Note is fully repaid and satisfied prior to the date which is one hundred eighty (180) days following the Issue Date, subject
further to the terms and conditions of this Note.

 

This
Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum
or (ii) the maximum amount allowed by law from the due date thereof until the same is paid (the “Default Interest”).
Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year
and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001 par
value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United
States of America.

 

     

     

    

 

All
payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is
not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest
payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken
into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business
day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York
are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which
this Note was originally issued (the “Purchase Agreement”).

 

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

 

The
following terms shall apply to this Note:

 

Article
I. CONVERSION RIGHTS

 

1.1 
Conversion Right. The Holder shall have the right, in its sole and absolute discretion, from time to time, and at any time
on or following the date of this Note and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default
Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal
amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and
non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as
defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall
the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this
Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1)
of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder
(up to a maximum of 9.99%) upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and
the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by
the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then
in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 11:59
p.m., New York, New York time on such conversion date (the “Conversion Date”).

 

    	 	2	 

     

    

 

The
term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of
this Note to be converted in such conversion, plus (2) at the Holder’s option, accrued and unpaid interest, if any,
on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower
shall have the right to pay any or all interest in cash, plus (3) at the Holder’s option, Default Interest, if any,
on the amounts referred to in the immediately preceding clauses (1) and/or (2), plus (4) any Additional Principal for such
Conversions, plus (5) at the Holder’s option, any amounts owed to the Holder pursuant to any other provision of this Note,
all subject to the 4.99% (or up to 9.99% if increased as provided above) limitation discussed above.

 

1.2 
Conversion Price.

 

(a)
Calculation of Conversion Price. Subject to the adjustments described herein, the conversion price (the “Conversion
Price”) shall equal the Alternate Conversion Price (as defined herein)(subject to equitable adjustments for stock splits,
stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary
of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Alternate
Conversion Price” shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%).
“Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading
Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” and “Trading
Prices” means, for any security as of any date, the lesser of: (i) the lowest trade price on the OTC Pink, OTCQB, or applicable
trading market (the “OTC Market”) as reported by a reliable reporting service (“Reporting Service”) designated
by the Holder or, if the OTC Market is not the principal trading market for such security, the trading price of such security
on the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such
security is available in any of the foregoing manners, the average of the trading prices of any market makers for such security
that are listed in the “pink sheets” by the National Quotation Bureau, Inc., or (ii) the lowest closing bid price
on the OTC Market as reported by a Reporting Service designated by the Holder or, if the OTC Market is not the principal trading
market for such security, the closing bid price of such security on the principal securities exchange or trading market where
such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the
average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the
National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in
interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion
Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the
OTC Market or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. In the
event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest
error. If at any time after the Issue Date, the lowest Trading Price is equal to or lower than $0.095, then an additional fifteen
percent (15%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting
in a discount rate of 50%, assuming no other adjustments are triggered hereunder).

 

    	 	3	 

     

    

 

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

 

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

 

    	 	4	 

     

    

 

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

 

    	 	5	 

     

    

 

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

 

(d) [Intentionally
Omitted].

 

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

 

(f) Conversion
Price During Major Announcements. Notwithstanding anything contained in the preceding section to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower's Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the "Announcement Date"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined
below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section. For purposes hereof, "Adjusted Conversion Price
Termination Date" shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section has been made, the date upon which the Borrower (in the case of clause (i) above)
or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment
of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(d) to become operative.

 

    	 	6	 

     

    

 

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

 

1.3 
Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all
times to have authorized and reserved eight (8) times the number of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). Initially,
the Company will instruct the Transfer Agent to reserve 8,535,980 shares of common stock in the name of the Holder for
issuance upon conversion hereof. The Reserved Amount shall be increased from time to time in accordance with the Borrower’s
obligations pursuant to Section 3(d) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change
to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at
the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be
a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding
Notes. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section
3.2 of the Note, and the then outstanding principal due under this Note shall increase by Fifteen Thousand and No/100 United
States Dollars ($15,000).

 

The
Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable
upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers
and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares
of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the
Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions, and the Reserved Amount will be
increased by a factor of two (2) each time the Borrower issues a Variable Security (as defined herein).

 

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1.4 
Method of Conversion.

 

(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time
on or following the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable
means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time) and (B) subject to
Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

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

 

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

 

    	 	8	 

     

    

 

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

 

(e)
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail
(or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.

 

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

 

    	 	9	 

     

    

 

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

  

(i)  
Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate
to the Holder or credit the Holder's balance account with OTC for the number of shares of Common Stock to which the Holder is
entitled upon such Holder's conversion of any Conversion Amount (under Holder's and Borrower's expectation that any damages will
tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which
it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the
month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, and interference with such conversion right are difficult if not impossible to qualify.
Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(i) are justified. 

 

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

 

    	 	10	 

     

    

 

1.5 
Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the
Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined
in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and
who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of
this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in
the following form, as appropriate:

 

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

 

    	 	11	 

     

    

 

The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be reasonably accepted by the Borrower so that the sale or transfer is
effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the
Borrower does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant
to Section 3.2 of the Note.

 

1.6 
Effect of Certain Events.

 

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

 

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

 

    	 	12	 

     

    

 

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

 

(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or
sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued
directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however,
that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to
the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction
of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”),
then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share
received by the Borrower in such Dilutive Issuance.

 

    	 	13	 

     

    

 

The
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants,
rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”)
(such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price
then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the
“price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i)
the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options,
plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible
or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming
full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities
issuable upon exercise of such Options.

 

Additionally,
the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and
the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

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

 

    	 	14	 

     

    

 

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

 

1.7 
[Intentionally Omitted].

 

1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved
Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a
Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the third (3rd) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect
to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive
Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance
with Section 1.3) for the Borrower’s failure to convert this Note.

 

1.9
Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding
hereunder pursuant to the following terms and conditions:

 

(a)
At any time during the period beginning on the Issue Date and ending on the date which is one hundred eighty (180) days following
the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to
the Holder of the Note, to prepay the outstanding Note in full by making a payment to the Holder of an amount in cash equal to
the sum of: (i) the then outstanding principal amount of this Note plus (ii) accrued and unpaid interest on the unpaid
principal amount of this Note plus (iii) Default Interest, if any, in accordance with Article III, plus (iv) any
Additional Principal, plus (v) at the Holder’s option, any amounts owed to the Holder pursuant to any other provision
of this Note, plus (vi) $750.00 to reimburse Holder for the fees associated with the Returnable Shares.

 

    	 	15	 

     

    

 

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

 

Any
notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its
registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment
which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment
(the “Optional Prepayment Date”), the Borrower shall make payment of the applicable prepayment amount to or upon the
order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional
Prepayment Date.

 

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

 

Article
II. CERTAIN COVENANTS

 

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

 

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

 

    	 	16	 

     

    

 

2.3
Borrowings; Liens. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors financial institutions or other lenders incurred in the ordinary course of business, (c) borrowings, the proceeds of
which shall be used to repay this Note, or (ii) enter into, create or incur any liens, claims or encumbrances of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits
therefrom, securing any indebtedness occurring after the date hereof.

  

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

 

2.5
Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

 

2.6
Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction
or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9)
of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”).
In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0)
Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note,
but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will become immediately due and payable to the Holder
at its election in the form of a cash payment or added to the balance of this Note (under Holder's and Borrower's expectation
that this amount will tack back to the Issue Date).

 

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

 

    	 	17	 

     

    

 

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

 

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

 

2.10 Repayment
from Proceeds. While any portion of this Note is outstanding, if the Company receives cash proceeds from any source or series
of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the
conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower
or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the
Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately
apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note. Failure
of the Borrower to comply with this provision shall constitute an Event of Default. In the event that such proceeds are received
by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.

 

Article
III. EVENTS OF DEFAULT

 

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

 

3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this
Note, whether at maturity, upon acceleration or otherwise. Any amount of principal on this Note which is not paid when due shall
bear interest at the rate of Twenty Four percent (24%) per annum from the due date thereof until the same is paid (“Default
Interest”).

 

    	 	18	 

     

    

 

3.2
Conversion and the Shares. The Borrower fails to reserve the Reserved Amount required for Holder at all times, issue shares
of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise
by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its
transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its
transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically
or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise
pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs,
delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant
to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend
to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement,
statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder
shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer
agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a
balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s
transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty
eight (48) hours of a demand from the Holder.  

 

3.3
Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this
Note and any collateral documents including but not limited to the Purchase Agreement.

 

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

 

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

 

3.6
 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall
be instituted by or against the Borrower or any subsidiary of the Borrower, or the Borrower admits in writing its inability to
pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable or the Borrower admits in writing its inability to pay its debts generally as they mature, or have
filed against it an involuntary petition for bankruptcy relief, all under international, federal or state laws as applicable.

 

    	 	19	 

     

    

 

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

 

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

 

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

 

3.10
 Cross-Default.  Notwithstanding anything to the contrary contained in this
Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition
contained in any of the Other Agreements (as defined herein), after the passage of all applicable notice and cure or grace periods,
shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder
shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the
Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively,
all agreements and instruments between, among or by: (1) the Borrower, and (2) the Holder or any other third party, including,
without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include this Note.
Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future
debt of Borrower to the Holder.

 

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

 

3.12 Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

    	 	20	 

     

    

 

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

 

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

 

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

 

3.16 Market
Capitalization.The Borrower fails to maintain a market capitalization of at least $5,000,000 on any Trading Day,
which shall be calculated by multiplying (i) the closing bid price of the Borrower’s common stock on the Trading Day
immediately preceding the respective date of calculation by (ii) the total shares of the Borrower’s common stock issued
and outstanding on the Trading Day immediately preceding the respective date of calculation.

 

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

 

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

 

    	 	21	 

     

    

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	22	 

     

    

 

Upon
the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13,
3.14, 3.15, 3.16, 3.17, 3.18, 3.19, 3.20, 3.21, 3.22, 3.23, and/or 3.24, the Holder shall no longer be required to return the
Returnable Shares to the Borrower under any circumstances and the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% (except
with respect to SECTION 3.2, in which case 150% shall be replaced with 200%) times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts
referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof
(the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the “Default Sum”) and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all
costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all
other rights and remedies available at law or in equity. This requirement by the Borrower shall automatically apply upon the occurrence
of an Event of Default without the need for any party to give any notice or take any other action. Additionally, if this Note
is not paid at the Maturity Date, then the outstanding principal due under this Note shall increase by Fifteen Thousand and No/100
United States Dollars ($15,000).

 

The
Holder shall have the right at any time to convert the Default Amount, in whole or in part, at the Conversion Price in effect
at the time of conversion, subject to the beneficial ownership limitations contained in the Note.

 

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

 

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

 

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

 

    	 	23	 

     

    

 

Article
IV. MISCELLANEOUS

 

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

 

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

 

If
to the Borrower, to:

 

Drone
USA, Inc.

16
Hamilton Street

West
Haven, CT 06516

E-mail:
grant@droneusainc.com

  

If
to the Holder:

 

Labrys
Fund, LP

48
Parker Road

Wellesley,
MA 02482

E-mail:
admin@equiluxgroup.com

 

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

 

Legal
& Compliance, LLC

330
Clematis Street, Ste. 217

West
Palm Beach, FL 33401

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

E-mail:
CFriend@LegalAndCompliance.com

 

    	 	24	 

     

    

 

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

 

4.4
Assignability. The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be
binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and
assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this
Note may be less than the amount stated on the face hereof.

 

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

 

4.6
Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without
regard to principles of conflicts of laws. The parties hereby warrant and represent that the selection of Nevada law as governing
under this Note (i) has a reasonable nexus to each of the Parties and to the transactions contemplated by the Note; and (ii) does
not offend any public policy of Nevada, Massachusetts, or of any other state, federal, or other jurisdiction.  Any action
brought by either party against the other arising out of or related to this Note, or any other agreements between the parties,
shall be commenced only in the state or federal courts of general jurisdiction located in the Commonwealth of Massachusetts, except
that all such disputes between the parties shall be subject to alternative dispute resolution through binding arbitration at the
Holder’s sole discretion and election (regardless of which party initiates the legal proceedings). The parties
to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The parties agree that, in
connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim
within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding
shall be waived and such party will forever be barred from asserting such a claim. Both parties agree to submit to the jurisdiction
of such courts or to such arbitration panel, as the case may be.

 

    	 	25	 

     

    

 

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

 

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

 

The
prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that
any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this
Note or any other related transaction document by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any other manner permitted by law.​ 

 

    	 	26	 

     

    

 

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

 

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

 

4.9 Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of
Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the
Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose
of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any
share of any class or any other securities or property, or to receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all
of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail
a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of
such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification
to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes,
recapitalizations, etc. as soon as possible under law.

 

    	 	27	 

     

    

 

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

 

4.11
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that
the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation
of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place,
and rate, and in the form, herein prescribed.

 

    	 	28	 

     

    

 

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

 

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

 

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

 

4.15
Piggyback Registration Rights. The Borrower shall include on the next registration statement the Borrower files with SEC
(or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion
of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but
not less than Fifteen Thousand and No/100 United States Dollars ($15,000), being immediately due and payable to the Holder at
its election in the form of a cash payment or added to the balance of this Note.

 

    	 	29	 

     

    

 

 

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

 

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

 

 

[signature
page to follow]

    	 	30	 

     

    

 

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

 

	 	DRONE
    USA, INC.
	 	 	 
	 	By:	 
	 	Name: 	Michael
    Bannon
	 	Title:	Chief
    Executive Officer

 

     

     

    

 

EXHIBIT
A

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert $_________________principal amount of the Note (defined below) together with $________________
of accrued and unpaid interest thereto, totaling $_____________ into that number of shares
of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of
Drone USA, Inc., a Delaware corporation (the “Borrower”), according to the conditions of the convertible note of the
Borrower dated as of December 26, 2017 (the “Note”), as of the date written below. No fee will be charged to the Holder
for any conversion, except for transfer taxes, if any.

 

Box
Checked as to applicable instructions:

 

	☐	The
    Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the
    undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”).

 

Name
of DTC Prime Broker:

Account
Number:

 

	☐	The
    undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock
    set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately
    below or, if additional space is necessary, on an attachment hereto:

 

	 	Name:
    Labrys Fund, LP	 
	 	Address:
_________________________	 
	 	 	 
	 	Date
    of Conversion:	______________
	 	 	 
	 	Applicable
    Conversion Price:	$_____________
	 	 	 
	 	Number
    of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes:	______________
	 	 	 
	 	Amount
    of Principal Balance Due remaining Under the Note after this conversion:	______________
	 	 	 
	 	Accrued
    and unpaid interest remaining:	$_____________
	 	 	 
	 	Default
    Amounts & Penalties remaining (if applicable):	$_____________

 

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

 

    	 	A-1	 

     

    

 

EXHIBIT
B

Affidavit of Confession of Judgment

 

	COMMONWEALTH
    OF MASSACHUSETTS	 	 
	-----------------------------------------------------------------------
    X	 	 
	LABRYS
    FUND, LP,	 	 
	 	 	Index
    No.
	Plaintiff,     	 	 
		 	AFFIDAVIT
    OF

    CONFESSION OF
	-
    against -	 	JUDGMENT
	 	 	 
	DRONE
    USA, INC.,	 	 
	 	 	 
	Defendant.     	 	 
	-----------------------------------------------------------------------
    X	 	 
	 	 	 
	COMMONWEALTH
    OF MASSACHUSETTS        )	 	 
	)
          ss.: 		 

 

Michael
Bannon, being duly sworn, hereby deposes and says:

 

1.
I am the Chief Executive Officer of defendant DRONE USA, INC. (“Borrower”). As such, I am fully familiar with all
the facts and circumstances recited herein on personal knowledge. Borrower has its principal place of business at 16 Hamilton
Street, West Haven, CT 06516. On behalf of the Borrower, I hereby confess judgment in favor of Labrys Fund, LP (“Labrys
Fund”), residing at 48 Parker Road, Wellesley, MA 02482, in the amount of One Hundred Seven Thousand Five Hundred Dollars
($107,500.00), less any payments made on or after the date of this affidavit of confession of judgment, plus interest at default
interest rate of twenty four percent (24%) percent per annum on said amount and all other applicable penalties under the Note
(as defined herein). In no event shall interest payable hereunder exceed the maximum permissible under applicable law.

 

2. I
hereby authorize the federal courts and/or state courts located in the Commonwealth of Massachusetts to enter judgment against
Borrower in the amount of in the amount of One Hundred Seven Thousand Five Hundred Dollars ($107,500.00), less any payments made
on or after the date of this affidavit of confession of judgment, plus interest at default interest rate of twenty four percent
(24%) percent per annum on said amount and all other applicable penalties under the Note, plus the costs and attorneys’
fees that are set forth below, less any payments made on or after the date of this affidavit of confession of judgment, upon Borrower’s
failure for any reason to timely make any payment to Labrys Fund called for by the convertible promissory note between of the
parties, dated December 26, 2017 (the “Note”), due to the occurrence of an Event of Default (as defined in the Note)
under the Note.

 

    	 	B-1	 

     

    

 

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

 

4. The
sums confessed pursuant to this affidavit of confession of judgment are justly due and owing to Labrys Fund under the following
circumstances: Borrower entered into the Note pursuant to which Borrower promised to pay to the order of Labrys Fund the principal
sum of One Hundred Seven Thousand Five Hundred Dollars ($107,500.00) plus interest as provided for therein. The amounts confessed
by this affidavit represent a convertible promissory note investment by Labrys Fund in Borrower and arise out of Borrower’s
breach of its obligations under the Note.

 

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

 

    	 	B-2	 

     

    

 

	 	DRONE
    USA, INC.
	 	 	 
	 	By:	 
	 	Name: 	Michael
    Bannon
	 	Title:	Chief
    Executive Officer

  

    	 	B-3	 

     

    

 

STATE
OF ______________ )

ss.:

COUNTY
OF ______________ )

 

ACKNOWLEDGMENT

 

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

 

	 	 
	Notary
    Public	 

 

SEAL:

 

 

[Signature
Page to Affidavit of Confession of Judgment]

 

 

B-4Exhibit

Exhibit 10. 1

AMENDED AND RESTATED GRANT OF PERFORMANCE BASED AWARDS
PURSUANT TO THE
R1 RCM INC. 
SECOND AMENDED AND RESTATED 2010 STOCK INCENTIVE PLAN

*  *  *  *  *

Participant:        Joseph Flanagan
Grant Date:        December 20, 2017 
Number of PBRSUs:    737,604
Measurement Date:      December 31, 2020 (the “Non-COC Measurement Date”)
*  *  *  *  *
THIS AMENDED AND RESTATED GRANT OF PERFORMANCE BASED AWARDS (this “Agreement”), effective as of the Grant Date specified above, is entered into by and between R1 RCM Inc., a Delaware corporation (the “Company”), and the Participant specified above, pursuant to the R1 RCM Inc. Second Amended and Restated 2010 Stock Incentive Plan, as in effect and as amended from time to time (the “Plan”), as administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”).
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“PBRSUs”) provided herein to the Participant; 
WHEREAS, the number of shares of Common Stock available for issuance under the Plan are, as of the Grant Date, deemed by the Committee to be insufficient to allow the award of PBRSUs contemplated by this Agreement;
WHEREAS, capitalized terms used in this Agreement and not otherwise defined in this Agreement have the meanings ascribed to them in the Plan;
WHEREAS, the Company and the Participant previously entered into a Grant of Performance Based Awards Pursuant to the R1 RCM Inc. Second Amended and Restated 2010 Stock Incentive Plan dated as of December 20, 2017 (the “Prior Agreement”); and
WHEREAS, the Prior Agreement contained an inadvertent error in the number of Granted PBRSUs (as defined below) granted to the Participant, and the Company and the Participant now desire to amend and restate the Prior Agreement in its entirety as set forth herein to correct such error.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, receipt of which is acknowledged, the parties hereto hereby mutually covenant and agree as follows:
1.Grant of Restricted Stock Units.  In consideration of services rendered and to be rendered to the Company by the Participant, the Company hereby grants to the Participant, upon the terms and subject to the conditions set forth in this Agreement and in the Plan, an award consisting of the number of PBRSUs specified above (the “Granted PBRSUs”), provided that:

1

(a)    in the event that the Granted PBRSUs vest and are settled in shares of Common Stock under the Plan, the actual number of shares of Common Stock to be issued (the “PBRSU Shares”) shall not exceed the maximum number of shares derived from the table in Section 2(b)(ii) below (the “Maximum Shares”);
(b)    issuance of the PBRSU Shares, or payment of Cash Payments (defined below), if applicable pursuant to the occurrence of a Shortfall Event (defined below), in respect of the Granted PBRSUs pursuant to Section 3, is contingent upon satisfaction of the vesting conditions described in Section 2;
(c)    the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the equity of the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the Granted PBRSUs, except as otherwise specifically provided for in the Plan or this Agreement;
(d)    the Committee may, in its sole discretion, make adjustments or take other equitable actions to remediate any dilutive effect resulting from any strategic transaction, including in connection with any Change of Control; and
(e)    the Granted PBRSUs are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code and this Agreement shall be construed and interpreted consistent with such intent.
2.    Vesting.
(a)    For purposes of this Section 2, the following terms have the following meanings:
(i)    “Affiliate” means, with respect to any Person as of any time of determination, any entity controlling or controlled by or under common control with such Person as of such time the Company or another Affiliate, at the time of execution of the Agreement and any time thereafter, where “control” is defined as the ownership of at least fifty percent of the equity or beneficial interest of such entity, and any other entity with respect to which such Person as of such time has significant management or operational responsibility (even though such Person may own less than fifty percent of the equity of such entity).
(ii)    “Ascension” means, collectively, Ascension Health Alliance and any Affiliate of Ascension Health Alliance. 
(iii)    “Average Per Share Price” means (x) in the case of a Performance Measurement Date that occurs on the Non-COC Measurement Date, the average closing per share price of Common Stock during the sixty-day period prior to the Non-COC Measurement Date and (y) in the case of a Performance Measurement Date that occurs as result of a Change of Control, the sum of (1) the price per share of Common Stock paid by an acquiror in connection with such Change of Control, or if the consideration is in a form other than cash, the average per share closing price of the Common Stock over the five day period prior to the consummation of the Change of Control, plus, (2) (A) the aggregate amount of any management or transaction-related fees (excluding expense reimbursements) paid to TowerBrook (as defined herein) or Ascension (as defined herein) in connection with 

2

such Change of Control (other than any transaction-related payment made to Ascension with respect to any customer agreement with the Company or any of its subsidiaries), divided by (B) the number of shares of Common Stock outstanding as of the date of such Change of Control (on a fully-diluted basis and assuming the vesting of all outstanding equity awards as of the date of such Change of Control). If the actual Average Per Share Price is at least $4.00 and between the applicable levels set forth in Section 2(b), then the percentage at which the Performance-Based Condition is satisfied shall be determined on a pro-rata basis using straight-line interpolation, provided that, notwithstanding the foregoing, in the event the Average Per Share Price in connection with a Change of Control is between the threshold and target vesting levels indicated in Section 2(b), the percentage for which the Performance-Based Condition is satisfied will be 100%; provided, further, that the maximum number of Granted PBRSUs that satisfy the Performance-Based Condition shall not exceed the Maximum Shares.  For the sake of clarity and avoidance of doubt, no Granted PBRSUs shall become vested if, as of the applicable Performance Measurement Date, the actual Average Per Share Price is less than the threshold level of performance. 
(iv)    “Cause” means (A) the Participant’s conviction of, or plea of guilty or nolo contendere to, a felony; (B) in carrying out the Participant’s duties to the Company, the Participant’s engagement in conduct that constitutes gross neglect or willful misconduct and that, in either case, results in material economic or reputational harm to the Company; (C) the Participant’s willful breach of any provision of this Agreement or any applicable non-disclosure, non-competition, non-solicitation or other similar restrictive covenant obligation owed to the Company, and such breach results in material economic or reputational harm to the Company; (D) the Participant’s repeated refusal, or failure to undertake good faith efforts, to perform the Participant’s material duties and responsibilities as an officer or employee for the Company; or (E) the Participant’s engagement in willful misconduct resulting in or intended to result in direct personal gain to the Participant at the Company’s expense.
(v)    “Change of Control” means (i) the consummation of any consolidation or merger of the Company with  any Third Party Purchaser where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent of the voting shares of the company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (ii) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company to a Third Party Purchaser, (iii) any sale of a majority of the voting shares of the Company to a Third Party Purchaser, (iv) the consummation of a Take Private Change of Control or (v) any liquidation or dissolution of the Company.  Notwithstanding the foregoing, other than with respect to a Take Private Change of Control, a “Change of Control” shall not be deemed to have occurred if the event constituting such “Change of Control” is not (x) a change in the ownership of the corporation, (y) a change in effective control of the corporation, or (z) a change in the ownership of a substantial portion of the assets of the corporation, as those terms are used and defined in Section 409A(a)(2)(A)(v) of the Code, and the regulations thereunder, and where the word “corporation” used above and in such provisions is taken to refer to the Company. 

3

(vi)    “Disability” means the Participant’s inability, due to physical or mental incapacity, to perform the essential functions of the Participant’s job, for one hundred eighty (180) days out of any 365-day period.
(vii)    “Good Reason” means the occurrence of any of the following events, without the Participant’s express written consent, unless such event is fully corrected in all material respects by the Company within 30 days following the Participant’s written notice to the Company of the occurrence of such event: (A) material diminution in the Participant’s duties, authorities or responsibilities, including, without limitation, any change to the Company’s reporting structure that would require the Participant to report directly to a role other than the role the Participant reports to on the Grant Date (other than temporarily while physically or mentally incapacitated or as required by applicable law), (B) any relocation of the Participant’s principal office, or principal place of employment, to a location that is more than 40 miles from the Participant’s principal place of employment as of the Grant Date; or (C) any material breach by the Company of its material obligations under that certain offer letter by and between the Participant and Accretive Health, Inc. dated April 27, 2013, as amended on April 29, 2014. The Participant must provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within 90 days after the first occurrence of such circumstances and actually terminate employment within 30 days following the expiration of the Company’s 30-day cure period described above. Otherwise, the Participant will be deemed to have irrevocably waived any claim of such circumstances as “Good Reason”.
(viii)    “PBRSU-Related Holdings” means, collectively, PBRSU Shares and any Take Private Change of Control Consideration or Cash Payments (as defined below).
(ix)     “Person” shall mean any individual, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding (A) the Company and any of its subsidiaries, (B) any employee stock ownership or other employee benefit plan maintained by the Company, and (C) an underwriter or underwriting syndicate that has acquired the Company’s securities solely in connection with a public offering thereof.
(x)    “Take Private Change of Control” shall mean the consummation of any transaction or series of transactions following which no shares of the Company (or of its ultimate parent corporation) are listed on the New York Stock Exchange or the NASDAQ, on any other United States stock exchange, or are otherwise listed on a public trading market (including the OTC Markets Group, Inc.). 
(xi)    “Take Private Change of Control Consideration” means consideration, other than PBRSU Shares in respect of the Granted PBRSUs, including Cash Payments, received by Participant in connection with the consummation of a Take Private Change of Control (including, without limitation, cash or equity securities of the successor to the Company or any direct or indirect parent entity of the Company).
(xii)    “Third Party Purchaser” shall mean any Person or group of Persons, none of whom is, immediately prior to the subject transaction, TowerBrook, Ascension, a TB/AS Co-Investment Vehicle or any Affiliate thereof.
(xiii)    “TowerBrook” means TowerBrook Capital Partners L.P. and any Affiliate of TowerBrook Capital Partners L.P., including, for this purpose, TowerBrook Investors IV 

4

(Onshore), L.P., TowerBrook Investors IV (892), L.P., TowerBrook Investors IV (OS), L.P., TowerBrook Investors IV Executive Fund, L.P., TowerBrook Investors IV Team Daybreak, L.P. and any other investment fund managed or advised, directly or indirectly, by TowerBrook Capital Partners L.P. or any of its Affiliates, and any Affiliate of any such fund; provided that, for purposes of this definition, the Company shall not be deemed an Affiliate of TowerBrook.
(b)    The Granted PBRSUs shall be subject to both a time-based vesting condition (the “Time-Based Condition”) and a performance-based vesting condition (the “Performance-Based Condition”), as described herein.  Except as expressly provided herein, none of the Granted PBRSUs (or any portion thereof) shall be “vested” for purposes of this Agreement unless and until both the Time-Based Condition and the Performance-Based Condition for such Granted PBRSUs are satisfied.  The number of Granted PBRSUs that are “vested” for purposes of this Agreement at any time (which, for the sake of clarity and avoidance of doubt, may be greater than the number of PBRSUs specified above as having been granted on the Grant Date) shall equal the product of (i) the number of the Granted PBRSUs that have satisfied the Time-Based Condition and (ii) the percentage level at which the Performance-Based Condition has been satisfied.
(i)    The Time-Based Condition for the Granted PBRSUs shall be satisfied on the earlier of (A) the Non-COC Measurement Date (defined above) and (B) the effective date of a Change of Control (the earlier of (A) and (B), the “Performance Measurement Date”), subject to the Participant not having ceased to perform services to the Company for any reason or no reason, with or without Cause, prior to the Performance Measurement Date. Notwithstanding the foregoing, in the event that the Participant’s employment with the Company is terminated (x) by the Company due to a termination without Cause, (y) due to the Participant’s death or by the Company due to the Participant’s Disability or (z) by the Participant for Good Reason (each, a “Qualifying Termination”), the Time-Based Condition for the Granted PBRSUs shall be satisfied with respect to a pro-rata portion of the Granted PBRSUs upon the occurrence of the Performance Measurement Date, with such pro-rata portion determined by multiplying the number of Granted PBRSUs that would have vested on the Performance Measurement Date based on actual achievement of the Performance-Based Condition had the Participant continued to perform services to the Company through the Performance Measurement Date, by a fraction, (A) the numerator of which is the number of days the Participant performed services to the Company following May 26, 2016 through the date of the Qualifying Termination and (B) the denominator of which is 1,651; provided, however, if a Change of Control occurs within 180 days following a Qualifying Termination of the type described in clause (x) or (z) of the definition thereof, then the Time-Based Condition will be deemed to be fully satisfied with respect to all of the Granted PBRSUs (and not a pro-rata portion thereof) as of the date of such Change of Control.
(ii)    The percentage level at which the Performance-Based Condition shall be satisfied shall be based upon the level at which the performance goal is satisfied, as determined pursuant to the table below.  With respect to the dollar values set forth in the table below in the column labeled “Average Per Share Price,” such values will be adjusted proportionately by the Committee for any increase in the outstanding shares of Common Stock after the Grant Date due to any stock split, sub-division or similar event and for any decrease in the outstanding shares of Common Stock after the Grant Date due to any consolidation, combination, reverse stock split, reclassification or similar event. 

5

	
			
	Level of Performance
	Average Per Share Price
	Percentage for which the Performance-Based Condition is Satisfied

	Below Threshold
	<$4.00
	0%

	Threshold
	$4.00
	50%

	Target
	$5.00
	100%

	Above Target
	$7.00
	250%

	Maximum
	$9.00 or higher
	350%

(c)    Forfeiture.  
(i)    In the event that the Participant ceases to perform services to the Company for any reason or no reason, other than due to a Qualifying Termination, then all of the Granted PBRSUs that are unvested, after giving effect to any pro-rated vesting attributable to a Qualifying Termination, as of the time of such cessation shall be forfeited immediately and automatically to the Company, without the payment of any consideration to the Participant, effective as of such cessation, and the Participant shall have no further rights with respect to any Granted PBRSUs that are so forfeited (or any cash consideration or other compensation with respect to such forfeited Granted PBRSUs);
(ii)    If the Participant provides services to a subsidiary of the Company, any references in this Agreement to provision of services to the Company shall instead be deemed to refer to service to such subsidiary.  
(iii)    Any Granted PBRSUs that do not become fully vested as of the Performance Measurement Date shall expire immediately following the date that the Committee determines the level at which the Performance-Based Condition is satisfied.
3.    Delivery of Shares; Cash Settlement Provisions.  
(a)    Provided that the Committee has made the determination, in its sole discretion, that shares available for issuance under the Plan are sufficient to allow for the settlement of the  Granted PBRSUs in shares of Common Stock, up to and including the Maximum Shares (a “Grant Award Determination”), upon the satisfaction of both the Time-Based Condition and the Performance-Based Condition with respect to any Granted PBRSUs, the Participant shall, subject to Section 10(a), receive the number of shares of Common Stock that correspond to the number of such vested Granted PBRSUs, which shall be delivered within two and one-half months following the end of the calendar year in which or with respect to which both such vesting conditions were satisfied.  
(b)    Notwithstanding the foregoing, if by the earliest of the effective date of a Change of Control, the effective date of a Qualifying Termination and the occurrence of the Non-COC Measurement Date, (i) the Participant has not forfeited rights under this Agreement as provided in Section 2(c), and (ii) a Grant Award Determination has not occurred (a “Shortfall Event”), then in lieu of the issuance of Granted PBRSUs and in settlement of the award contemplated by this 

6

Agreement, the Company shall pay the Participant an amount equal to the cash value of the underlying shares of Common Stock that would have been issued to the Participant under Section 3(a) of this Agreement but for the occurrence of the Shortfall Event (the “Cash Payments”).
4.    Restrictions on Transfer of Granted PBRSUs.  No portion of the Granted PBRSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the Granted PBRSUs as provided herein, except that the Participant may transfer or assign such unvested Granted PBRSUs: (a) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Committee (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Granted PBRSUs shall remain subject to this Agreement (including without limitation the vesting and forfeiture provisions set forth in Section 2 and the restrictions on transfer set forth in this Section 4) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement; or (b) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation) (collectively, the “Transfer Restrictions”).  The Company shall not be required (i) to transfer on its books any of the Granted PBRSUs which have been transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of the Granted PBRSUs or to pay dividends to any transferee to whom such Granted PBRSUs have been transferred in violation of any of the provisions of this Agreement.
5.    Restrictions on Transfer of PBRSU Shares and Take Private Change of Control Consideration. 
(a)    For purposes of this Section 5, the following terms have the following meanings:
(i)    “Affiliate Transferee” means (i) in the case of any Transfer by Ascension, any transferee that is an Affiliate of Ascension Health Alliance and (ii) in the case of any Transfer by TowerBrook, any transferee that is an Affiliate of TowerBrook Capital Partners L.P., including, for this purpose, any investment fund managed or advised, directly or indirectly, by TowerBrook and any Affiliate of any such fund; provided that, for purposes of this definition, the Company shall not be deemed an Affiliate of Ascension or TowerBrook.
(ii)    “Applicable TB/AS Sell-Down Percentage” means, as of any date of determination: (A) if, as of such date of determination, Ascension has Transferred (other than to Affiliate Transferees, Customer Transferees or TowerBrook) 50% or more of the Ascension R1 Ownership Interests, then the percentage equal to the greater of (x) 50% and (y) the percentage of TowerBrook R1 Ownership Interests that have been Transferred (other than to Affiliate Transferees and Customer Transferees) by TowerBrook as of such date of determination; and (B) if, as of such date of determination, Ascension has Transferred (other than to Affiliate Transferees, Customer Transferees or TowerBrook) less than 50% of the Ascension R1 Ownership Interests, then the percentage equal to the greater of (x) the percentage so Transferred by Ascension as of such date of determination and (y) the percentage of the TowerBrook R1 Ownership Interests that have been Transferred (other than to Affiliate Transferees or Customer Transferees) by TowerBrook as of such date of determination.  For purposes of computing the percentage of R1 Ownership Interests that have been Transferred by Ascension or TowerBrook as of any date of determination, (1) the number of R1 Ownership Interests that have been Transferred by Ascension or TowerBrook (other than to Affiliate Transferees or Customer Transferees and, in the case of Ascension, other than to TowerBrook) shall be compared to the aggregate number (without duplication) of R1 Ownership Interests acquired by Ascension or TowerBrook, as applicable, during the 

7

period beginning on December 7, 2016 and ending on the date of determination less any R1 Ownership Interests that have been transferred by Ascension or TowerBrook, as applicable, to any Customer Transferee and less, in the case of Ascension, any R1 Ownership Interests that have been Transferred to TowerBrook; and (2) if TowerBrook or Ascension is issued any Exchange Securities (as defined below), including, without limitation, in connection with a Take Private Change of Control,  then the determination of the Applicable TB/AS Sell-Down Percentage will be made by the Committee using a methodology, adopted by the Committee in its sole reasonable discretion, that allows for the comparison contemplated by the foregoing clause (1) to be made in a fair and equitable manner notwithstanding the change in number and type of R1 Ownerships Interests owned by TowerBrook or Ascension.
(iii)    “Ascension R1 Ownership Interests” means the R1 Ownership Interests owned directly or beneficially by Ascension, other than (A) any R1 Ownership Interests of which Ascension is deemed to have beneficial ownership but in which Ascension has no pecuniary interest and (B) any R1 Ownership Interests purchased by Ascension from TowerBrook.
(iv)    “Common Share Equivalent” means, as of any time of determination, (A) in the case of any shares of preferred stock issued by the Company that are convertible into shares of Common Stock, the number of shares of Common Stock into which such preferred shares are convertible as of such time; and (B) in the case of any options, warrants or other securities issued by the Company that are exercisable or exchangeable for shares of Common Stock, the number of shares of Common Stock into or for which such options, warrants or other securities are exercisable or exchangeable as of such time of determination, but only if such options, warrants or other securities are “in-the-money” as of such time of determination.
(v)    “Customer Transferee” means any customer of the Company that acquires R1 Ownership Interests from Ascension, TowerBrook or any TB/AS Co-Investment Vehicle (including any Person who becomes a customer upon the consummation of such acquisition), other than any such acquisition that constitutes a Change of Control.
(vi)    “R1 Ownership Interests” means, collectively, (A) any shares of Common Stock issued by the Company, (B) any shares of preferred stock issued by the Company that are not convertible into or exchangeable for shares of Common Stock, (C) the Common Share Equivalent of any shares of preferred stock issued by the Company that are convertible into or exchangeable for shares of Common Stock, (D) the Common Share Equivalent of any options, warrants or other securities issued by the Company that are exercisable or exchangeable for shares of Common Stock, and (E) any securities of the Company or any other Person that are issued in exchange for, or in respect of, the securities referenced in the foregoing clauses (A)-(D), including, without limitation, in connection with any “roll-over” or recapitalization effected as part of a Take Private Change of Control (the securities, described in this clause (E) being referred to herein as “Exchange Securities”).  For purposes  of this definition, the term “Company” shall mean (1) R1 RCM Inc., (2) any successor to R1 RCM Inc. (by merger or otherwise), (3) any subsidiary of R1 RCM Inc. or any such successor, and (4) any entity that, directly or indirectly, owns a majority of the equity interests of R1 RCM Inc. or of any such successor (including, without limitation, any such entity that, as a result of a Take Private Change of Control, becomes a direct or indirect parent entity of R1 RCM Inc. or of any such successor).

8

(vii)    “TB/AS Co-Investment Vehicle” means any entity that is owned, directly or indirectly, by both Ascension and TowerBrook and that holds any R1 Ownership Interests. As of the Grant Date, TCP-ASC ACHI Series LLLP is a TB/AS Co-Investment Vehicle, of which 45% of the R1 Ownership Interests owned by it are economically beneficially owned by Ascension and 55% of the R1 Ownership Interests owned by it are economically beneficially owned by TowerBrook.
(viii)    “TowerBrook R1 Ownership Interests” means, as of any date of determination, the R1 Ownership Interests owned directly or beneficially by TowerBrook as of such date of determination, other than any R1 Ownership Interests of which TowerBrook is deemed to have beneficial ownership but in which it has no pecuniary interest.
(ix)    “Transfer” means any sale, transfer, assignment or other disposition, and the term “Transferred” has the corresponding meaning. 
(b)    Notwithstanding anything to the contrary set forth in this Agreement, any shares of Common Stock delivered to the Participant pursuant to Section 3 (other than those withheld pursuant to Section 10(a)) (the “PBRSU Shares”), will be subject to the Transfer Restrictions as set forth in Section 4 in the same manner as such Transfer Restrictions apply to the Granted PBRSUs (the “PBRSU Shares Transfer Restrictions”), provided that (i) if, on any date of determination, the portion of PBRSU Shares that have been Transferred by the Participant (as a percentage of the Participant’s total PBRSU Shares) is less than the Applicable TB/AS Sell-Down Percentage, then the Participant may Transfer up to such number of PBRSU Shares that would result in the portion of the PBRSU Shares that have been Transferred by the Participant (as a percentage of the Participant’s total PBRSU Shares) equaling the Applicable TB/AS Sell-Down Percentage; and (ii) in addition to the exceptions to the Transfer Restrictions set forth in Section 4, the PBRSU Shares Transfer Restrictions will lapse in respect of the number of PBRSU Shares determined as follows: (A) as to 100% of the PBRSU Shares upon the occurrence of a Change of Control other than a Take Private Change of Control; and (B) as to 100% of the PBRSU Shares upon termination of the Participant’s employment with the Company (1) by the Company due to a termination without Cause, or (2) by the Participant for Good Reason.  Notwithstanding the foregoing, in the event that the Participant receives Take Private Change of Control Consideration or Cash Payments, then (A) any Cash Payments and any of the Participant’s Take Private Change of Control Consideration in the form of cash (other than cash withheld pursuant to Section 10(a))  will be deposited into escrow with the Company,  (B) any Cash Payments and any Take Private Change of Control Consideration shall be subject to the same transfer restrictions (or release from escrow, in the case of cash) as described in the immediately preceding sentence with respect to the PBRSU Shares mutatis mutandis to reflect the applicable type of consideration comprising the Cash Payments and Take Private Change of Control Consideration, (C) such transfer restrictions (or escrow arrangement, in the case of cash) will apply to the PBRSU Shares, any Cash Payments, and any Take Private Change of Control Consideration (collectively, Participant’s “PBRSU-Related Holdings”) on a combined basis, and (D) with respect to the amount of the Participant’s PBRSU-Related Holdings that Participant is entitled to transfer (or claim from escrow, as the case may be), the Participant shall have sole discretion as to in what proportion, and in what order, such amount is allocated among the various types of the Participant’s PBRSU-Related Holdings.
(c)    For purposes of applying Sections 5(b):
(i)    in the case of any Transfer of R1 Ownership Interests by any TB/AS Co-Investment Vehicle, such Transfer will be deemed to have been a Transfer by Ascension and/or TowerBrook, as applicable, of a portion of the corresponding Ascension R1 

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Ownership Interests and/or a portion of the corresponding TowerBrook R1 Ownership Interests, respectively, as determined in good faith by the Committee based on the extent to which Ascension and/or TowerBrook had an economic beneficial ownership interest in such R1 Ownership Interests that were Transferred by the TB/AS Co-Investment Vehicle; and
(ii)    in the case of any Transfer by TowerBrook or Ascension of any portion of its interest in any TB/AS Co-Investment Vehicle, such Transfer will be deemed to have been a Transfer by TowerBrook or Ascension of that same portion of the TowerBrook R1 Interests or Ascension R1 Interests, as applicable, that were economically beneficially owned by TowerBrook or Ascension through such TB/AS Co-Investment Vehicle as of immediately prior to the consummation of such Transfer, as determined in good faith by the Committee. 
6.    Clawback.  Notwithstanding the vesting of any Granted PBRSUs, in the event of (i) a termination of the Participant’s employment for Cause pursuant to subsection (B), (C), or (E) of the definition of Cause, with subsection (E) modified by replacing the word “expense” with “material expense” (each, a “Specified Cause Event”), (ii) the Participant’s resignation during an investigation by the Company into a potential Specified Cause Event, or (iii) a determination by the Company, within 180 days following the Participant’s resignation for any reason, that the Company had grounds to terminate the Participant for a Specified Cause Event (each of (i), (ii), and (iii), a “Clawback Event”), then (x) all PBRSU Shares (or other PBRSU-Related Holdings) then held by the Participant will be immediately forfeited by the Participant for no consideration and (y) to the extent that the Participant has sold or disposed of any PBRSU Shares (or other PBRSU-Related Holdings other than cash consideration received in connection with a Take Private Change of Control) prior to the occurrence of the Clawback Event, the Participant shall be required to pay to the Company, within 10 business days’ of the Company’s request to the Participant therefor, an amount equal to the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Participant received upon the sale or other disposition of, or distributions in respect of, the PBRSU Shares or such other PBRSU-Related Holdings (it being understood that the foregoing remedies shall not be exclusive).
7.    Restrictive Legends.  The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Agreement.
8.    Rights as Stockholder.  Except as otherwise provided herein, the Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by any Granted PBRSU unless and until the Participant has become the holder of record of PBRSU Shares.  Cash dividends on the number of shares of Common Stock issuable hereunder shall be credited to a dividend book entry account on behalf of the Participant with respect to each Granted PBRSU, provided that such cash dividends shall not be deemed to be reinvested in shares of Common Stock and shall be held uninvested and without interest and paid in cash only if and when the PBRSU Shares underlying the Granted PBRSUs are delivered to the Participant in accordance with the provisions hereof.  Stock dividends on shares of Common Stock shall be credited to a dividend book entry account on behalf of the Participant with respect to each Granted PBRSU granted to the Participant, provided that such stock dividends shall be paid in shares of Common Stock only if and when the PBRSU Shares underlying the Granted PBRSUs are delivered to the Participant in accordance with the provisions hereof.  If the Granted PBRSUs are forfeited in accordance with this Agreement, then the foregoing book entry account shall automatically and at the same time also be forfeited without any payment or consideration to the Participant in respect thereof.

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9.    Provisions of the Plan.  This Agreement is subject to the provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Granted PBRSUs awarded hereunder), a copy of which is furnished to the Participant with this Agreement.  The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content.  In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
10.    Tax Matters.
(a)    Withholding.  The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or other taxes of any kind required by law to be withheld with respect to the vesting of the Granted PBRSUs, any Cash Payments, or any Take Private Change of Control Consideration. On each date on which the Granted PBRSUs vest, the Company shall deliver written notice to the Participant of the amount of withholding taxes due with respect to the vesting of the Granted PBRSUs that vest on such date. The Participant shall satisfy such tax withholding obligations by transferring to the Company, on each date on which Granted PBRSUs vest under this Agreement, such number of shares that are issuable on such date as have a fair market value (calculated using the last reported sale price of the Common Stock of the Company on the New York Stock Exchange or the NASDAQ, as applicable (or, if the Company’s Common Stock is not then traded on the New York Stock Exchange or the NASDAQ, then on any other United States stock exchange upon which the Company’s Common Stock is then listed, or otherwise as reported through the facilities of the OTC Markets Group, Inc.) on the trading date immediately prior to such vesting date) equal to the amount of the Company’s tax withholding obligation in connection with the vesting of such Granted PBRSUs (such withholding method, a “Surrender”), unless, prior to any vesting date, the Committee determines that a Surrender shall not be available to the Participant, in which case, the Participant shall be required to satisfy the Participant’s tax obligations hereunder in a manner permitted by the Plan upon the vesting date.
(b)    Section 409A.  Notwithstanding anything herein or in the Plan to the contrary, the Granted PBRSUs are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent as is reasonable under the circumstances.
11.    Restrictive Covenants.
(a)General.  This Award represents a substantial economic benefit to the Participant. The Participant, by virtue of the Participant's role with the Company, has access to, and is involved in the formulation of, certain confidential and secret information of the Company regarding its operations and the Participant could materially harm the business of the Company by competing with the Company or soliciting employees or customers of the Company.
(b)Non-Solicitation. During the period in which the Participant performs services for the Company and for a period of eighteen months after the Participant ceases to perform services for the Company, regardless of the reason, the Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation:
(i)       hire, recruit, solicit or otherwise attempt to employ or retain or enter into any business relationship with, any person who is or was an employee of the Company within the 

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twelve-month period immediately preceding the cessation of the Participant’s service with the Company; or
(ii)       solicit the sale of any products or services that are similar to or competitive with products or services offered by, manufactured by, designed by, or distributed by the Company, to any person, company or entity which was or is a customer or potential customer of the Company for such products or services. 
(c)Non-Disclosure.
(i)       The Participant will not, without the Company’s prior written permission, directly or indirectly, utilize for any purpose other than for a legitimate business purpose solely on behalf of the Company, or directly or indirectly, disclose to anyone outside of the Company, either during or after the Participant’s relationship with the Company, the Company’s Confidential Information (as defined below), as long as such matters remain Confidential Information.
(ii)       This Agreement shall not prohibit the Participant from (A) revealing evidence of criminal wrongdoing to law enforcement, (B) disclosing or discussing concerns regarding regulatory or legal compliance with any governmental agency or entity to the extent that such disclosures or discussions are protected under any whistleblower protection provisions of Federal or state laws or regulations or (C) divulging the Company’s Confidential Information by order of court or agency of competent jurisdiction. However, in the case of foregoing clause (C), the Participant shall promptly inform the Company of any such situations and shall take such reasonable steps to prevent disclosure of the Company’s Confidential Information until the Company has been informed of such requested disclosure and the Company has had an opportunity to respond to the court or agency.
(d)Return of Company Property.  The Participant agrees that, in the event that Participant’s service to the Company ceases for any reason, the Participant shall immediately return all of the Company’s property, including without limitation, (i) computers, tablets, phones, printers, key cards, documents or any other tangible property of the Company, and (ii) the Company’s Confidential Information in any media, including paper or electronic form, and the Participant shall not retain in the Participant’s possession any copies of such information.
(e)Ownership of Software and Inventions. All discoveries, designs, improvements, ideas, inventions, software, whether patentable or copyrightable or not, shall be works-made-for-hire and Company shall be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, with the rights to use the same in perpetuity in any manner the Company determines in its sole discretion without any further payment to the Participant whatsoever. If, for any reason, any of such results and proceeds which relate to the business shall not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then the Participant hereby irrevocably assigns and agrees to quitclaim any and all of the Participant’s right, title and interest thereto including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to the Participant whatsoever. The Participant shall, from time to time, as may be reasonably requested by the Company, at the Company’s expense, do any and all things which the Company may deem useful or desirable to establish or document the Company’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent the Participant has any rights in the results and proceeds of the Participant’s services that cannot be assigned 

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in the manner described above, the Participant unconditionally and irrevocably waives the enforcement of such rights. Notwithstanding anything to the contrary set forth herein, works developed by the Participant (i) which are developed independently from the work developed for the Company regardless of whether such work was developed before or after the Participant performed services for the Company; or (ii) applications independently developed which are unrelated to the business and which the Participant develops during non-business hours using non-business property shall not be deemed work for hire and shall not be the exclusive property of the Company.
(f)Non-Competition.  During the time in which the Participant performs services for the Company and for a period of twelve months after the cessation of the Participant’s service to the Company, regardless of the reason, the Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation, within the Restricted Area (as defined below), own, manage, operate, or participate in the ownership, management, operation, or control of, or be employed by or provide services to, a “Competing Business”. For the purposes of this Agreement, the term “Competing Business” shall mean any entity or business: (i) engaged in the business of offering finance-related services to health care systems and hospitals, including, but not limited to, the collection of medical debt, hospital billings and revenue management; or (ii) engaged in any other business or activity in which the Company is engaged during the term of the Participant’s employment. Notwithstanding anything to the contrary, nothing in this Section 11(f) prohibits the Participant from being a passive owner of not more than one percent of the outstanding stock of any class of a corporation which is publicly traded, so long as the Participant has no active participation in the business of such corporation. Notwithstanding the foregoing, the post-employment period of the covenant set forth in this Section 11(f) shall not apply to the Participant if the enforcement of such covenant is prohibited by applicable law. 
(g)Acknowledgments. The Participant acknowledges and agrees that the restrictions contained in this Agreement with respect to time, geographical area and scope of activity are reasonable and do not impose a greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Company and that the Participant has had the opportunity to review the provisions of this Agreement with his legal counsel. In particular, the Participant agrees and acknowledges (i) that the Company is currently engaging in business and actively marketing its services and products throughout the United States, (ii) that the Participant’s duties and responsibilities for the Company are co-extensive with the entire scope of the Company's business, (iii) that the Company has spent significant time and effort developing and protecting the confidentiality of its methods of doing business, technology, customer lists, long term customer relationships and trade secrets, and (iv) that such methods, technology, customer lists, customer relationships and trade secrets have significant value.
(h)Enforcement. The Participant agrees that the restrictions contained in this Agreement are necessary for the protection of the business, the Confidential Information, customer relationships and goodwill of the Company and are considered by the Participant to be reasonable for that purpose and that the scope of restricted activities, the geographic scope and the duration of the restrictions set forth in this Agreement are considered by the Participant to be reasonable. The Participant further agrees that any breach of any of the restrictive covenants in this Agreement would cause the Company substantial, continuing and irrevocable harm for which money damages would be inadequate and therefore, in the event of any such breach or any threatened breach, in addition to such other remedies as may be available, the Company shall be entitled to specific performance and injunctive relief. This Agreement shall not in any way limit the remedies in law or equity otherwise available to the Company or its Affiliates. The Participant further agrees that to the extent any provision or portion of the restrictive covenants of this Agreement shall be held, found or deemed to be unreasonable, unlawful or unenforceable by a court of competent jurisdiction, then any such provision or portion thereof shall be deemed to be modified to the extent necessary in order that any such provision or portion thereof shall be legally enforceable to the fullest extent permitted by applicable law. Without limitation to any other remedies available hereunder or at law in the event of any 

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breach of any of the restrictive covenants in this Agreement by the Participant, the Participant agrees that (i) any PBRSU Shares issued by the Company to the Participant pursuant to this Agreement shall be forfeited for no consideration, (ii) in the event that the Participant sold the PBRSU Shares issued to the Participant pursuant to this Agreement, then the Participant shall be required to pay to the Company in cash, within thirty (30) days of a request by the Company for such payment, the price at which the Participant sold the shares, and (iii) in the case of unvested Granted PBRSUs, such unvested Granted PBRSUs will automatically be forfeited for no consideration.
(i)Severability; Modification. It is expressly agreed by the Participant that:
(i)       Modification. If, at the time of enforcement of this Agreement, a court holds that the duration, geographical area or scope of activity restrictions stated herein are unreasonable under circumstances then existing or impose a greater restraint than is necessary to protect the goodwill and other business interests of the Company, the Participant agrees that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law, in all cases giving effect to the intent of the parties that the restrictions contained herein be given effect to the broadest extent possible; and
(ii)       Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, such invalidity, illegality or unenforceability will not affect any other provision, but this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein.
(j)Non-Disparagement. The Participant agrees not to disparage the Company, its officers, directors, administrators, representatives, employees, contractors, consultants or customers or engage in any communications or other conduct which might interfere with the relationship between the Company and its current, former, or prospective employees, contractors, consultants, customers, suppliers, regulatory entities, and/or any other persons or entities.
(k)Definitions.
(i)       “Confidential Information” as used in this Agreement shall include the Company’s trade secrets as defined under Illinois law, as well as any other information or material which is not generally known to the public, and which (A) is generated, collected by or utilized in the operations of the Company’s business and relates to the actual or anticipated business, research or development of the Company; or (B) is suggested by or results from any task assigned to the Participant by the Company or work performed by the Participant for or on behalf of the Company.  Confidential Information shall not be considered generally known to the public if the Participant or others improperly reveal such information to the public without the Company’s express written consent and/or in violation of an obligation of confidentiality to the Company. Examples of Confidential Information include, but are not limited to, all customer, client, supplier and vendor lists, budget information, contents of any database, contracts, product designs, technical know-how, engineering data, pricing and cost information, research and development work, software, business plans, proprietary data, projections, market research, perceptual studies, strategic plans, marketing information, financial information (including financial statements), sales information, training manuals, employee lists and compensation of employees, and all other competitively sensitive information with respect to the Company, whether or not it is in tangible form, and including without 

14

limitation any of the foregoing contained or described on paper or in computer software or other storage devices, as the same may exist from time to time.
(ii)       Restricted Area. As used in this Agreement, the term “Restricted Area” shall mean the United States of America.
12.    Miscellaneous.
(a)    Compliance with Laws.  The grant of Granted PBRSUs and any issuance of PBRSU Shares hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto.  The Company shall not be obligated to issue any PBRSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements.  As a condition to the settlement of the Granted PBRSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.
(b)    Authority of Committee. In making any decisions or taking any actions with respect to the matters covered by this Agreement, the Committee shall have all of the authority and discretion, and shall be subject to all of the protections, provided for in the Plan. All decisions and actions by the Committee with respect to this Agreement shall be made in the Committee’s discretion and shall be final and binding on the Participant.
(c)    No Right to Continued Service. The Participant acknowledges and agrees that, notwithstanding the fact that the vesting of the Granted PBRSUs is contingent upon his or her continued service to the Company, this Agreement does not constitute an express or implied promise of continued service relationship with the Participant or confer upon the Participant any rights with respect to a continued service relationship with the Company.
(d)    Acquired Rights.  The Participant acknowledges and agrees that: (i) the Company may terminate or amend the Plan at any time; (ii) the award of the Granted PBRSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (iii) no past grants or awards (including, without limitation, the Granted PBRSUs) give the Participant any right to any grants or awards in the future whatsoever; and (iv) any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.
(e)    Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of law provisions.
(f)    Exclusive Jurisdiction/Venue. All disputes that arise from or relate to this Agreement shall be decided exclusively by binding arbitration in Cook County, Illinois under the Commercial Arbitration Rules of the American Arbitration Association. The parties agree that the arbitrator’s award shall be final, and may be filed with and enforced as a final judgment by any court of competent jurisdiction. Notwithstanding the foregoing, any disputes related to the enforcement of the restrictive covenants contained in Section 11 shall be subject to and determined under Delaware law and adjudicated in Illinois courts.
(g)    Notices.  Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel or 

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Chief Executive Officer of the Company.  Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company.
(h)    Headings; Section References.  The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.  Except as provided otherwise in this Agreement, a reference to any Section is a reference to a Section of this Agreement.
(i)    Counterparts.  This Agreement may be executed in one or more counterparts (including in pdf format or by other electronic means), each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
(j)    Severability.  The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
(k)    Binding Agreement; Assignment.  This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns and the Participant and his permitted assigns.  The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.
(l)    Entire Agreement; Amendment.  This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter.  The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan.  This Agreement may also be modified or amended by a writing signed by both the Company and the Participant.  The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.
(m)    Further Assurances.  Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
R1 RCM INC.

By:    /s/ M. Sean Radcliffe
             M. Sean Radcliffe
                                                                                           EVP, General Counsel

        
I hereby acknowledge that I have read this Agreement, have received and read the Plan, and understand and agree to comply with the terms and conditions of this Agreement and the Plan.
 
 
PARTICIPANT ACCEPTANCE
                        

/s/ Joseph Flanagan
Joseph Flanagan

Signature Page to Grant of Performance Based Awards

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