Document:

crvl-ex104_367.htm

Exhibit 10.4

 

CORVEL CORPORATION

ID: 33-0282651

2010 Main Street Suite 600

Irvine, California 92614

 

Notice of Grant of Stock Options and Option Agreement

 

 

	
Maxim Shishin
	
Option Number:
	
005791

	
 
	
Plan
	
1988

 

Effective 11/02/2017, you have been granted a(n) Non-Qualified Stock Option to buy 8,000.0000 shares of CORVEL CORPORATION (the Company) stock at $57.7500 per share.

The total option price of the shares granted is $462,000.00.

Shares in each period will become fully vested on the date shown.

 

	
Shares
	
 
	
Vest Type
	
 
	
Full Vest
	
 
	
Expiration

	
8,000.0000
	
 
	
On Vest Date
	
 
	
11/02/2022
	
 
	
11/02/2022

 

Provided you continue to be a Service Provider (as defined in the Stock Option Agreement attached hereto as Exhibit A) throughout the specified period, this option will vest based on the achievement of certain performance criteria relating to the Company’s earnings per share (“EPS”) growth. The specific EPS Targets for calendar years 2018, 2019, and 2020, are listed on Schedule A of the Stock Option Agreement.

Optionee hereby agrees that the option is granted pursuant to and in accordance with the express terms and conditions of the Stock Option Agreement and the Corporation’s Restated Omnibus Incentive Plan.

 

By your signature and the Company's signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company's Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.

 

 

	
Richard Schweppe
	
 
	
November 16, 2017

	
CORVEL CORPORATION
	
 
	
Date

	
Maxim Shishin
	
 
	
Nov 21,2017

	
Maxim Shishin
	
 
	
Date

 

Section 16 Insiders Discretionary Option Grant Program

CorVel Corporation

Stock Option Agreement

A.The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board (or the board of directors of any Parent or Subsidiary) and consultants and advisors who provide services to the Company (or any Parent or Subsidiary). 

B.Optionee is to render valuable services to the Company (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s grant of an option to Optionee. 

C.All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix. 

Now, therefore, it is hereby agreed as follows:

1.Grant of Option.  Subject to and upon the terms and conditions set forth in this Agreement, Optionee is hereby granted, as of the Grant Date, an option to purchase the Option Shares.  The Option Shares shall be purchasable from time to time during the option term at the Exercise Price. 

2.Option Term.  This option shall expire at the close of business on the Expiration Date, unless sooner terminated in accordance with this Agreement. 

3.Limited Transferability.

(a).During Optionee’s lifetime, this option shall be exercisable only by Optionee and shall not be assignable or transferable other than by will, by the laws of descent and distribution following the Optionee’s death, or to any “Family Member” (as such term is defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities Act), provided that Optionee may not receive any consideration for such transfer, the Family Member may not make any subsequent transfers other than by will or by the laws of descent and distribution and the Company receives written notice of such transfer. This assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Company may deem appropriate. 

(b).Should Optionee die while holding this option, then this option shall be transferred in accordance with Optionee’s will or the laws of inheritance. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this option, and this option shall, in accordance with such designation, automatically be transferred to such

beneficiary or beneficiaries upon Optionee’s death while holding this option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this 

Agreement, including (without limitation) the limited time period during which this option may, pursuant to Paragraph 5, be exercised following Optionee’s death. 

4.Exercisability.  This option shall become exercisable in one or more installments as specified in the Grant Notice.  As the option becomes exercisable for such installments, those installments shall accumulate, and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term. 

5.Effect of Cessation of Service.

(a).Should Optionee cease to be a Service Provider for any reason (other than death, Permanent Disability or Misconduct) while this option is outstanding, then this option shall remain exercisable until the earlier of (i) the expiration of the three month period commencing with the date of such cessation of Service Provider status or (ii) the Expiration Date. 

(b).Should Optionee cease to be a Service Provider by reason of Permanent Disability or death while this option is outstanding, then the option shall remain exercisable until the earlier of (i) the expiration of the twelve month period commencing with the date of such cessation of Service Provider status or (ii) the Expiration Date. 

(c).Should Optionee cease to be a Service Provider due to termination for Misconduct, then this option shall terminate immediately. 

(d).During the limited period of post-service exercisability, this option may not be exercised in the aggregate for more than the number of Option Shares for which the option is exercisable at the time Optionee ceased to be a Service Provider.  This option shall, immediately when Optionee ceases to be a Service Provider for any reason, terminate with respect to any Option Shares for which this option is not otherwise at that time exercisable. Upon the expiration of the limited post-service exercise period or (if earlier) upon the Expiration Date, this option shall terminate entirely.

6.Effect of Corporate Transaction.

(a).This option, to the extent outstanding at the time of a Corporate Transaction but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the effective date of such Corporate Transaction, become exercisable for all of the Option Shares at the time subject to this option.  However, this option shall not become exercisable on such an accelerated basis, if and to the extent: (i) this option is, in connection with the Corporate Transaction, to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof) or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Corporate Transaction on any Option Shares for which this option is not otherwise at that

time exercisable (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent payout in accordance with the same exercise schedule for those Option Shares set forth in the Grant Notice. 

(b).Upon the consummation of the Corporate Transaction, this option shall terminate, except to the extent assumed by the successor corporation (or parent thereof) in connection with the Corporate Transaction. 

(c).If this option is assumed in connection with a Corporate Transaction, then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to Optionee as a result of the consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same.

(d).This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

7.Adjustment in Option Shares.  Should any change be made to the Common Stock by reason of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares, reorganization, merger, consolidation, split-up, spinoff, or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, appropriate adjustments shall be made to (a) the total number and/or class of securities subject to this option and (b) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 

8.Stockholder Rights.  The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option in accordance with the provisions of Paragraph 9, paid the Exercise Price and become a holder of record of the purchased shares. 

9.Manner of Exercising Option.

(a).In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions: 

(i).Execute and deliver to the Company (A) a Notice of Exercise, in substantially the form attached hereto as Exhibit I, that specifies the number of Option Shares for which the option is being exercised and (B) any additional documents which the Committee may, in its discretion, deem advisable. 

(ii).Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms: 

(A) cash or check payable to the Company’s order;

(B) shares of Common Stock held by Optionee for the requisite period necessary to avoid a charge to the Company’s reported earnings and valued at Fair Market Value on the Exercise Date; or 

(C) through a special sale and remittance procedure pursuant to which Optionee is to provide irrevocable written instructions (1) to a brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, an amount sufficient to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Federal and state income and employment taxes required to be withheld by the Company by reason of such purchase and (2) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. 

(iii) Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option. 

(iv) Make appropriate arrangements with the Company (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state and local income and employment tax withholding requirements applicable to the option exercise. 

(b) If payment of the exercise price is made by means of the surrender of shares of Common Stock which are subject to certain restrictions, the number of shares of Common Stock issued upon the exercise of the option equal to the number of shares of restricted stock surrendered shall be subject to the same restrictions as the restricted stock that was surrendered. 

(c) Except to the extent the sale and remittance procedure specified in Paragraph 9(a)(ii)(C) is utilized in connection with the option exercise, payment of the option price for the purchased shares must accompany the Notice of Exercise. 

(d) Assuming Optionee does not sell the purchased shares of Common Stock on the Exercise Date, as soon as practical after the Exercise Date, the Company shall either (i) issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto, or (ii) instruct the Company’s transfer agent to make a book-entry reflecting the purchase on its stockholder ledger. 

(e) In no event may this option be exercised for any fractional shares.

10.Tax Withholding.  The Committee may, in its discretion and upon such terms and conditions as it may deem appropriate (including the applicable safe-harbor provisions of Securities and Exchange Commission Rule 16b-3 or any successor rule or regulation) provide Optionee (if Optionee is an Employee) with the election to surrender previously acquired shares of Common Stock or have shares withheld in satisfaction of the tax withholding obligations.  To the extent necessary to avoid adverse accounting treatment, the number of shares that may be withheld for this purpose shall not exceed the minimum number needed to satisfy the applicable income and employment tax withholding rules.  If Common Stock is used to satisfy the Company's tax withholding obligations, the shares of Common Stock shall have been held by Optionee for the requisite period necessary to avoid a charge to the Company’s reported earnings and shall be valued at their Fair Market Value when the tax withholding is required to be made. 

11.Compliance with Laws and Regulations.

(a) The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any Stock Exchange (or the Nasdaq Stock Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance. 

(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained.  The Company, however, shall use reasonable efforts to obtain all such approvals. 

12.Successors and Assigns.  Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee, Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’s estate and any beneficiaries of this option designated by Optionee. 

13.Notices.  Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant Notice.  All notices shall be deemed effective upon personal delivery or three days after deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 

14.Construction.  This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan.  In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall prevail.  All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option. 

15.Governing Law.  The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to its conflict-of-laws rules. 

16.No Employment/Service Contract.  Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue to be a Service Provider of the Company (or any Parent or Subsidiary) for any period of specific duration or otherwise interfere with or restrict in any way the rights of the Company (or such Parent or Subsidiary) or Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Service Provider status at any time and for any reason whatsoever, with or without cause. 

EXHIBIT I

NOTICE OF EXERCISE OF STOCK OPTION

I hereby notify CorVel Corporation (the “Company”) that I, _______________________, elect to purchase __________ shares of Common Stock of the Corporation (the “Purchased Shares”) at an option price of $ _________ per share (the “Option Price”) pursuant to the option (the “Option”) granted to me on ____________. 

My option was granted as a non-qualified stock option.  I will need to report taxable income at the time I exercise this Option and pay the corresponding withholding tax (the “Withholding Tax”) to the Corporation.  The Withholding Tax is computed on the difference between the Option Price and the Fair Market Value of the stock on the date I exercise the Option. 

Concurrently with the delivery of the Exercise Notice to the Chief Financial Officer of the Corporation, I shall hereby pay to the Corporation the Option Price and Withholding Tax for the Purchased Shares in accordance with the provisions of my agreement with the Corporation evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. 

 

	
Date
	
 
	
Optionee’s Signature

	
 
	
 
	
 

	
If applicable, print name in exact manner it is to appear on the stock certificate: 
	
 
	
 

	
 
	
 
	
 

	
Optionee’s Mailing Address: 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
Address to which certificate is to be sent, if

different from address above: 
	
 
	
 

	
 
	
 
	
 

	
Brokerage Account  Information 

(Broker Name, Contact Info., Account #)
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

APPENDIX

The following definitions shall be in effect under this Agreement:

A.Agreement shall mean this Stock Option Agreement.

B.Board shall mean the Board of Directors of the Company.

C.Common Stock shall mean shares of the Company’s common stock, $0.0001 par value.

D.Code shall mean the Internal Revenue Code of 1986, as amended.

E.Committee shall mean a committee designated by the Board to administer the Plan,which initially shall be the compensation committee of the Board. The Committee shall be comprised of at least two directors but not less than such number of directors as shall be required to permit awards granted under the Plan to qualify under Rule 16b-3 under the Securities Act and Section 162(m) of the Code, and each member of the Committee shall be a “Non-Employee Director ” within the meaning of Rule 16b-3 under the Securities Act and an “Outside Director” within the meaning of Section 162(m) of the Code.  

F.Company shall mean CorVel Corporation, a Delaware corporation, or any corporate successor which shall assume the Plan.  

G.Corporate Transaction shall mean any of the following transactions for which the approval of the Company’s stockholders is obtained: 

(i)  a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state of the Company’s incorporation, 

(ii)  the sale, transfer or other disposition of all or substantially all of the assets of the Company to any entity other than a parent or subsidiary of the Company, or 

(iii)  any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company’s outstanding voting stock is transferred to holders different from those who held such fifty percent (50%) or greater interest immediately prior to such merger.  

H.Employee shall mean an individual for whom the Company or one or more of its Parent or Subsidiaries reports his or her earnings on a Form W-2. 

I.Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9. 

J.Exercise Price shall mean the exercise price per Option Share as specified in the Grant Notice.

K.Expiration Date shall mean the date on which the option expires as specified in the Grant Notice.

L.Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 

(i)  If the Common Stock is at the time listed on the Nasdaq National Market or the Nasdaq Capital Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or the Nasdaq Capital Market and published in The Wall Street Journal.  

(ii)  If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Committee to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in The Wall Street Journal.

(iii)  If the Common Stock is not listed on the Nasdaq National Market, Nasdaq Capital Market or a national securities exchange, the Fair Market Value shall be the average of the closing bid and ask prices of the Common Stock on that day as reported by the Nasdaq bulletin board or any comparable system on that day. 

(iv)  If the Common Stock is not traded included in the Nasdaq bulletin board or any comparable system, the Fair Market Value shall be the average of the closing bid and ask prices on that day as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. 

(v)  If the date in question is not a trading day, then the Fair Market Value shall be determined based on prices for the trading day prior to the date in question. 

M.Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

N.Grant Notice shall mean the Notice of Grant of Stock Option accompanying this

Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. 

O.Misconduct shall mean any of the following:

(i) Optionee’s intentional misconduct or continuing gross neglect of duties which materially and adversely affects the business and operations of the Company or any Parent or Subsidiary employing Optionee; 

(ii) Optionee’s unauthorized use or disclosure of (or attempt to use or disclose) confidential information or trade secrets of the Company or any Parent or Subsidiary; or 

(iii) Optionee’s commission of an act involving embezzlement, theft, fraud, falsification of records, destruction of property or commission of a crime or other offense involving money or other property of the Company or any Parent or Subsidiary employing Optionee. 

The reasons for termination of Optionee as a Service Provider set forth in this subparagraph are not intended to be an exclusive list of all acts or omissions which the Company (or any Parent or Subsidiary) may deem to constitute misconduct or other grounds for terminating Optionee (or any other individual). 

P.Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. 

Q.Notice of Exercise shall mean the notice of exercise in the form attached hereto as Exhibit I

R.Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

S.Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

T Parent shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each such corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

U.Permanent Disability shall have the meaning assigned to “permanent and total disability” as set forth in Code Section 22(e)(3). 

V.Plan shall mean the CorVel Corporation Restated Omnibus Incentive Plan (Formerly The Restated 1988 Executive Stock Option Plan). 

W.Securities Act shall mean the Securities Act of 1933, as amended.

X.Service Provider shall mean an individual who renders service on a periodic basis to the Company, its Parent and/or any of its Subsidiaries as an Employee, a non-Employee member of the board of directors or a consultant or independent advisor. 

Y.Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange, or any other national stock exchange. 

Z.Subsidiary shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, provided such corporation (other than the last corporation in the unbroken chain) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. For purposes of all Non-Statutory Option grants under the Plan and all 

Corporate Transaction provisions of the Plan, the term “Subsidiary” shall also include any partnership, joint venture or other business entity of which the Company owns, directly or indirectly through another entity, more than a fifty percent (50%) interest in voting power, capital or profits. 

 

 

SCHEDULE A: PERFORMANCE OPTION

CorVel Corporation

Performance Stock Options

Options granted in November, 2017

 

									
	
 
	
CY 2018
	
 
	
CY 2019
	
Pct. Increase
	
CY 2020
	
Pct. Increase

	
EPS Target for each calendar year
	
$
	
*.**
	
$
	
*.**
	
*.*%
	
$
	
*.**
	
*.*%

	
Percentage of option grant for tranche (totals 100%)
	
 
	
30%
	
 
	
30%
	
 
	
 
	
40%
	
 

	
to earn 100% of tranche (105% of EPS target)
	
$
	
*.**
	
$
	
*.**
	
*.*%
	
$
	
*.**
	
*.*%

	
to earn 80% of tranche (100% of EPS target)
	
$
	
*.**
	
$
	
*.**
	
*.*%
	
$
	
*.**
	
*.*%

	
to earn 30% of tranche (95% of EPS target)
	
$
	
*.**
	
$
	
*.**
	
*.*%
	
$
	
*.**
	
*.*%

	
EPS at zero earned (90% of EPS target)
	
$
	
*.**
	
$
	
*.**
	
*.*%
	
$
	
*.**
	
*.*%

 

*Confidential treatment requested pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.  In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission.

 

SCHEDULE A

				
	
CORVEL CORPORATION
	
 
	
 
	
 

	
Shares earned by EPS number by Tranche year
	
 

	
CY 2018, CY 2019, CY 2020
	
 
	
 
	
 

	
Option grant:
	
8,000
	
Shares option grant
	
 

	
CY 2018 Tranche
	
2400
	
30% of total grant
	
 

	
CY 2019 Tranche
	
2400
	
30% of total grant
	
 

	
CY 2020 Tranche
	
3200
	
40% of total grant
	
 

 

									
	
 
	
CY 2018
	
 
	
CY 2019
	
 
	
CY 2020

	
 
	
Percentage
	
Shares
	
 
	
Percentage
	
Shares
	
 
	
Percentage
	
Shares

	
$*.**
	
0.0%
	
0
	
$*.**
	
0.0%
	
0
	
$*.**
	
0.0%
	
0

	
$*.**
	
3.3%
	
80
	
$*.**
	
3.0%
	
72
	
$*.**
	
2.7%
	
87

	
$*.**
	
6.7%
	
160
	
$*.**
	
6.0%
	
144
	
$*.**
	
5.5%
	
175

	
$*.**
	
10.0%
	
240
	
$*.**
	
9.0%
	
216
	
$*.**
	
8.2%
	
262

	
$*.**
	
13.3%
	
320
	
$*.**
	
12.0%
	
288
	
$*.**
	
10.9%
	
349

	
$*.**
	
16.7%
	
400
	
$*.**
	
15.0%
	
360
	
$*.**
	
13.6%
	
436

	
$*.**
	
20.0%
	
480
	
$*.**
	
18.0%
	
432
	
$*.**
	
16.4%
	
524

	
$*.**
	
23.3%
	
560
	
$*.**
	
21.0%
	
504
	
$*.**
	
19.1%
	
611

	
$*.**
	
26.7%
	
640
	
$*.**
	
24.0%
	
576
	
$*.**
	
21.8%
	
698

	
$*.**
	
30.0%
	
720
	
$*.**
	
27.0%
	
648
	
$*.**
	
24.5%
	
785

	
$*.**
	
35.6%
	
853
	
$*.**
	
30.0%
	
720
	
$*.**
	
27.3%
	
873

	
$*.**
	
41.1%
	
987
	
$*.**
	
35.6%
	
853
	
$*.**
	
30.0%
	
960

	
$*.**
	
46.7%
	
1,120
	
$*.**
	
41.1%
	
987
	
$*.**
	
35.0%
	
1,120

	
$*.**
	
52.2%
	
1,253
	
$*.**
	
46.7%
	
1,120
	
$*.**
	
40.0%
	
1,280

	
$*.**
	
57.8%
	
1,387
	
$*.**
	
52.2%
	
1,253
	
$*.**
	
45.0%
	
1,440

	
$*.**
	
63.3%
	
1,520
	
$*.**
	
57.8%
	
1,387
	
$*.**
	
50.0%
	
1,600

	
$*.**
	
68.9%
	
1,653
	
$*.**
	
63.3%
	
1,520
	
$*.**
	
55.0%
	
1,760

	
$*.**
	
74.4%
	
1,787
	
$*.**
	
68.9%
	
1,653
	
$*.**
	
60.0%
	
1,920

	
$*.**
	
80.0%
	
1,920
	
$*.**
	
74.4%
	
1,787
	
$*.**
	
65.0%
	
2,080

	
$*.**
	
82.2%
	
1,973
	
$*.**
	
80.0%
	
1,920
	
$*.**
	
70.0%
	
2,240

	
$*.**
	
84.4%
	
2,027
	
$*.**
	
82.0%
	
1,968
	
$*.**
	
75.0%
	
2,400

	
$*.**
	
86.7%
	
2,080
	
$*.**
	
84.0%
	
2,016
	
$*.**
	
80.0%
	
2,560

	
$*.**
	
88.9%
	
2,133
	
$*.**
	
86.0%
	
2,064
	
$*.**
	
81.8%
	
2,618

	
$*.**
	
91.1%
	
2,187
	
$*.**
	
88.0%
	
2,112
	
$*.**
	
83.6%
	
2,676

	
$*.**
	
93.3%
	
2,240
	
$*.**
	
92.0%
	
2,208
	
$*.**
	
85.5%
	
2,735

	
$*.**
	
95.6%
	
2,293
	
$*.**
	
92.0%
	
2,208
	
$*.**
	
87.3%
	
2,793

	
$*.**
	
97.8%
	
2,347
	
$*.**
	
94.0%
	
2,256
	
$*.**
	
89.1%
	
2,851

	
$*.**
	
100.0%
	
2,400
	
$*.**
	
96.0%
	
2,304
	
$*.**
	
90.9%
	
2,909

	
 
	
 
	
 
	
$*.**
	
98.0%
	
2,352
	
$*.**
	
92.7%
	
2,967

	
 
	
 
	
 
	
$*.**
	
100.0%
	
2,400
	
$*.**
	
94.5%
	
3,025

	
 
	
 
	
 
	
 
	
 
	
 
	
$*.**
	
96.4%
	
3,084

	
 
	
 
	
 
	
 
	
 
	
 
	
$*.**
	
98.2%
	
3,142

	
 
	
 
	
 
	
 
	
 
	
 
	
$*.**
	
100.0%
	
3,200

 

Notwithstanding anything to the contrary in this Schedule A or the Stock Option Agreement to which this Schedule A is attached, the Company shall have the right, in its sole discretion, with or without the consent of the Optionee, to amend this Schedule A to adjust any or all of the targets, dates and/or target EPS amounts as it deems equitable to recognize unusual or non-recurring events, including, but not limited to the Company’s acquisition of another business entity or assets, a corporate merger or other consolidation, or the sale or discontinuation of significant business operations or business units of the Company; changes in tax laws or accounting procedures; and any other extraordinary circumstances.

*Confidential treatment requested pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.  In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission.Exhibit
4.1

 

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE 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: $100,000

Date:
February 2, 2018

 

FORM
OF DEMAND CONVERTIBLE PROMISSORY NOTE

 

PositiveID
Corp., (hereinafter called the “Company”), hereby promises to pay to the order of M2B Funding Corp., or
its registered assigns (the “Holder”) the sum of up to $100,000 on the Maturity Date (as defined below), together
with any interest as set forth herein, and to pay interest on the unpaid principal balance hereof at the rate of Twelve percent
(12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due
and payable, whether at maturity or upon acceleration or by prepayment or otherwise.

 

This
Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. 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,
notwithstanding the first year’s interest is guaranteed. All payments due hereunder (to the extent not converted into common
stock) shall be made in lawful money of the United States of America. Following any Event of Default, interest shall accrue at
the lesser of Twenty Percent (24%) per annum or the maximum interest permitted by Law.

 

All
payments shall be made at such address as the Holder shall hereafter give to the Company 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 the supporting documents of same date (attached hereto).

 

    	1

     

    

 

This
Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Company 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 and at any time from the execution 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 Company into which such Common Stock shall hereafter
be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Company 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. 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, (the “Notice
of Conversion”), delivered to the Company by the Holder in accordance with the Sections 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 Company before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). Notwithstanding
the foregoing, the term “4.99%” above shall be replaced with “9.99%” following any Event of Default if
the Holder, in its sole discretion and in writing, elects to demand the replacement. If the term “4.99%” is replaced
with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until
decreased by the Holder in writing.

 

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,
(the “Notice of Conversion”), delivered to the Company by the Holder in accordance with the Sections below.

 

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

 

1.2 Conversion
Price.

 

(a) Calculation
of Conversion Price. Holder, at its discretion, shall have the right to convert this Note in its entirety or in part(s)
into common stock of the Company valued at a thirty-seven and a half percent (37.5%) discount off of the lowest price for the
Company’s common stock during the fifteen (15) trading days immediately preceding a conversion date, as reported by Quotestream
Media.

If at any time after the execution of this Note, the Company experiences a “DTC Chill,” the Conversion Price Discount
shall be increased by five percent (5%). If at any time following the execution of this Note, the Company becomes ineligible to
participate in the DTC’s “DWAC” system, the Conversion Price Discount will be increased by five percent (5%).
Following any Event of Default, the Conversion Price discount shall be increased to forty-five percent (45%).

 

1.3 Authorized
Shares. The Company covenants that during the period the conversion right exists the Company 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. The Company is required at all times to have authorized and reserved three 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”). The Reserved Amount shall be increased from time to time in accordance with
the Company’s obligations.

The
Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition,
if the Company 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 Company shall at the same
time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved,
free from preemptive rights, for conversion of the outstanding Notes.

 

The
Company (i) acknowledges that it will irrevocably instruct its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and conditions of this Note.

 

If,
at any time the Company does not maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.

 

    	3

     

    

 

1.4 Method
of Conversion.

 

(a) Mechanics
of Conversion. This Note may be converted by the Holder in whole or in part at any time from time to time after the Issue
Date, by (A) submitting to the Company a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time).

 

(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 Company unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Company 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 Company,
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 Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be
less than the amount stated on the face hereof.

 

(c) Payment
of Taxes. The Company 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 Company 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 Company the amount of any such
tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(d) Delivery
of Common Stock Upon Conversion. Upon receipt by the Company 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,
the Company shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and,
solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the
terms hereof.

 

Within
Five (5) business days of having received common stock pursuant to a Notice of Conversion and prior to having traded any shares
from that specific conversion, Holder may elect to rescind the Notice of Conversion and return the shares, at Holder’s expense,
to the Company’s Transfer Agent. In the event of such rescission, the principal amount outstanding under this Note shall
be adjusted to include the Conversion Amount which was deducted from the Note as part of the rescinded Notice of Conversion.

 

    	4

     

    

 

(e) Obligation
of Company to Deliver Common Stock. Upon receipt by the Company 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 Company 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 Company’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 Company 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 Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company 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 Company before 6:00 p.m., New York, New York time, on such date.

 

(f) Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Company 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 Company shall use its best efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system.

 

(g) Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline the Company shall pay to the Holder $2,000 per day in cash, for each day beyond
the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of
the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Company 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 Company agrees that the right to convert is a valuable right
to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify.

 

Accordingly the parties acknowledge that the liquidated damages provision contained in this Section
are justified. Any delay or failure of performance by the Company hereunder shall be excused if and to the extent caused by Force
Majeure. For purposes of this agreement, Force Majeure shall mean a cause or event that is not reasonably foreseeable and not
caused by the Company, including acts of God, fires, floods, explosions, riots wars, hurricanes, etc.

 

    	5

     

    

 

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 Company 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
Company who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited
Investor. Except as otherwise provided herein (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.”

 

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

 

    	6

     

    

 

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 Company, the effectuation by the Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, or the consolidation, merger or other business combination of the
Company with or into any other Person (as defined below) or Persons when the Company is not the survivor shall either: (i) be
deemed to be an Event of Default (as defined in Article III) pursuant to which the Company 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 Company shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Company or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation
of the Company, 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 Company 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 Company) 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.

 

    	7

     

    

 

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

 

(d) Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock in connection with a financing transaction
based on a variable price formula (the “Alternative Variable Price Formula”) that is more favorable to the investor
in such financing transaction than the formula for calculating 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 formula for the Conversion Price will be adjusted to match the Alternative Variable Price Formula. If it is unclear whether
the Alternative Variable Price Formula is better or worse, then Holder, in its sole discretion, may elect at the time of such
issuance whether to switch to the Alternative Variable Price Formula or not.

(e) Purchase
Rights. If, at any time when any Notes are issued and outstanding, the Company 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.

 

(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 Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish
to the Holder of a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based. The Company 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.

 

    	8

     

    

 

1.7 Not
Used.

 

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 Company to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Company) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Company 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 Company’s failure to convert this Note.

 

1.9 Demand
Payment. Holder can demand payment to be made on any day after 90 calendar days from the issuance date at 105% of the Principal
and Interest Outstanding. To exercise the demand right the Holder must give 5 days’ written notice to the Company. Written
notice may be U.S. Mail or electronic mail.

 

ARTICLE
II. CERTAIN COVENANTS

 

2.1 Distributions
on Capital Stock. So long as the Company shall have any obligation under this Note, the Company 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 Company’s disinterested directors.

 

2.2 Restriction
on Stock Repurchases. So long as the Company shall have any obligation under this Note, the Company 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 Company or
any warrants, rights or options to purchase or acquire any such shares.

 

    	9

     

    

 

2.3 Borrowings.
So long as the Company shall have any obligation under this Note, the Company shall not, without providing the Holder with the
right of first refusal, 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 Issuer has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note. Holder shall have 3 business days from receipt of the terms of any potential borrowings to confirm
if they want to provide such financing on similar terms.

 

2.4 Sale
of Assets. So long as the Company shall have any obligation under this Note, the Company 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 Company shall have any obligation under this Note, the Company 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 Company, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Company has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $50,000.

 

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 Company fails to pay the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.

 

3.2 Conversion
and the Shares. The Company fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form)
any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, the Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer
agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or
directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement,
statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for
three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Company 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 Company to its transfer agent. If at the option of the Holder, the
Holder advances any funds to the Company’s transfer agent in order to process a conversion, such advanced funds shall be
paid by the Company to the Holder within forty eight (48) hours of a demand from the Holder.

 

    	10

     

    

 

3.3 Breach
of Covenants. The Company breaches any covenant or other term or condition contained in this Note and any collateral documents.

 

3.4 Breach
of Representations and Warranties. Any representation or warranty of the Company made herein or in any
agreement, statement or certificate given in writing pursuant hereto or in connection herewith, 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.

 

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

 

3.6 Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or
any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

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

 

3.8 Delisting
of Common Stock. The Company shall fail to maintain, in good standing, the listing of the Common Stock on the OTCQB or an
equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or the New York Stock Exchange.

 

    	11

     

    

 

3.9 Failure
to Comply with the Exchange Act. The Company shall fail to comply, in a timely manner, with the reporting requirements of
the Exchange Act; and/or the Company shall cease to be subject to the reporting requirements of the Exchange Act.

 

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

 

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

 

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

 

3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Company 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 original financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or supporting documents.

 

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

 

3.15 Replacement
of Transfer Agent. In the event that the Company proposes to replace its transfer agent, the Company fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
with this Note (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 Company and the Company.

 

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

 

    	12

     

    

 

Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable
and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum
(as defined herein). 

 

UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) 125% (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due
on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3.15 exercisable through the delivery of written notice to the Company by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 125% times the sum of (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment
Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the
date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default
Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article
I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes
of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending
one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together
with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.

 

If
the Company fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable,
then the Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in
effect.

 

    	13

     

    

 

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 Company, to:

PositiveID
Corporation

1690
S. Congress Ave.,

Suite 201

Delray
Beach, FL 33445

If
to the Holder:

M2B
Funding Corp.

17201
Collins Avenue,

Unit
3207

Sunny
Isles, FL 33160

 

4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.

 

    	14

     

    

 

4.4 Assignability. This
Note shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.

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

 

4.6 Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Note shall be brought only in the state or federal courts located in the County, City and State of New York. 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 Company and Holder waive
trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and
costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

    	15

     

    

 

4.7 Certain
Amounts. Whenever pursuant to this Note the Company 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 Company 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 Company 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 Company 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 Not
Used.

 

 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 Company shall provide the Holder with prior
notification of any meeting of the Company’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Company 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 Company or any proposed liquidation, dissolution
or winding up of the Company, the Company 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
Company shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously
with the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10
Remedies. The Company 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 Company 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 Company 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.

 

    	16

     

    

 

IN
WITNESS WHEREOF, Company has caused this Note to be signed in its name by its duly authorized officer:

 

	 	PositiveID Corp.
	 	 	 
	 	By:
    	 
	 	Print:	 
	 	Title/Date:	 

 

    	17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00278-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00278-of-00352.parquet"}]]