Document:

al-ex41_6.htm

Exhibit 4.1

 

 

Spire Alabama Inc.

 

 

 

Third Supplement to Master Note Purchase Agreement

 

 

 

Dated as of December 2, 2019

 

 

 

Re:

$100,000,000 2.88% Series 2019B Senior Notes

due December 1, 2029

 

 

 

 

 

 

 

 

 

 

Spire Alabama Inc.

2101 6th Avenue North

Birmingham, AL 35203

 

 

Dated as of December 2, 2019

 

To the Purchasers named in

Schedule A hereto 

 

Ladies and Gentlemen:

This Third Supplement to Master Note Purchase Agreement (this or the “Third Supplement”) is between Spire Alabama Inc., an Alabama corporation (as successor to Alabama Gas Corporation, the “Company”), and the institutional investors named on Schedule A attached hereto (the “Purchasers”).

Reference is hereby made to that certain Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of June 5, 2015 (the “Master Note Purchase Agreement”), as supplemented by (i) that certain First Supplement to Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of December 1, 2017 (the “First Supplement”) and (ii) that certain Second Supplement to Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of January 15, 2019 (the “Second Supplement”; and, together with the First Supplement and the Master Note Purchase Agreement as amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”).  All capitalized definitional terms not otherwise defined herein shall have the same meaning as specified in the Note Purchase Agreement.  Reference is further made to Section 1.2 of the Note Purchase Agreement which requires that, prior to the delivery of any Additional Notes, the Company and each Additional Purchaser shall execute and deliver a Supplement.

The Company hereby agrees with the Purchasers as follows:

1.The Company has authorized the issue and sale of its $100,000,000 aggregate principal amount 2.88% Series 2019B Senior Notes due December 1, 2029 (the “Series 2019B Notes”).  The Series 2019B Notes, together with the Series 2019A Notes, the Series 2017 Notes, and the Series 2015 Notes initially issued pursuant to the Second Supplement, the First Supplement, and the Master Note Purchase Agreement, respectively, and each series of Additional Notes which may from time to time hereafter be issued pursuant to the provisions of Section 1.2 of the Note Purchase Agreement, are collectively referred to as the “Notes” (such term shall also include any such notes issued in substitution therefor pursuant to Section 13 of the Note Purchase Agreement).  The Series 2019B Notes shall be substantially in the form set out in Exhibit B hereto with such changes therefrom, if any, as may be approved by the Purchasers and the Company.  

 

 

2.Subject to the terms and conditions hereof and as set forth in the Note Purchase Agreement and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to each Purchaser, and each Purchaser agrees to purchase from the Company, Series 2019B Notes in the principal amount set forth opposite such Purchaser’s name on Schedule A hereto at a price of 100% of the principal amount thereof on the closing date hereinafter mentioned.

3.The execution of this Supplement and the sale and purchase of the Series 2019B Notes to be purchased by each Purchaser shall occur at 10:00 A.M., Chicago time, at a closing (the “Closing”) on December 2, 2019 or on such other Business Day thereafter on or prior to December 31, 2019 as may be agreed upon by the Company and the Purchasers.  The Closing shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603.  At the Closing, the Company will deliver to each Purchaser the Series 2019B Notes to be purchased by such Purchaser in the form of a single Series 2019B Note (or such greater number of Series 2019B Notes in denominations of at least $250,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser’s name (or in the name of such Purchaser’s nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company, with wire instructions to be provided by the Company to the Purchaser at least three Business Days prior to the Closing date in accordance with Section 4.  If, at the Closing, the Company shall fail to tender such Series 2019B Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to any Purchaser’s satisfaction, such Purchaser shall, at such Purchaser’s election, be relieved of all further obligations under this Supplement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.

4.The obligation of each Purchaser to purchase and pay for the Series 2019B Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to the Closing, of the conditions set forth in Section 4 of the Note Purchase Agreement (giving effect to any changes to the representations and warranties set forth in the Note Purchase Agreement effectuated by this Supplement) with respect to the Series 2019B Notes to be purchased at the Closing, and to the following additional conditions:

(a)Except as supplemented, amended or superseded by the representations and warranties set forth in Exhibit A hereto, each of the representations and warranties of the Company set forth in Section 5 of the Note Purchase Agreement shall be correct as of the date of the Closing and the Company shall have delivered to each Purchaser an Officer’s Certificate, dated the date of the Closing certifying that such condition has been fulfilled.

(b)The Company shall have consummated the sale of the entire principal amount of the Series 2019B Notes scheduled to be sold at the Closing, pursuant to this Supplement.

5.(a) As provided therein, the entire unpaid principal balance of each Series 2019B Note shall be due and payable on December 1, 2029 thereof.

-2-

 

(b)Optional Prepayments without Make-Whole Amount.  Prior to September 1, 2029, the Company may, at its option, in accordance with, and upon notice as provided in, Section 8.2 of the Master Note Purchase Agreement, prepay at any time all, or from time to time any part of, the Series 2019B Notes (but if in part then in a minimum aggregate principal amount of $100,000), at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount.  On and after September 1, 2029, the Company may, at its option, upon notice as provided Section 8.2 of the Master Note Purchase Agreement, prepay at any time all the Series 2019B Notes, at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment, but without payment of the Make-Whole Amount.

6.The term “Make-Whole Amount” means, with respect to any Series 2019B Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Series 2019B Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero.  For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

“Called Principal” means, with respect to any Series 2019B Note, the principal of such Series 2019B Note that is to be prepaid pursuant to Section 8.2 of the Note Purchase Agreement or has become or is declared to be immediately due and payable pursuant to Section 12.1 of the Note Purchase Agreement, as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Series 2019B Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Series 2019B Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Series 2019B Note, the sum of (a) 0.50% (50 basis points) plus (b) the yield to maturity implied by the “Ask Yield(s)” reported as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on-the-run U.S. Treasury securities (“Reported”) having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  If there are no such U.S. Treasury securities Reported having a maturity equal to such Remaining Average Life, then such implied yield to maturity will be determined by (i) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between the “Ask Yields” Reported for the applicable most recently issued actively traded on-the-run U.S. Treasury securities with the maturities (1) closest to and greater than such Remaining Average Life and (2) closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of such Series 2019B Note.  

-3-

 

If such yields are not Reported or the yields Reported as of such time are not ascertainable (including by way of interpolation), then “Reinvestment Yield” means, with respect to the Called Principal of any Series 2019B Note, the sum of (x) 0.50% (50 basis points) plus (y) the yield to maturity implied by the U.S. Treasury constant maturity yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for the U.S. Treasury constant maturity having a term equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  If there is no such U.S. Treasury constant maturity having a term equal to such Remaining Average Life, such implied yield to maturity will be determined by interpolating linearly between (1) the U.S. Treasury constant maturity so reported with the term closest to and greater than such Remaining Average Life and (2) the U.S. Treasury constant maturity so reported with the term closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of such Series 2019B Note.

“Remaining Average Life” means, with respect to any Called Principal, the number of years obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years, computed on the basis of a 360-day year comprised of twelve 30-day months and calculated to two decimal places, that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Series 2019B Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the Series 2019B Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 of the Note Purchase Agreement or Section 12.1 of the Note Purchase Agreement.

“Settlement Date” means, with respect to the Called Principal of any Series 2019B Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 of the Note Purchase Agreement or has become or is declared to be immediately due and payable pursuant to Section 12.1 of the Note Purchase Agreement, as the context requires.

7.For the purpose of the Note Purchase Agreement and this Supplement, the terms below have the following meanings with respect to any holder of a Series 2019B Note:

“Parent” shall mean Spire Inc., a Missouri corporation.

“Wells Facility” means the Loan Agreement, dated as of December 14, 2016, as amended by the First Amendment to Loan Agreement dated as of October 31, 2018 or as it may be subsequently be amended, renewed, restated, replaced or otherwise modified from time to time, amongst the Parent, the Company, Spire Missouri Inc., a Missouri corporation, the banks from 

-4-

 

time to time party thereto and Wells Fargo Bank, National Association, as administrative agent for the banks, or any successor thereto.

8.Each Purchaser represents and warrants that the representations and warranties set forth in Section 6 of the Note Purchase Agreement are true and correct on the date of the Closing with respect to the purchase of the Series 2019B Notes by such Purchaser.

9.Except as otherwise required by applicable law, the Company agrees that it will not withhold from any applicable payment to be made to a holder of a Note that is not a United States Person any tax so long as such holder shall have delivered to the Company (in such number of copies as shall be requested) on or about the date on which such holder becomes a holder under this Supplement (and from time to time thereafter upon the reasonable request of the Company), executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, as well as the applicable U.S. Tax Compliance Certificate substantially in the form attached as Exhibit C, in both cases correctly completed and executed.

10.Subject to the terms of this Supplement, the Company and each Purchaser agree to be bound by and comply with the terms and provisions of the Note Purchase Agreement as fully and completely as if such Purchaser were an original signatory to the Note Purchase Agreement.

* * * * *

 

-5-

 

           The execution hereof shall constitute a contract between the Company and the Purchasers for the uses and purposes hereinabove set forth, and this agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.

 

Spire Alabama Inc.

 

 

 

By  /s/ Adam Woodard                                        

	
 
	

	
Name:  Adam Woodard

	
 
	

	
Title:    Treasurer

 

Signature page to Third Supplement to Master Note Purchase Agreement

 

Accepted as of December 2, 2019

 

			
	
 
	
The Northwestern Mutual Life Insurance Company

	
 
	
 
	
 

	
 
	
By:
	
Northwestern Mutual Investment Management Company, LLC, its investment advisor

	
 
	
 
	
 

	
 
	
By:
	
/s/ Howard Stern

	
 
	
 
	
Name:  Howard Stern

	
 
	
 
	
Title:  Managing Director

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account

	
 
	
 
	
 

	
 
	
By:
	
/s/ Howard Stern

	
 
	
 
	
Name:  Howard Stern

	
 
	
 
	
Title:  Authorized Representative

 

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

Accepted as of December 2, 2019

 

 

 

			
	
 
	
MetLife Insurance K.K.

	
 
	
by MetLife Investment Management, LLC, Its Investment Manager

	
 
	
 
	
 

	
 
	
By:
	
/s/ John Tanyeri

	
 
	
Name:  John Tanyeri

	
 
	
Title:  Authorized Signatory

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
Brighthouse Life Insurance Company

	
 
	
by MetLife Investment Management, LLC, Its Investment Manager

	
 
	
 
	
 

	
 
	
By:
	
/s/ Judith A. Gulotta

	
 
	
Name:  Judith A. Gulotta

	
 
	
Title:  Authorized Signatory

	
 
	
 

	
 
	
 

	
 
	
RSUI Indemnity Company

	
 
	
by MetLife Investment Management, LLC, Its Investment Manager

	
 
	
 

	
 
	
By:
	
/s/ Frank Monfalcone

	
 
	
Name:  Frank Monfalcone

	
 
	
Title:  Authorized Signatory

	
 
	
 

	
 
	
 

	
 
	
Swiss Re Life & Health America Inc.

	
 
	
by MetLife Investment Management, LLC, Its Investment Manager

	
 
	
 

	
 
	
By:
	
/s/ Judith A. Gulotta

	
 
	
Name:  Judith A. Gulotta

	
 
	
Title:  Authorized Signatory

	
 
	
 

	
 
	
 

 

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

 

 

 

 

			
	
 
	
Pensionskasse des Bundes PUBLICA

	
 
	
by MetLife Investment Management Limited, as Investment Manager

	
 
	
 
	
 

	
 
	
By:
	
/s/ Annette Bannister

	
 
	
         Name:  Annette Bannister

	
 
	
         Title:  Authorised Signatory

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
 
	
 

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

Accepted as of December 2, 2019

 

			
	
 
	
New York Life Insurance Company

	
 
	
 
	
 

	
 
	
By
	
/s/ Jessica L. Maizel

	
 
	
 
	
Name:  Jessica L. Maizel

	
 
	
 
	
Title:  Corporate Vice President

	
 
	
 

	
 
	
 

	
 
	
New York Life Insurance and Annuity Corporation

	
 
	
 
	
 

	
 
	
By:
	
NYL Investors LLC, its Investment Manager

	
 
	
 
	
 

	
 
	
By
	
/s/ Jessica L. Maizel

	
 
	
 
	
Name:  Jessica L. Maizel

	
 
	
 
	
Title:  Senior Director

	
 
	
 
	
 

	
 
	
 

	
 
	
New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 30C)

	
 
	
 
	
 

	
 
	
By:
	
NYL Investors LLC, its Investment Manager

	
 
	
 
	
 

	
 
	
By
	
/s/ Jessica L. Maizel

	
 
	
 
	
Name:  Jessica L. Maizel

	
 
	
 
	
Title:  Senior Director

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

Accepted as of December 2, 2019

 

			
	
 
	
THE BANK OF NEW YORK MELLON, A BANKING CORPORATION ORGANIZED UNDER THE LAWS OF NEW YORK, NOT IT ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE UNDER THAT CERTAIN TRUST AGREEMENT DATED AS OF JULY 1ST, 2015 BETWEEN NEW YORK LIFE INSURANCE COMPANY, AS GRANTOR, JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.), AS BENEFICIARY, JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK, AS BENEFICIARY, AND THE BANK OF NEW YORK MELLON, AS TRUSTEE

	
 
	
 
	
 

	
 
	
By:
	
New York Life Insurance Company, its attorney-in-fact

	
 
	
 
	
 

	
 
	
By
	
/s/ Jessica L. Maizel

	
 
	
 
	
Name:  Jessica L. Maizel

	
 
	
 
	
Title:  Corporate Vice President

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

Accepted as of December 2, 2019

 

			
	
 
	
American United Life Insurance Company

	
 
	
 
	
 

	
 
	
By
	
/s/ David M. Weisenberger

	
 
	
         Name:  David M. Weisenberger

	
 
	
         Title:  VP, Fixed Income Securities

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
 
	
 

 

Spire Alabama Inc.

Signature page to Third Supplement to Master Note Purchase Agreement

 

Information Relating to Purchasers

		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
The Northwestern Mutual Life Insurance Company
	
$51,480,000

 

	
	
I.  The Northwestern Mutual Life Insurance Company 

 

	
II.  All payments on account of Notes held by such Purchaser shall be made by wire transfer of immediately available funds, providing sufficient information to identify the source of the transfer, the amount of the interest and/or redemption (as applicable) and the identity of the security as to which payment is being made.

 

Please contact our Treasury & Investment Operations Department to securely obtain wire transfer instructions for The Northwestern Mutual Life Insurance Company.

 

E-mail:  payments@northwesternmutual.com 

Phone: (414) 665-1679

 

	
III.  All notices with respect to confirmation of payments on account of the Notes shall be delivered or mailed to:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Investment Operations

E-mail: payments@northwesternmutual.com 

Phone: (414) 665-1679

 

	
IV.  All other communications including any permitted electronic delivery of financial and business information (or any notices related thereto) shall be delivered or mailed to:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Securities Department

E-mail: privateinvest@northwesternmutual.com

 

With a copy to:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Timothy S. Collins, Managing Director

                 Andrew T. Julian, Director

E-mail: timothycollins@northwesternmutual.com

             andrewjulian@northwesternmutual.com

Schedule A

(to Supplement)

 

 

	
	
V.  Address for delivery of the Notes:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention:  Martin G. Flyke 

 

	
VI.  If posted to IntraLinks or another document repository/hosted website, send to:

 

Email: preautodownload@northwesternmutual.com

 

	
VII.  Tax Identification No.: 39-0509570

 

 

A-2

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account
	
$520,000

 

	
	
I.  The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account

 

	
II.  All payments on account of Notes held by such Purchaser shall be made by wire transfer of immediately available funds, providing sufficient information to identify the source of the transfer, the amount of the dividend and/or redemption (as applicable) and the identity of the security as to which payment is being made.

 

Please contact our Treasury & Investment Operations Department to securely obtain wire transfer instructions for The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account.

 

E-mail:  payments@northwesternmutual.com

Phone: (414) 665-1679

 

	
III.  All notices with respect to confirmation of payments on account of the Notes shall be delivered or mailed to:

 

The Northwestern Mutual Life Insurance Company

for its Group Annuity Separate Account

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Investment Operations

E-mail: payments@northwesternmutual.com

Phone: (414) 665-1679

 

A-3

 

	
	
IV.  All other communications including any permitted electronic delivery of financial and business information (or any notices related thereto) shall be delivered or mailed to:

 

The Northwestern Mutual Life Insurance Company

for its Group Annuity Separate Account

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Securities Department

E-mail: privateinvest@northwesternmutual.com

 

With a copy to:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Timothy S. Collins, Managing Director

                     Andrew T. Julian, Director

E-mail: timothycollins@northwesternmutual.com

               andrewjulian@northwesternmutual.com

 

	
V.  Address for delivery of Notes:

 

The Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, WI 53202

Attention:  Martin G. Flyke

 

	
VI.  If posted to IntraLinks or another document repository/hosted website, send to:

 

Email: preautodownload@northwesternmutual.com 

 

	
VII.  Tax Identification No.: 39-0509570

 

 

A-4

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
METLIFE INSURANCE K.K.

1-3, Kioicho, Chiyoda-ku

Tokyo, 102-8525 JAPAN
	
$ 8,800,000

 (portfolio ADK,ADL,ADN,ADU,ADV,AEB,AEF,AEM,CUB,CUC,CUD,CUE,DGN,

 DHN,DHO,DHP,DJG,DJH,MM1,TT3,TT4,TT9,UU2,UU4 - for USD non-GGA)

 

(Securities to be registered in the name of MetLife Insurance K.K.)

 

(1)  All scheduled payments of principal and interest by wire transfer of immediately available funds to:

		
	
Beneficiary Bank:
	
The HongKong and Shanghai Banking Corporation Ltd

	
Beneficiary Bank BIC:
	
HSBCHKHHGCC

	
Beneficiary Account No.:
	
741-243737-201

	
Beneficiary Name:
	
MetLife Insurance K.K.

	
Intermediary Bank:
	
HSBC BANK USA NA

	
Intermediary Bank BIC:
	
MRMDUS33

	
Beneficiary Bank Account No.:
	
000044415

	
Additional Information:
	
Fedwire No.: 021001088 CHIPS No:0108

	
 
	
 

	
Ref:
	
PPN 84858# AD5 – SPIRE ALABAMA INC; 2.88% due 01-Dec-2029

 

with sufficient information to identify the source and application of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or otherwise.  For all payments other than scheduled payments of principal and interest, the Company shall seek instructions from the holder, and in the absence of instructions to the contrary, will make such payments to the account and in the manner set forth above.

 

(2)  All notices and communications:

 

MetLife Asset Management Corp. (Japan)

Administration Department

Tokyo Garden Terrace Kioicho Kioi Tower 25F

1-3, Kioicho, Chiyoda-ku, Tokyo 102-8525 Japan

Attention: Administration Dept. Manager

Email:  saura@metlife.co.jp 

 

With a copy to:

 

MetLife Insurance K.K.

c/o MetLife Investment Management, LLC

Investments, Private Placements

One MetLife Way

Whippany, New Jersey 07981

Attention:  Shaun Oliver, Associate Director; Michael Brown, Associate

Emails: PPUCompliance@metlife.com; soliver@metlife.com; michael.t.brown@metlife.com; OpsPvtPlacements@metlife.com

 

A-5

 

With another copy OTHER than with respect to deliveries of financial statements to:

 

MetLife Insurance K.K.

c/o MetLife Investment Management, LLC, Investments Law

One MetLife Way

Whippany, New Jersey 07981

Attention: Chief Counsel-Investments Law (PRIV)

Email:  sec_invest_law@metlife.com

 

(3)  Original notes delivered to:

 

MetLife Insurance K.K.

c/o MetLife Investment Management, LLC, Investments Law

One MetLife Way

Whippany, New Jersey 07981

Attention:  Sobara Simon-Hart, Senior Corporate Counsel

 

 

(4)  Taxpayer I.D. Number: 98-1037269 (USA) and 00661996 (Japan)

(5)  Tax Jurisdiction: Japan

(6)  UK Passport Treaty Number (if applicable): 43/M/359828/DTTP

 

	
	
Audit Requests:  Soft copy to AuditConfirms.PvtPlacements@metlife.com or hard copy to:  Metropolitan Life Insurance Company, Attn:  Private Placements Operations (ATTN: Audit Confirmations), 18210 Crane Nest Drive – 5th Floor, Tampa, FL 33647

 

 

A-6

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
Swiss Re Life & Health America Inc.

175 King Street

Armonk, New York 10504

United States
	
$ 4,500,000

(portfolio code GRA for USD)

 

Securities to be registered in the name of Swiss Re Life & Health America Inc.

 

	
(1)
	
All scheduled payments of principal and interest by wire transfer of immediately available funds to:

 

		
	
USD
	
 

	
Bank
	
JP Morgan Chase Bank, New York

	
Swift 
	
CHASUS33

	
ABA
	
021000021

	
Beneficiary Account No. 
	
9009000127

	
Beneficiary Account Name 
	
JPMorgan North America Insurance

	
Account No.
	
G 23001

	
Account
	
SL - Private Placements – Metlife

	
Ref:
	
PPN 84858# AD5 – SPIRE ALABAMA INC; 2.88% due 01-Dec-2029

 

with sufficient information to identify the source and application of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or otherwise.

For all payments other than scheduled payments of principal and interest, the Company shall seek instructions from the holder, and in the absence of instructions to the contrary, will make such payments to the account and in the manner set forth above.

 

	
(2)
	
All notices and communications:

 

Swiss Re Life & Health America Inc.

c/o MetLife Investment Advisors, LLC

Investments, Private Placements

One MetLife Way

Whippany, NJ 07981

Attention:  Shaun Oliver, Associate Director; Michael Brown, Associate

Facsimile (973) 355-4250

Emails:  PPUCompliance@metlife.com and soliver@metlife.com; michael.t.brown@metlife.com;

 

and

 

Swiss Re Life & Health America Inc.

175 King Street

Armonk, New York 10504

United States

Attention: Luca Alberti (Luca_Alberti@swissre.com)

 

A-7

 

With a copy OTHER than with respect to deliveries of financial statements to:

 

		
	
 
	
Swiss Re Life & Health America Inc.

c/o MetLife Investment Advisors, LLC

One MetLife Way 

Whippany, NJ 07981

Attention: Chief Counsel-Investments Law (PRIV)

Email: sec_invest_law@metlife.com

 

	
(3)
	
Original notes delivered to:

 

For overnight or standard mail
JPMorgan Chase Bank, N.A.
4 Chase Metrotech Center
3rd Floor
Brooklyn, New York 11245-0001
Attention:  Physical Receive Department

For Street Deliveries (via messenger or walk up)
JPMorgan Chase Bank, N.A.
4 Chase Metrotech Center
1st  Floor, Window 5
Brooklyn, New York 11245-0001
Attention:  Physical Receive Department
(Use Willoughby Street Entrance)

 

 

With COPIES OF THE NOTES emailed to LST.OPS.INFRA@swissre.com and
sobara.simon-hart@metlife.com

 

 

 

	
(4)
	
Taxpayer I.D. Number: 06-0839705

 

	
(5)
	
UK Passport Treaty Number (if applicable):  N/A

 

A-8

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
Pensionskasse des Bundes PUBLICA

Attn. Asset Management

3007 Bern, Switzerland
	
$ 3,300,000

(portfolio code PB1 for USD)

 

Securities to be registered in the name of Pensionskasse des Bundes PUBLICA

 

	
(6)
	
All scheduled payments of principal and interest by wire transfer of immediately available funds to:

 

		
	
Currency:
	
USD

	
Bank Name:
	
JPMORGAN CHASE BANK, N.A.

	
SWIFT:
	
CHASUS33

	
Account No.:
	
001 0 962009

	
ABA:
	
021000021

	
Name:
	
CHASGB2L

	
FFC:
	
GB63CHAS60924241360786

	
Name:
	
PD_CORP_MET_DIR

	
Ref:
	
EAQ51 and PPN 84858# AD5 – SPIRE ALABAMA INC; 2.88% due 01-Dec-2029

 

with sufficient information to identify the source and application of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or otherwise.

For all payments other than scheduled payments of principal and interest, the Company shall seek instructions from the holder, and in the absence of instructions to the contrary, will make such payments to the account and in the manner set forth above.

 

	
(7)
	
All notices and communications:

 

Publica

c/o MetLife Investment Management Limited

Investments, Private Placements

One MetLife Way

Whippany, NJ 07981

Attention:  Shaun Oliver, Associate Director; Michael Brown, Associate

Emails:  PPUCompliance@metlife.com    and    soliver@metlife.com; michael.t.brown@metlife.com;

 

With a copy OTHER than with respect to deliveries of financial statements to:

 

Pensionskasse des Bundes PUBLICA

Attn. Asset Management

Eigerstrasse 57

3007 Bern, Switzerland

Facsimile: +41 58 485 21 13

and

	
	
Publica

c/o MetLife Investment Management Limited

One MetLife Way

Whippany, NJ 07981

Attention: Chief Counsel-Investments Law (PRIV)

Email: sec_invest_law@metlife.com

A-9

 

	
(8)
	
Original notes delivered to:

 

JPMorgan Chase Bank, N.A.
4 Chase Metrotech Center, 3rd Floor
Brooklyn, New York 11245-0001
Attention:  Physical Receive Department 

Reference Account: GTI EAQ51
Reference:  Account Name - PD_CORP_MET_DIR

 

With COPIES OF THE NOTES emailed to sobara.simon-hart@metlife.com

 

 

	
(9)
	
Taxpayer I.D. Number: ZPV 230’763’575

	
(10)
	
Tax Jurisdiction: Switzerland

	
(11)
	
UK Passport Treaty Number (if applicable):        6/P/344506/DTTP

 

A-10

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
BRIGHTHOUSE LIFE INSURANCE COMPANY

11225 North Community House Road

Charlotte, NC 28277
	
$ 2,200,000

(Portfolio 7PP)

 

(Securities to be registered in the name of Brighthouse Life Insurance Company)

 

(1)All scheduled payments of principal and interest by wire transfer of immediately available funds to:

 

		
	
Bank Name:
	
NORTHERN CHGO/Trust

	
ABA Routing #:
	
071000152

	
Credit Wire Account#
	
5186061000

	
Further Credit Account Name: 
	
BLIC MM 7YB_PP

	
Further Credit Account Number: 
	
17-66316

	
Ref:
	
PPN 84858# AD5 – SPIRE ALABAMA INC; 2.88% due 01-Dec-2029

 

with sufficient information to identify the source and application of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or otherwise.

 

For all payments other than scheduled payments of principal and interest, the Company shall seek instructions

from the holder, and in the absence of instructions to the contrary, will make such payments to the account and in the manner set forth above.

 

(2)All notices and communications:

 

Brighthouse Life Insurance Company

c/o MetLife Investment Advisors, LLC, Investments - Private Placements

One MetLife Way

Whippany, New Jersey 07981

Attention:  Shaun Oliver, Associate Director; Michael Brown, Associate

Emails:  PPUCompliance@metlife.com   and   soliver@metlife.com; michael.t.brown@metlife.com;

 

With a copy OTHER than with respect to deliveries of financial statements to:

 

Brighthouse Life Insurance Company

c/o MetLife Investment Advisors, LLC, Investments Law

One MetLife Way

Whippany, New Jersey 07981

Attention: Chief Counsel-Investments Law (PRIV)

Email:  sec_invest_law@metlife.com

 

(3)Original notes delivered to:

 

Northern Trust

Attn: Daniel P. Murphy

50 South La Salle Street, M-27

Chicago, Illinois 60603

 

With COPIES OF THE NOTES emailed to sobara.simon-hart@metlife.com

A-11

 

 

(4)Taxpayer I.D. Number: 06-0566090

(5)Tax Jurisdiction: United States

(6)Tax Classification: C Corporation

(7)UK Passport Treaty Number (if applicable): 13/B/61653/DTTP

 

A-12

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
RSUI Indemnity Company

945 East Paces Ferry Road, Suite 1800 

Atlanta, GA 30326-1125
	
$ 1,200,000

 

(Securities to be registered in the name of Hare & Co., LLC)

 

(1) All scheduled payments of principal and interest by wire transfer of immediately available funds to:

 

			
	
Bank Name:
	
The Bank of New York Mellon
	
 

	
SWIFT:
	
IRVTUS3N or 
	
 

	
ABA:
	
021 000 018
	
 

	
Account No.:
	
GLA 111566
	
 

	
Sort Code:
	
 
	
 

	
FFC:
	
301476
	
 

	
Ref:
	
PPN 84858# AD5 – SPIRE ALABAMA INC; 2.88% due 01-Dec-2029
	
 

 

with sufficient information to identify the source and application of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or otherwise.

For all payments other than scheduled payments of principal and interest, the Company shall seek instructions from the holder, and in the absence of instructions to the contrary, will make such payments to the account and in the manner set forth above.

 

(2) All notices and communications:

 

RSUI Indemnity Company 

c/o MetLife Investment Advisors, LLC

Investments, Private Placements

One MetLife Way

Whippany, New Jersey 07981

Attention:  Shaun Oliver, Associate Director; Michael Brown, Associate

Facsimile (973) 355-4250

Emails: PPUCompliance @metlife.com    and    soliver@metlife.com; michael.t.brown@metlife.com;

 

With a copy OTHER than with respect to deliveries of financial statements to:

 

Leonard C. Sjostrom, CPA, CPCU

Senior Vice President, CFO

RSUI Group, Inc.

945 East Paces Ferry Road, Suite 1800

Atlanta, GA 30326-1125

404 260-3880 Direct

 

(3) Original notes delivered to: 

 

The Depository Trust Company

570 Washington Blvd – 5th Floor

Jersey City, NJ 07310

Attn: BNY Mellon/Branch Deposit Department

REF: TRUST A/C# 301476 

 

A-13

 

Please include in the cover letter accompanying the Notes a reference to the Purchaser's account number (RSUI Indemnity Company Private Placements; Account Number: 301476)

With COPIES OF THE NOTES emailed to sobara.simon-hart@metlife.com

 

(4) Taxpayer I.D. Number: 16-0366830

 

(5) Tax Jurisdiction: United States

 

(6) UK Passport Treaty Number (if applicable): [_______________________]

 

A-14

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
New York Life Insurance and Annuity Corporation 
	
$10,750,000

 

 

 

See instructions on following page.

 

Also, with respect to any notices delivered electronically under clause 2 in the attached, please also send a copy to: jennifer_kusa@nylinvestors.com.

 

A-15

 

A-16

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
New York Life Insurance Company
	
$7,250,000

 

 

 

See instructions on following page.

 

Also, with respect to any notices delivered electronically under clause 2 in the attached, please also send a copy to: jennifer_kusa@nylinvestors.com.

 

A-17

 

A-18

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
The Bank of New York Mellon, a banking corporation organized under the laws of New York, not in its individual capacity but solely as Trustee under that certain Trust Agreement dated as of July 1st, 2015 between New York Life Insurance Company, as Grantor, John Hancock Life Insurance Company (U.S.A.), as Beneficiary, John Hancock Life Insurance Company of New York, as Beneficiary, and The Bank of New York Mellon, as Trustee

 

Hare & Co., LLC (as nominee for the NYL- JH Trust)
	
$1,500,000

 

 

See instructions on following page.

 

Also, with respect to any notices delivered electronically under clause 2 in the attached, please also send a copy to: jennifer_kusa@nylinvestors.com.

 

 

A-19

 

A-20

 

A-21

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI30C)
	
$500,000

 

 

 

See instructions on following page.

 

Also, with respect to any notices delivered electronically under clause 2 in the attached, please also send a copy to: jennifer_kusa@nylinvestors.com.

 

A-22

 

A-23

 

		
		
	

Name of Purchaser

 
	
Principal Amount of Notes to be Purchased

 

	
American United Life Insurance Company
	
$8,000,000

 

		
	
Purchaser:
	
American United Life Insurance Company

	
 
	
 

	
Issuer:
	
Spire Alabama, Inc.

	
 
	
 

	
Issuing:
	
Senior Note(s) due 2029

	
 
	
 

	
Closing:
	
12/02/2019

	
 
	
 

	
Issue:
	
2.88%

	
 
	
 

	
Amount:
	
$8,000,000.00

 

The original note(s) should be sent to:

 

The Depository Trust Company

Attn:  BNY Mellon/Branch Deposit Dept.

Acct # 186683 American United Life Ins. Co.

570 Washington Blvd. – 5th Floor

Jersey City, NJ  07310

 

Please send all POST-CLOSING documentation to:

 

American United Life Insurance Company

Attn:  Mike Bullock, Securities Department

One American Square, Suite 1017

Post Office Box 368

Indianapolis, IN 46206

mike.bullock@oneamerica.com

 

	
Payment:
	
Spire Alabama, Inc. shall make payment of principal and interest on the note(s) in 
immediately available funds by wire transfer to the following bank account:

 

AMERICAN UNITED LIFE INSURANCE COMPANY

Bank of New York

ABA #:  021000018

Credit Account:  GLA111566

Account Name: American United Life Insurance Company

Account #:  186683

P & I Breakdown:  (Insert)

Re:  (Insert PPN 84858# AD5 and credit name here)

 

Payments should contain sufficient information to identify the breakdown of principal and interest and should identify the full description of the note(s) and the payment date.

 

The United States Tax I.D. Number of American United Life Insurance Company is 35-0145825.

 

A-24

 

Exhibit A

Supplemental Representations

The Company represents and warrants to each Purchaser that except as hereinafter set forth in this Exhibit A, each of the representations and warranties set forth in Section 5 of the Note Purchase Agreement is true and correct in all Material respects as of the date of the Closing with respect to the Series 2019B Notes with the same force and effect as if each reference to “Series 2015 Notes” set forth therein was modified to refer to the “Series 2019B Notes” and each reference to “this Agreement” therein was modified to refer to the Note Purchase Agreement as supplemented by the Third Supplement.  The Section references hereinafter set forth correspond to the similar sections of the Note Purchase Agreement which are supplemented hereby:

Section 5.3.Disclosure.  The Company has delivered to each Purchaser a copy of its financial statements listed in Schedule 5.5.  The Note Purchase Agreement, the Third Supplement, and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Company in connection with the transactions contemplated by the Note Purchase Agreement and the Third Supplement and identified in Schedule 5.3, and the financial statements listed in Schedule 5.5 (the Note Purchase Agreement, the Third Supplement, and such documents, certificates or other writings and such financial statements delivered to each Purchaser prior to August 14, 2019 being referred to, collectively, as the “Disclosure Documents”), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made; provided that, with respect to projections, budgets and other estimates, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.  Except as disclosed in the Disclosure Documents, since September 30, 2019, there has been no change in the financial condition, operations, business or properties of the Company or any of its Subsidiaries except changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect.

Section 5.4.Organization and Ownership of Shares of Subsidiaries.  Schedule 5.4 to the Third Supplement is (except as noted therein), as of the date of the Closing a complete and correct list of the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its Capital Stock outstanding owned by the Company and each other Subsidiary.

Section 5.13.Private Offering by the Company.  Neither the Company nor anyone acting on its behalf has offered the Series 2019B Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasers and not more than twenty-six (26) other Institutional Investors, each of which has been offered the Series 2019B Notes at a private sale for investment.  Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Series 2019B Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.

Exhibit A

(to Supplement)

 

Section 5.14.Use of Proceeds; Margin Regulations.  The Company will apply the proceeds of the sale of the Series 2019B Notes to refinance existing debt and for general corporate purposes.  No part of the proceeds from the sale of the Series 2019B Notes under the Third Supplement will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 15% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 15% of the value of such assets.  As used in this Section 5.14, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

Section 5.15.Existing Indebtedness.  Except as described therein, Schedule 5.15 to the Third Supplement sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of June 30, 2019 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranty thereof, if any), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries (other than as permitted hereunder).  Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary the outstanding principal amount of which exceeds $10,000,000 that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

 

 

A-2

 

[Form of Series 2019B Note]

Spire Alabama Inc.

2.88% Series 2019B Senior Note, due December 1, 2029

 

		
	
No. 2019B-[__]
	
[Date]

	
$[_______]
	
PPN 84858# AD5

 

For Value Received, the undersigned, Spire Alabama Inc. (herein called the “Company”), a corporation organized and existing under the laws of the State of Alabama, hereby promises to pay to [____________], or its registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on December 1, 2029, with interest (computed on the basis of a 360-day year of twelve 30‐day months) (a) on the unpaid balance hereof at the rate of 2.88% per annum from the date hereof, payable semi-annually, on the 1st day of December and June in each year, commencing on June 1, 2020 and thereafter on the December 1 or June 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make‐Whole Amount, payable semi‐annually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 4.88% and (ii) 2.0% over the rate of interest publicly announced by Chase Bank, N.A. from time to time in New York, New York as its “base” or “prime” rate.

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at Commerce Bank or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Third Supplement dated as of December 2, 2019 to the Master Note Purchase Agreement, dated as of June 5, 2015 (as from time to time amended, restated and supplemented, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof.  Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the provisions of the Note Purchase Agreement, including, without limitation, the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) made the representations set forth in Section 6.1 and Section 6.2 of the Note Purchase Agreement.  Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the 

Exhibit B

(to Supplement)

 

transferee.  Prior to due presentment for registration of transfer, the Company may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.  

If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

[Signature Page Follows]

 

B-2

 

This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

 

Spire Alabama Inc.

 

 

By                                                                     

	
 
	

	
Name:

	
 
	

	
Title:

 

 

 

B-3

 

[FORM OF] 

U.S. TAX COMPLIANCE CERTIFICATE

 

Reference is hereby made to that certain Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of June 5, 2015 (the “Master Note Purchase Agreement”), as supplemented by (i) that certain First Supplement to Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of December 1, 2017 (the “First Supplement”), (ii) that certain Second Supplement to Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of January 15, 2019 (the “Second Supplement”), and (iii) that certain Third Supplement to Master Note Purchase Agreement between the Company and the purchasers listed on the Schedule A thereto and dated as of December 2, 2019 (the “Third Supplement”; and, together with the First Supplement, the Second Supplement, and the Master Note Purchase Agreement as amended, restated, supplemented or otherwise modified from time to time, the “Note Purchase Agreement”).  Unless otherwise defined herein, capitalized terms defined in the Note Purchase Agreement and used herein have the meanings given to them in the Note Purchase Agreement.

Pursuant to the provisions of Section 9 of the Third Supplement, the undersigned hereby certifies that:

	
 
	
(i)
	
it is the sole record and beneficial owner of the Notes in respect of which it is providing this certificate;

	
 
	
(ii)
	
it is not a bank within the meaning of Section 881(c)(3)(A) of the Code;

	
 
	
(iii)
	
it is not a ten percent shareholder of the Company within the meaning of Section 871(h)(3)(B) of the Code; and 

	
 
	
(iv)
	
it is not a controlled foreign corporation related to the Company as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Company with a certificate of its non-U.S. Person status on IRS W-8BEN-E.  

 

		
	
[Noteholder]

	
By: ______________________________________

	
 
	
Name:  

	
 
	
Title:  

Date: ________ __, ____

 

 

 

Exhibit C

(to Supplement)

 

Schedule 5.3

Disclosure Materials

 

None.

 

 

Schedule 5.3
(to Supplement)

 

Schedule 5.4

Organization and Ownership of Shares of Subsidiaries

 

None.

 

Schedule 5.4
(to Supplement)

 

Schedule 5.5

Financial Statements

	
 
	
•
	
Form 10-Q filed by Spire Inc., Spire Missouri Inc. and Spire Alabama Inc. for the quarterly periods ended December 31, 2018, March 31, 2019 and June 30, 2019: http://investors.spireenergy.com/filings-and-reports/sec-filings 

	
 
	
•
	
Form 10-K filed by Spire Inc., Spire Missouri Inc. and Spire Alabama Inc. for the year ended September 30, 2017: http://investors.spireenergy.com/filings-and-reports/sec-filings

	
 
	
•
	
Form 10-K filed by Spire Inc., Spire Missouri Inc. and Spire Alabama Inc. for the year ended September 30, 2018: http://investors.spireenergy.com/filings-and-reports/sec-filings

	
 
	
•
	
Form 10-K filed by Spire Inc., Spire Missouri Inc. and Spire Alabama Inc. for the year ended September 30, 2019: http://investors.spireenergy.com/filings-and-reports/sec-filings

 

 

Schedule 5.5
(to Supplement)

 

Schedule 5.15

Existing Indebtedness

 

 

				
	
Issue Date
	
Maturity Date
	
Principal Amount
	
Interest Rate

	
12/1/2015
	
12/1/2045
	
$80,000
	
4.31%

	
1/14/2005
	
1/15/2020
	
$40,000
	
5.20%

	
12/22/2011
	
12/22/2021
	
$50,000
	
3.86%

	
9/15/2015
	
9/15/2025
	
$35,000
	
3.21%

	
1/15/2007
	
1/15/2037
	
$45,000
	
5.90%

	
1/12/2018
	
1/15/2048
	
$45,000
	
3.92%

	
1/15/2019
	
1/15/1949
	
$90,000
	
4.64%

	
12/1/2017
	
1/15/2058
	
$30,000
	
4.02%

	
 
	
 
	
$415,000
	
4.43%

 

 

Short-term borrowings from Parent, as of 6/30/19$79,600,000

 

 

 

 

 

Schedule 5.15
(to Supplement)Blueprint

 

Exhibit 10.2

 

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

 

	

Original Issue Date: November 27, 2019

	

Original Principal Amount: $833,333.33

Purchase Price: $750,000.00

 

FORM OF

 

8% SENIOR SECURED

 

CONVERTIBLE PROMISSORY NOTE

 

DUE NOVEMBER 26, 2020

 

THIS 8%
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE is one of a series of
duly authorized and validly issued 8% Senior Secured Convertible
Promissory Notes of EXACTUS,
INC., a Nevada corporation (the “Company”), having its
principal place of business at 80 NE 4th Avenue, Suite 28, Delray
Beach, Florida 33483, designated as its 8% Senior Secured
Convertible Promissory Note due November 26, 2020 (this
“Note”,
and collectively with the other Notes of such series, the
“Notes”).

 

This
Note is being issued at a ten percent (10%) original issue
discount.

 

FOR
VALUE RECEIVED, the Company promises to pay to 3i, LP, a Delaware limited partnership, or its
registered assigns (each, a “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of Eight
Hundred Three Hundred Thirty Three Thousand Three Hundred Thirty
Three Dollars and Thirty Three Cents ($833,333.33) on November 26, 2020 or such
earlier date as this Note is required or permitted to be repaid
and/or redeemed as provided hereunder, and to pay interest to the
Holder on the aggregate unconverted and outstanding principal
amount of this Note in accordance with the provisions hereof. This
Note is subject to the following additional
provisions:

 

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

 

“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 

“Alternate
Consideration” shall have
the meaning set forth in Section
5(d).

 

“Amortization
Conversion Rate”
means 80% of the lowest VWAP
during the ten (10) consecutive Trading Days ending on the Trading
Day that is immediately prior to the applicable Amortization
Redemption Payment Date, 
provided; however,
that in the event that a Holder elects to defer an Amortization
Payment as provided for in 
Section 2(d), the Amortization
Conversion Rate to be
calculated as of the delivery of the Deferral
Notice.

 

“Amortization
Redemption” shall have
the meaning set forth in Section
2(d).

 

 

 

-1-

 

 

 

“Amortization
Redemption Payment Amount” means the product of: (a) (i) 110%, and
(b) the sum of (i) one-ninth (1/9th)
of the Original Principal Amount of this Note, (ii) 100% of all
accrued and unpaid interest on the principal amount of this Note
that is subject to such Amortization Redemption, (iii) 100% of the
Make-Whole Amount payable in respect of the principal amount of
this Note that is subject to such Amortization Redemption (as
applicable), and (iv) all liquidated damages, costs of collection
and other amounts payable in respect of this Note as of the
applicable Amortization Redemption Payment Date for such
Amortization Redemption.

 

“Amortization
Redemption Payment Date” shall
have the meaning set forth in Section
2(d).

 

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

 

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

 

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

 

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

 

“Change of
Control” means any
Fundamental Transaction other than (i) any merger of the Company or
any of its, direct or indirect, wholly-owned Subsidiaries with or
into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock
in which holders of the Company’s voting power immediately
prior to such reorganization, recapitalization or reclassification
continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly
or indirectly, are, in all material respects, the holders of at
least 50.1% of the voting power of the surviving entity (or
entities with the authority or voting power to elect the members of
the board of directors (or their equivalent if other than a
corporation) of such entity or entities) after such reorganization,
recapitalization or reclassification, or (iii) pursuant to a
migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company or any of its
Subsidiaries.

 

 “Closing Bid
Price” and
“Closing Sale
Price” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the then
principal Trading Market, as reported by Bloomberg, or, if the then
principal Trading Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing
trade price (as the case may be) then the last bid price or last
trade price, respectively, of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the then principal
Trading Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities
exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the
last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price (as the case may be) of such security on such date shall
be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be
resolved in good faith by an independent, regionally recognized
accounting mutually agreeable to the Company and the Holder. All
such determinations shall be appropriately adjusted for any stock
splits, stock dividends, stock combinations, recapitalizations or
other similar transactions during such period.

 

 

 

-2-

 

“Common
Stock” means the common
stock of the Company, par value $0.0001 per share, and any other
class of securities into which such securities may hereafter be
reclassified or changed.

 

“Common Stock
Equivalents” means any
securities of the Company or any Subsidiary which would entitle the
holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option,
warrant, unit, or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

 

“Conversion”
means any conversion of any Conversion Amount under this Note into
shares of Common Stock pursuant to Section 4
herein.

 

“Conversion
Amount” means, with
respect to a Conversion pursuant to Section 4
herein, the sum of: (a) the principal
amount of this Note to be converted in such Conversion, (b) 100% of
the accrued and unpaid interest on the principal amount of this
Note to be converted in such Conversion, (c) 100% of the Make-Whole
Amount payable in respect of the principal amount of this Note to
be converted in such Conversion (as applicable), and (d) all
liquidated damages, costs of collection and other amounts payable
in respect of this Note as of the applicable Conversion Date for
such Conversion.

 

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

 

 “Conversion
Rate” means, as
applicable, the Amortization Conversion Rate, the Fixed Conversion
Price, the Base Conversion Price and the EOD Conversion
Rate.

 

“Conversion
Schedule” means the
Conversion Schedule in the form of Schedule 1
attached hereto.

 

“Conversion
Shares” means,
collectively, the shares of Common Stock issuable upon Conversion
of this Note pursuant to Section 4
hereof in accordance with the terms of
this Note.

 

“Deferral
Notice” shall have the
meaning set forth in Section
2(d).

 

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

 

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

 

 “Dollar”,
“U.S.
Dollar”,
“United States
Dollar”,
“$”, “USD” and like expressions means United States
of America dollars.

 

“DTC” means the Depository Trust
Company.

 

“DWAC
Eligible” means that (a)
the Common Stock is eligible at DTC for full services pursuant to
DTC’s Operational Arrangements, including without limitation
transfer through DTC’s DWAC system, (b) the Company has been
approved (without revocation) by the DTC’s underwriting
department, (c) the Transfer Agent is approved as an agent in the
DTC/FAST Program, (d) the Conversion Shares are otherwise eligible
for delivery via DWAC, and (e) the Transfer Agent does not have a
policy prohibiting or limiting delivery of the Conversion Shares
via DWAC.

 

“EOD Conversion
Rate” shall have the
meaning set forth in Section
6(b).

 

“EOD Interest
Rate” shall have the
meaning set forth in Section
2(e).

 

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

 

“Event of Default
Notice” shall have the
meaning set forth in Section
6(b).

 

“Event of Default
Notice Date” shall have
the meaning set forth in Section
6(b).

 

“Event of Default
Redemption” shall have
the meaning set forth in Section
6(b).

 

 

 

-3-

 

“Event of Default Redemption
Amount” means, with respect to an Event of Default
Redemption pursuant to Section 6(b) herein, the
greater of (i) the product of (a) 135%, multiplied by (b) the sum
of (I) the principal amount of this Note that is subject to such
Event of Default Redemption, irrespective of when the applicable
Event of Default Redemption Date for such Event of Default occurs,
(II) 100% of the accrued and unpaid interest on the principal
amount of this Note that is subject to such Event of Default
Redemption, (III) 100% of the Make-Whole Amount payable in respect
of the principal amount of this Note that is subject to such Event
of Default Redemption (as applicable), and (IV) all liquidated
damages, costs of collection and other amounts payable in respect
of this Note as of the applicable Event of Default Redemption Date
for such Event of Default (the sum of (I), (II), (III), and (IV)
being “the Sum
Amount”), and (ii) (a)
the outstanding principal amount of this Note and accrued and
unpaid interest hereon, in addition to the payment of all other
amounts, costs, expenses and liquidated damages due in respect of
this Note, divided by the lower of the (x) the Fixed Conversion
Price and (y) the EOD Conversion Rate, multiplied by (b) the
highest closing price for the Common Stock on the Trading Market
(as defined in the Purchase Agreement) during the period beginning
on the date of first occurrence of the Event of Default and ending
on the date the Event of Default Redemption Amount is paid in
full.

 

“Event of Default Redemption
Date” shall have the
meaning set forth in Section
6(b).

 

“Event of Default Redemption
Notice” shall have the
meaning set forth in Section
6(b).

 

“Event of Default Redemption Notice
Date” shall have the
meaning set forth in Section
6(b).

 

“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

“Exempt Issuance” means
(i) the issuance of Common Stock by the Company pursuant to the
terms and conditions of the Purchase Agreement, (ii) the issuance
of (a) Conversion Shares upon conversion of this Note or any other
Notes issued under the Purchase Agreement in accordance with the
terms of such Notes, which for the avoidance of doubt, includes any
adjustment to the conversion price prior to conversion hereof or
thereof, and (b) Warrant Shares upon exercise of the Warrants in
accordance with the terms of the Warrants, which for the avoidance
of doubt, includes any adjustment to the exercise price prior to
exercise thereof, (iii) the issue of shares of Common Stock or
options to employees, officers, directors, consultants, advisors or
contractors of the Company (pursuant to any stock or option plan
duly adopted for any such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose, provided, in no event shall the
aggregate amount of such issuances to employees, officers,
directors, consultants, advisors or contractors of the Company
during the period commencing on the Original Issuance Date and
ending on the date no Notes are outstanding exceed five (5%)
percent of the number of issued and outstanding shares of Common
Stock (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions
following the Closing Date), (iv) issuance of securities in
connection with strategic license agreements, mergers,
acquisitions, purchases or leases of assets and other partnering
arrangements so long as such issuances are not primarily for the
purpose of raising capital  and (v) the issuance of Common Stock
upon the exercise or exchange of or conversion of any Common Stock
Equivalents issued and outstanding on the date of the Purchase
Agreement pursuant to terms and conditions applicable to such
Common Stock Equivalents in effect as of the date of the Purchase
Agreement and disclosed in filings of the Company with the
Commission prior to the date of the Purchase Agreement,
provided that such
Common Stock Equivalents have not been amended since the date of
the Purchase Agreement to increase the number of such Common Stock
Equivalents or shares of Common Stock issuable upon the exercise or
exchange of or conversion of such Common Stock Equivalents, or to
decrease the exercise price, exchange price or conversion price of
such Common Stock Equivalents (other than Common Stock Equivalents
issued and outstanding on the date of the Purchase Agreement,
subject to exchange prices or conversion prices adjustable pursuant
to anti-dilution protection or in connection with stock splits or
combinations) or to extend the term of such Common Stock
Equivalents.

 

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

 

“Fundamental
Transaction” shall have
the meaning set forth in Section
5(d).

 

 

 

-4-

 

“Intellectual Property
Security Agreement” means
that certain Intellectual Property Security Agreement, by the
Company in favor of Holder, as secured lender, dated November 27,
2019.

 

“Interest Payment
Date” shall have the
meaning set forth in Section
2(a).

 

“Make-Whole
Amount” shall have the
meaning set forth in Section
2(a).

 

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

 

“Mandatory Redemption
Payment Amount and Order”
means the amount and order that the Mandatory Redemption Amount is
used by the Company to redeem from the Holder amounts due and/or
outstanding under this Note in connection with each Mandatory
Redemption pursuant to Section 7(c) and
Section 7(d) herein as
follows: First,
110% of the then accrued and unpaid interest on the principal
amount of this Note, Second,
110% of any Make-Whole Amount payable on or prior to the Mandatory
Redemption Date in respect of the principal amount of this Note
including with respect to any principal amount of this Note being
paid on the Mandatory Redemption Date, Third,
110% of all liquidated damages, costs of collection and other
amounts payable in respect of this Note (other than principal) as
of and including the applicable Mandatory Redemption Date for such
Mandatory Redemption, and Fourth,
any remaining portion of the Mandatory Redemptions Amount as
follows: (i) 110% of the then principal amount of this Note
outstanding.

 

“Mandatory Redemption
Amount” means, with
respect to any given Subsequent Financing, thirty percent (30%) of
the aggregate gross proceeds of such Subsequent Financing (together
with all prior Subsequent Financings) less than or equal to
$3,000,000 and sixty percent (60%) of the aggregate gross proceeds
of such Subsequent Financing (together with all prior Subsequent
Financings) in excess of $3,000,000.

 

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

 

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

 

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

 

“Maturity Date” shall mean
November 26, 2020; provided, however, the Maturity Date may
be extended at the option of the Holder (i) in the event that, and
for so long as, an Event of Default shall have occurred and be
continuing or any event shall have occurred and be continuing that
with the passage of time and the failure to cure would result in an
Event of Default, or (ii) through the date that is twenty (20)
Trading Days after the consummation of a Fundamental Transaction in
the event that a Fundamental Transaction is publicly announced or a
Fundamental Transaction Notice is delivered prior to the Maturity
Date, provided further that if a Holder elects to convert some or
all of this Note pursuant to Section 4 hereof, and the
Conversion Amount would be limited pursuant to Section 4(d) or Section 4(e)
hereunder, the Maturity Date shall automatically be extended until
such time as such provision shall not limit the conversion of this
Note.

 

“New York
Courts” shall have the
meaning set forth in Section
9(d).

 

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

 

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

 

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

 

“Optional Redemption
Amount” means, with
respect to an Optional Redemption pursuant to Section 7(a)
and Section 7(b)
herein, the product of: (a) (i) 110%,
and (b) the sum of (i) the principal amount of this Note that is
subject to the Optional Redemption and (ii) 100% of the accrued and
unpaid interest on the principal amount of this Note that is
subject to such Optional Redemption, (iii) 100% of the Make-Whole
Amount payable in respect of the principal amount of this Note that
is subject to such Optional Redemption (as applicable), and (iv)
all liquidated damages, costs of collection and other amounts
payable in respect of this Note as of the applicable Optional
Redemption Date for such Optional Redemption.

 

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

 

 

 

-5-

 

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

 

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

 

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

 

“Permitted
Indebtedness” means
indebtedness of the Company or any Subsidiary (i) evidenced by this
Note, (ii) outstanding on the date hereof and set forth on
Schedule
3.1(n) to the Purchase
Agreement, provided no such indebtedness shall constitute Permitted
Indebtedness if such indebtedness has been incurred and expensed
and/or otherwise modified following the date of its original
issuance and not disclosed in Schedule 3.1, other than indebtedness
evidenced by the Notes, which in no event shall all or any portion
thereof constitute Permitted Indebtedness; and (iii) indebtedness
disclosed in the Company’s consolidated balance sheet at
September 30, 2019.

 

“Permitted
Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries, or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, or (z) that are not overdue
by more than thirty (30) days or are being contested in good faith,
(c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance
and other social security laws or regulations, (d) deposits to
secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business, (e) liens for Indebtedness and other obligations of
the Company to the Holder including under this Note and the other
Transaction Documents (f) any other lien in favor of the Holders,
and (g) Liens permitted as set forth on Schedule 2
hereto.

 

“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.

 

 “Purchase
Agreement” means that
certain Securities Purchase Agreement, by and between the Company
and the Holder, dated November 27, 2019.

 

“Registration Rights
Agreement” means that
certain Registration Rights Agreement, by and between the Company
and the Holder, dated November 27, 2019.

 

“Registration
Statement” has the
meaning set forth in the Registration Rights
Agreement.

 

“Required Minimum” means,
(i) 300% of the maximum aggregate number of shares of Common Stock
(including all Conversion Shares), then issued or potentially
issuable in the future upon conversion in full of the Notes, and
(ii) 100% of the maximum aggregate number of shares of Common Stock
(including all Warrant Shares), then issued or potentially issuable
upon exercise in full of the Warrants or otherwise in any
Transaction Document, ignoring any conversion or exercise limits
set forth in the Notes and the Warrants, and assuming (a) no
Conversions or redemptions of any principal amount of and/or any
other payments due under the Notes from the Original Issue Date
through the Trading Day immediately preceding the Maturity Date,
(b) no exercise of the Warrants until the Trading Day immediately
preceding the Termination Date (as defined in the Warrants), (c) on
the Maturity Date and Termination Date, the Notes are fully
converted and the Warrants are fully exercised, respectively, and
(d) (A) the Notes convert into Common Stock at the Amortization
Conversion Rate as of a determination date, and (B) the Warrants
exercise into Warrant Shares at the Exercise Price (as defined in
the Warrants) as of any determination date.

 

 

 

-6-

 

“SEC” or
“Commission” means the
United States Securities and Exchange Commission.

 

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

 

“Security
Agreement” means that
certain Security Agreement, by and among the Company, any
Subsidiary of the Company now joined or joined in the future, and
the Holder, dated November 27, 2019.

 

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

 

“Subsequent
Financing” means any
issuance by the Company or any of its Subsidiaries for
capital-raising purposes of (i) Common Stock or Common Stock
Equivalents for cash consideration, (ii) Indebtedness, and/or (iii)
a combination of units thereof.

 

“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) of the Purchase
Agreement and shall also include any direct or indirect subsidiary
of the Company formed or acquired after the date hereof, to the
extent permitted under the Security Agreement.

 

“Subsidiary Guarantee”
means the Subsidiary Guarantee by each Guarantor (as defined in the
Security Agreement) in favor of the Holders.

 

“Successor
Entity” shall have the
meaning set forth in Section
5(d).

 

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

 

“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American; the Nasdaq Capital Market; the Nasdaq Global Market; the
Nasdaq Global Select Market; the New York Stock Exchange, the OTCQB
or OTCQX.

 

“Transaction Documents”
means the Notes (including this Note), the Warrants, the Purchase
Agreement, the Registration Rights Agreement, the Security
Agreement, the Subsidiary Guarantees, the Intellectual Property
Security Agreement, the Transfer Agent Instruction Letter, the
Perfection Certificate and all other security related instruments,
agreements, documents and filings, and all exhibits and schedules
thereto and hereto and any other documents or agreements and/or
delivered in connection with the transactions contemplated
hereunder.

 

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

 

“Warrants” means the
Company’s Common Stock Purchase Warrants issued to the
Holders to purchase up to the aggregate 275,612 of shares of Common
Stock (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions
following the sale of the Warrants).

 

 

 

-7-

 

 

Section 2.
Interest; Mandatory
Prepayment and Amortization.

 

a) Payment of Interest. The
Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note at
the rate of eight (8%) percent per annum, payable monthly on the
first (1st) day of each month,
beginning on the first such date after the Original Issue Date (in
accordance with the Amortization Schedule attached as Annex B), on
each Conversion Date (as to that principal amount then being
converted), on each Optional Redemption Date (as to that principal
amount then being redeemed), on each Event of Default Redemption
Date (as to that principal amount then being redeemed), on each
Amortization Redemption Payment Date (as to that principal amount
then being redeemed and
in accordance with the Amortization Schedule attached as Annex B),
on each Mandatory Redemption Date (as to the principal amount then
being redeemed) and on the Maturity Date (each such date, an
“Interest Payment
Date”) (if any Interest Payment Date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day), in whole or in part, in cash, or , in
shares of Common Stock (provided they can be issued without a
restrictive legend) at the lesser of (i) the Fixed Conversion
Price, and (ii) the Amortization Conversion Rate. With respect to
any principal amount of this Note being converted or redeemed
hereunder on any Conversion Date, Optional Redemption Date, Event
of Default Redemption Date, Mandatory Redemption Date, or
Amortization Redemption Payment Date (as applicable) that occurs on
or and prior to the Maturity Date, and in addition to the amount of
interest payable to the Holder in accordance with the immediately
preceding sentence of this Section 2(a) on such Conversion
Date, Optional Redemption Date, Event of Default Redemption Date,
Mandatory Redemption Date, or Amortization Redemption Payment Date
(as applicable), the amount of interest that would have accrued
with respect to such principal amount of this Note being converted
or redeemed hereunder at the applicable interest rate hereunder for
the period from such applicable Conversion Date, Optional
Redemption Date, Event of Default Redemption Date, Mandatory
Redemption Date, or Amortization Redemption Payment Date (as
applicable) through and including the Maturity Date (such
additional interest amount, the “Make-Whole Amount”),
shall be guaranteed and shall be accelerated and payable to the
Holder in connection with the conversion or redemption of this Note
on any such applicable Conversion Date, Optional Redemption Date,
Event of Default Redemption Date, Mandatory Redemption Date, or
Amortization Redemption Payment Date (as applicable).

 

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

 

c) Reserved

 

 

 

-8-

 

 

 

d) Amortization Payments.
Commencing on the date that is ninety (90) days after the Original
Issue Date, and continuing on the first (1st) Trading Day of
each of the following eight (8) successive months thereafter (each
an “Amortization
Redemption Payment Date”), until no principal amount
of this Note is outstanding, the Company shall redeem (each, an
“Amortization
Redemption”), one-ninth (1/9th) of the Original
Principal Amount of this Note in accordance with the Amortization
Schedule attached as Annex B by paying to the Holder on each
Amortization Redemption Payment Date, the Amortization Redemption
Payment Amount in cash. Notwithstanding anything to the contrary
contained in this Section
2(d), the Holder, at its option, shall be entitled to
accelerate up to six (6) future Amortization Redemptions and demand
such corresponding Amortization Redemption Payment Amounts to be
paid in Common Stock at the lesser of (i) the Fixed Conversion
Price, and (ii) Amortization Conversion Rate. In the event that the
Holder elects to accelerate an Amortization Redemption Payment,
such accelerated Amortization Redemption Payment shall be applied
to, and in the order of, the last scheduled Amortization Redemption
Payment then due. Furthermore, notwithstanding anything to the
contrary contained in this Section 2(d), any Holder, at
its option and without regard to the actions of any other Holder,
shall be entitled to defer by delivery of written notice (each such
notice, a “Deferral
Notice”) each and any Amortization Payment in its sole
discretion and for as long as it wishes to defer such Amortization
Payment and receive such payments in Common Stock pursuant to the
Amortization Conversion Rate, to be calculated as of the delivery
of the Deferral Notice. Such Deferral Notice shall be effective
upon delivery to the Company, and any Amortization Payment shall be
settled no later than two (2) Trading Days after delivery of the
Deferral Notice to the Company. In addition, in the event the
Company shall fail to make any monthly amortization payment as
provided in this Section
2(d), the Holder at any time shall be entitled to convert an
amount, in whole or in part, equal to the sum of (i) one-ninth
(1/9th) of
the Original Principal Amount of this Note, (ii) 100% of all
accrued and unpaid interest on the principal amount of this Note
that is subject to such Amortization Redemption, (iii) 100% of the
Make-Whole Amount payable in respect of the principal amount of
this Note that is subject to such Amortization Redemption (as
applicable), and (iv) all liquidated damages, costs of collection
and other amounts payable in respect of this Note as of the
applicable Amortization Redemption Payment Date for such
Amortization Redemption, into shares of Common Stock at the lower
of (i) the Fixed Conversion Price and (ii) the Amortization
Conversion Price.

 

e) Event of Default Interest Rate.
If an Event of Default occurs, interest shall accrue from the date
of such Event of Default at the rate equal to the lesser of (i)
eighteen (18%) percent per annum, and (ii) the maximum amount
permitted by New York law (the lesser of (i) and (ii) being the
“EOD Interest
Rate”). In the event that such Event of Default is
subsequently cured, the adjustment to the interest rate referred to
in the preceding sentence shall cease to be effective as of the
calendar day immediately following the date of such cure of such
Event of Default.

 

Section 3.
Registration of Transfers
and Exchanges.

 

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

 

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

 

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

 

 

 

-9-

 

 

 

Section 4.
Conversion.

 

a) Voluntary Conversion. At any
time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any
time and from time to time (subject to the conversion limitations
set forth in Section 4(d)
and Section 4(e) hereof). The Holder shall effect
Conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the Conversion Amount
to be converted and the date on which such Conversion shall be
effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. Except as required by the Transfer
Agent, no ink-original Notice of Conversion shall be required, nor
shall any medallion guarantee (or other type of guarantee or
notarization) of any Notice of Conversion form be required. To
effect Conversions hereunder, the Holder shall not be required to
physically surrender this Note to the Company unless the entire
principal amount of this Note, plus all accrued and unpaid interest
thereon, Make-Whole Amounts (as
applicable) and other amounts payable in respect of this
Note, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of
this Note in an amount equal to 100% (irrespective of any higher
percentage used in calculating the Conversion Amount hereunder as
set forth in the definition of “Conversion Amount”) of
the principal amount of this
Note to be converted in such Conversion. The Holder and the
Company shall maintain a Conversion Schedule showing the principal
amount(s) converted and the date of such Conversion(s). The Company
may deliver an objection to any Notice of Conversion within one (1)
Business Day of delivery of such Notice of Conversion. In the event
of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.
The Holder, and any assignee by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face
hereof.

 

b) Conversion Price. The
conversion price in effect on any Conversion Date shall be equal to
$0.50 per share of Common Stock, subject to adjustment as provided
elsewhere in this Note (the “Fixed Conversion Price”).
Nothing herein shall limit a Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 6 hereof and the Holder
shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

 

c) Mechanics of
Conversion.

 

i. Conversion Shares Issuable Upon
Conversion of Conversion Amount. The number of Conversion
Shares issuable upon a Conversion of any Conversion Amount
hereunder shall be determined by the quotient obtained by dividing
(x) such Conversion Amount by (y) the Fixed Conversion
Price.

 

ii. Delivery of Certificate Upon
Conversion. Not later than the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion
Date (the “Share
Delivery Date”), the Company shall deliver, or cause
to be delivered, to the Holder (A) the Conversion Shares which, on
or after the earlier of (i) the six month anniversary of the
Original Issue Date or (ii) the Effective Date (as defined in the
Registration Rights Agreement), shall be free of restrictive
legends and trading restrictions (other than those which may then
be required by the Purchase Agreement) representing the number of
Conversion Shares being acquired upon the conversion of this Note
and (B) a bank check in the amount of accrued and unpaid interest.
On or after the earlier of (i) the six-month anniversary of the
Original Issue Date or (ii) the Effectiveness Date of the Initial
Registration Statement (as defined in the Registration Rights
Agreement), the Company shall deliver any Conversion Shares
required to be delivered by the Company under this Section 4(c) electronically
through the DTC or another established clearing corporation
performing similar functions. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Conversion.

 

 

 

-10-

 

 

 

Notwithstanding the
foregoing, commencing on such date that the Conversion Shares are
eligible for resale under Rule 144 by the Holder subject to current
public information requirements and compliance with any other
requirements of Rule 144, the Company, upon request and at the
Company’s sole cost and expense, shall obtain a legal opinion
that is acceptable to each of the Holder and the Company and the
Company’s Transfer Agent, to permit resale of Conversion
Shares received by Holder under Holder’s Conversion Notice,
pursuant to Rule 144.

 

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

 

iv. Obligation
Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon
conversion of this Note in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event the Holder of
this Note shall elect to convert any or all of the outstanding
Conversion Amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any violation of
law, agreement or for any other
reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Note
shall have been sought. If the injunction is not granted, the
Company shall promptly comply with all conversion obligations
herein. If the injunction is obtained, the Company must post a
surety bond for the benefit of the Holder in the amount of one
hundred fifty percent (150%) of the outstanding Conversion Amount
of this Note, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of
the underlying dispute and the proceeds of which shall be payable
to the Holder to the extent it obtains judgment. In the absence of
seeking such injunction, the Company shall issue Conversion Shares
or, if applicable, cash, upon a properly noticed Conversion. If the
Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section
4(c)(ii) by the Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, $1,000 per Trading Day for each
Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such Conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 6
hereof for the Company’s failure
to deliver Conversion Shares within the period specified herein and
the Holder shall have the right to pursue all remedies available to
it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

 

 

 

-11-

 

 

 

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

 

vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
shares of Common Stock a number of shares of Common Stock at least
equal to the Required Minimum (the “Reserve Amount”) for the
sole purpose of issuance upon conversion of this Note as herein
provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and
the other Holders of the Notes). The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue,
be duly authorized, validly issued, fully paid and
nonassessable.

 

vii. Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Note.
As to any fraction of a share which the Company shall round up to
the next whole share.

 

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

 

 

 

-12-

 

 

 

d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with
the Holder or any of the Holder’s Affiliates (such Persons,
“Attribution
Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable
upon conversion of this Note with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted principal amount of this Note beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties, and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject
to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any
other Notes) beneficially owned by the Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d)
applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which principal amount
of this Note is convertible shall be in the sole discretion of the
Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Note
may be converted (in relation to other securities owned by the
Holder together with any Affiliates or Attribution Parties) and
which principal amount of this Note is convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, the Holder will be deemed to
represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4(d), in determining
the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated
in the most recent of the following: (i) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (ii) a more recent public announcement by the Company,
or (iii) a more recent written notice by the Company or the
Company’s Transfer Agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within one (1) Trading Day confirm orally
and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Note, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
conversion of this Note held by the Holder. The Holder, upon notice
to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of
this Section
4(d), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
conversion of this Note held by the Holder and the Beneficial
Ownership Limitation provisions of this Section 4(d)
shall continue to apply. Any increase
in the Beneficial Ownership Limitation will not be effective until
the 61st
day after such notice is delivered to
the Company. The Beneficial Ownership Limitation provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this
Section
4(d) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor Holder of this
Note.

 

 

 

-13-

 

 

 

Section 5.
Certain
Adjustments.

 

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

 

b) Subsequent Rights Offerings. In
addition to any adjustment pursuant to Section 5(e) below, if at
any time the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this
Note (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

 

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

 

 

 

-14-

 

 

 

d) Fundamental
Transaction. If, at any time while this Note is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders
of fifty percent (50%) or more of the outstanding Common Stock,
(iv) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
(v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
more than fifty percent (50%) of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other
Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon
any subsequent conversion of this Note, the Holder shall have the
right to receive, for each Conversion Share that would have been
issuable upon such conversion immediately prior to the occurrence
of such Fundamental Transaction (without regard to any limitation
in Section 4(d) and
Section 4(e) on the conversion
of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the
“Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Note is
convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 4(d) and
Section 4(e) on the conversion
of this Note). For purposes of any such conversion, the
determination of the Fixed Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Fixed Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction. The Company shall use
its reasonable best efforts to cause any successor entity in a
Fundamental Transaction in which the Company is not the survivor
(the “Successor
Entity”) to assume in
writing all of the obligations of the Company under this Note and
any document ancillary hereto, in accordance with the provisions of
this Section 5(d)
pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the holder of this Note,
deliver to the Holder in exchange for this Note a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Note which is convertible for
a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon conversion of this Note
(without regard to any limitations on the conversion of this Note)
prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of
capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of
capital stock and such conversion price being for the purpose of
protecting the economic value of this Note immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Note and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company
herein.

 

e) Intentionally
omitted.

 

 

 

-15-

 

 

 

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

 

g) Notice to the
Holder.

 

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

 

ii. Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any shareholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of
conversion of this Note, and shall cause to be delivered to the
Holder at its last address as it shall appear upon the Note
Register, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
within one (1) Trading Day file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to convert this Note during the 20-day period commencing
on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set
forth herein.

 

h) Subsequent Equity Sales; Variable Rate
Transactions; Other.

 

(1) Intentionally
omitted.

 

(2) So long as this
Note remains outstanding or the Holder holds any Securities (as
defined in the Purchase Agreement), the Company shall not, directly
or indirectly, amend, modify, waive or alter any terms or
conditions of any Common Stock Equivalents outstanding as of the
date of the Purchase Agreement to decrease the exercise, conversion
and/or exchange price, as applicable, thereunder or otherwise
increase the aggregate number of shares of Common Stock issuable in
connection therewith (other than Common Stock Equivalents issued
and outstanding on the date of the Purchase Agreement that are
subject to exchange prices or conversion prices adjustable pursuant
to anti-dilution protection or in connection with stock splits or
combinations).

 

 

 

-16-

 

 

 

(3) During the period
commencing on the Original Issue Date through and including the
date that is the later of (i) twelve (12) months following the
Original Issue Date and (ii) the date that this Note is no longer
outstanding, the Company and each Subsidiary of the Company shall
be prohibited from effecting or entering into (or publicly
announcing or recommending to its shareholders the approval or
adoption thereof by such shareholders) any agreement, plan,
arrangement or transaction to effect, directly or indirectly, any
issuance by the Company or any of its Subsidiaries of Common Stock
or Common Stock Equivalents (or a combination of units thereof)
involving a Variable Rate Transaction, without the prior written
consent of the Holder (which consent may be withheld, delayed or
conditioned in the sole discretion of such Holder).
“Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, an at-the-market offering (as
defined in SEC Rule 415) or a similarly structured transaction,
whereby the Company may issue securities at a future determined
price.

 

(4) So long as this
Note remains outstanding, neither the Company nor any Subsidiary
shall, directly or indirectly, effect or enter into (or publicly
announce or recommend to its shareholders the approval or adoption
thereof by such shareholders) any agreement, plan, arrangement or
transaction structured in accordance with, based upon, or related
or pursuant to Section 3(a)(9) or Section 3(a)(l0) of the
Securities Act, without the prior written consent of the Holder
(which consent may be withheld, delayed or conditioned in the sole
discretion of such Holder).

 

(5) So long as this
Note remains outstanding, the Company and each of its Subsidiaries
shall be prohibited from, directly or indirectly, effecting or
entering into (or publicly announcing or recommending to its
shareholders the approval or adoption thereof by such shareholders)
any agreement, plan, arrangement or transaction, including, without
limitation, any Subsequent Financing, that would or would
reasonably be expected to restrict, delay, conflict with or impair
the ability or right of the Company and/or a Subsidiary to timely
perform its obligations under the Purchase Agreement, this Note,
the Warrants and/or the other Transaction Documents, including,
without limitation, the obligation of the Company to timely (i)
deliver shares of Common Stock to any Holder of the Notes (or a
designee thereof, if applicable) in accordance with the Purchase
Agreement or the Notes and/or (ii) repay in cash all outstanding
principal and other amounts outstanding under the Notes at maturity
or at any other times when payments are required to be made in cash
pursuant to the terms of the Notes whether pursuant to a redemption
and/or otherwise.

 

(6) The Holder shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance in this Section 6 (without the need for
the posting of any bond or similar item, which the Company hereby
expressly and irrevocably waives the requirement for), which remedy
shall be in addition to any right to collect damages.

 

i) Issuance Price. So long as this
Note remains outstanding, except with respect to any Exempt
Issuance pursuant to clauses (i), (ii), (iii) or (v) of thereof,
the Company shall not issue shares of Common Stock or Common Stock
Equivalents at a price lower than the Fixed Conversion Price (as
adjusted for stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions following the sale
of this Note) (subject to adjustment in accordance with
Section 5(a))
without the prior written consent of the Holder (which consent may
be withheld, delayed or conditioned in the sole discretion of such
Holder).

 

 

 

-17-

 

 

 

Section 6.
Events of
Default.

 

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

 

i. any failure to pay
any amount of principal, interest, Make-Whole Amount, liquidated
damages or other amounts as and when the same shall become due and
payable under any of the Notes and/or any of the other Transaction
Documents (whether on a Conversion Date, Optional Redemption Date,
Event of Default Redemption Date, Mandatory Redemption Date, the
Maturity Date and/or any other date when any funds are due to be
redeemed, converted and/or otherwise paid to the Holder by the
Company and/or any Subsidiary, whether by acceleration or
otherwise), including, without limitation, any failure to pay any
redemption payments or amounts thereunder, or under any other
Transaction Document (as defined in the Purchase Agreement) or any
other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby
and thereby, except, in the case of a failure to pay interest and
Make-Whole Amounts when and as due, in which case only if such
failure is not cured within three (3) Trading Days and except any
failure to make an amortization payment on an Amortization
Redemption Payment Date, which failure shall only be deemed an
Event of Default if the Conversion Shares to be issued upon
conversion of this Note cannot be issued without a restrictive
legend;

 

ii. the Company and/or
any Subsidiary shall fail to observe, perform and/or breaches any
material covenant, provision, or agreement contained in any of the
Notes (other than payment failures set forth in Section 6(a)(i) above, a breach
by the Company of its obligations to deliver Conversion Shares to
the Holder upon conversion of this Note, which such certain breach
is addressed in Section
6(a)(ix) below and any other failure, breaches and/or other
events covered by another provision of this Section 6(a)); (ii) the
Warrants (a breach by the Company of its obligations to exercise
the Warrants, issue Common Stock, and any other failure, breaches
and/or other events covered by another provision of this
Section 6(a));
and/or (iii) any of the other Transaction Documents (except those
covered in any other provision if this Section 6(a)), which failure
is not cured, if possible to cure, within the earlier to occur of
(A) five (5) Trading Days after notice of such failure is sent by
the Holder or by any other Holder to the Company and (B) ten (10)
Trading Days after the Company has become or should have become
aware of such failure;

 

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

 

iv. any material
representation or warranty made in any of the Notes, any other
Transaction Documents, any written statement pursuant hereto or
thereto, any other agreement, contract, lease, document or
instrument to which the Company or any Subsidiary is obligated
(including those covered by clause (vi) below), or any other
report, financial statement or certificate made or delivered to the
Holder or any other Holder shall be untrue or incorrect in any
material respect as of the date when made or deemed
made;

 

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

 

vi. the Company or any
Subsidiary shall default on any of its obligations under any
mortgage, credit and/or loan agreement or other facility, indenture
agreement, factoring agreement or other instrument under which
there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long
term leasing or factoring arrangement that (a) involves an
obligation greater than $50,000 whether such indebtedness now
exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and
payable;

 

 

 

-18-

 

 

 

vii. the
suspension from trading or quotation of the Common Stock, or the
failure of the Common Stock to be eligible for listing or quotation
on a Trading Market for a period of five (5) consecutive Trading
Days;

 

viii. the
Company shall fail for any reason to deliver certificates to a
Holder prior to the second (2nd) Trading Day after a Conversion
Date or any other date shares of Common Stock are required to be
delivered to the Holder pursuant to Section 4(c) or otherwise, or
the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s
intention to not honor requests for conversions of this Note in
accordance with the terms hereof;

 

ix. the Company fails
to file with the Commission any required reports under Section 13
or 15(d) of the Exchange Act such that it is not in compliance with
Rule 144(c)(1) (or Rule 144(i)(2), if applicable), which failure is
not cured, if possible to cure, within two (2) Trading Days after
the expiration of the applicable grace period permitted under Rule
12b-25 of the Exchange Act, further provided that the Company files
a Form 12b-25 for such report;

 

x. the Company shall
fail to maintain the Reserve Amount and such failure is not cured
within five (5) Trading Days;

 

xi. any monetary
judgment, writ or similar final process shall be entered or filed
against the Company, any Subsidiary or any of their respective
property or other assets for more than $250,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) calendar
days;

 

xii. the
Company shall fail to obtain all necessary approvals of the issue
and sale of all shares of Common Stock issuable in connection with
the Note, the Warrants and/or Transaction Documents, including, but
not limited to, all Conversion Shares and Warrant Shares, and other
shares of Common Stock issuable as payment of principal, interest,
liquidation damages, Make-Whole Amounts and or otherwise,
consistent with the rules and regulations of the principal Trading
Market as of the Original Issuance Date;

 

xiii. any
Person shall breach any agreement delivered to the Holder pursuant
to Section 2.2 of the Purchase Agreement;

 

xiv. the
electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established
clearing corporation is no longer available or is subject to a
“chill”;

 

xv. any Change of
Control occurs other than in compliance with Section 5 of the Notes and the
Purchase Agreement;

 

xvi. the
Security Documents (as defined in the Security Agreement) shall for
any reason fail or cease to create a separate valid and perfected
and first priority Lien on the Collateral (as defined in the
Security Agreement) in favor of each of the Secured Parties (as
defined in the Security Agreement) and such breach remains uncured
for a period of three (3) Business Days;

 

xvii. any
material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing
activities at any facility of the Company, if any such event or
circumstance could have a Material Adverse Effect.

 

 

 

-19-

 

 

 

xviii. the
Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not (a) have been filed with the Commission
on or prior to the Filing Date (as defined in the Registration
Rights Agreement) or declared effective by the Effectiveness Date
(as defined in the Registration Rights Agreement), and (b) the
Company does not meet the current public information requirements
under Rule 144 in respect of the Registrable Securities (as defined
under the Registration Rights Agreement); or

 

xix. if,
during the Company shall at any time after the Effectiveness Date,
the Company shall fail to keep the Registration Statement
continuously effective under the Securities Act until the date when
all Registrable Securities covered by such Registration Statement
have been; or

 

xx. any violation
and/or breach of Section 4.10(d) of the Purchase
Agreement.

 

b) Remedies Upon Event of Default.
If an Event of Default occurs with respect to this Note, then, at
the Holder’s election, all or any portion of the outstanding
principal amount of this Note, plus accrued but unpaid interest
thereon, Make-Whole Amounts, liquidated damages and other amounts
owing in respect thereof through the Event of Default Redemption
Notice Date, shall accelerate and become immediately due and
payable in cash and shall be redeemed by the Company at a
redemption price equal to the Event of Default Redemption Amount on
the applicable Event of Default Redemption Date in accordance
herewith (the “Event
of Default Redemption”). After the occurrence of any
Event of Default that results in the eventual acceleration of this
Note, the interest rate on this Note shall accrue at the EOD
Interest Rate. Upon the occurrence of
an Event of Default with respect to this Note, the Company shall
within one (1) Business Day of becoming aware of such Event of
Default deliver written notice thereof via facsimile or electronic
mail and overnight courier (with next day delivery specified) (an
“Event of Default
Notice”) to the Holder.
At any time after the earlier of (i) the date of the Holder’s
receipt of an Event of Default Notice and (ii) the Holder becoming
aware of an Event of Default, (such earlier date, the
“Event of Default Right
Commencement Date”), and
each such period, an “Event of Default
Redemption Right Period”)
the Holder may require the Company to redeem (regardless of whether
such Event of Default has been cured) all or any portion of this
Note by delivering written notice thereof (the
“Event of Default
Redemption Notice”) to
the Company and the date such Event of Default Redemption Notice is
deemed delivered to the Company (the “Event of Default
Notice Date”), which
Event of Default Redemption Notice shall indicate the portion of
this Note the Holder is electing to redeem (i) the portion of this Note the Holder is
electing to redeem in such Event of Default Redemption and the
total Event of Default Redemption Amount to be paid by the Company
to the Holder in cash in such Event of Default Redemption pursuant
to this Section 6(b), (ii) the Event of Default Redemption Date the
Company is required to pay such Event of Default Redemption Amount
to the Holder in cash, and (iii) the allocation of such Event of
Default Redemption Amount between this Note and any other Notes
held by the Holder.

 

 

 

-20-

 

 

 

Notwithstanding
anything to the contrary provided herein or elsewhere, commencing
upon the date of an Event of Default, the then Fixed Conversion
Price, Amortization Conversion Rate and/or any other Conversion
price set forth herein shall automatically be adjusted to equal the
lower of (i) the applicable Conversion price then in effect (i.e.
the Fixed Conversion Price, the Amortization Conversion Price or
others), and (ii) 70% of the lowest VWAP during the ten (10) day
consecutive Trading Days ending on the Trading day immediately
prior to the relevant Conversion Date or any other conversion of
any amounts owed under this Note to the Holder including, but not
limited to, any conversion of the Event of Default Redemption
Amount (the “EOD
Conversion Rate. Any redemption upon an Event of Default
shall not constitute an election of remedies by the Holder; and all
other rights and remedies of the Holder shall be preserved. To the
extent redemptions required by this Section 6(b) are deemed or
determined by a court of competent jurisdiction to be prepayments
of this Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything to the contrary in
this Section 6, but
subject to Section
4(d) and Section
4(e), at any time prior to the date the Event of Default
Redemption Amount is paid in full, the Event of Default Redemption
Amount submitted for redemption under this Section 6(b) may be converted,
in whole or in part, by the Holder, at its option and in its sole
discretion, into Common Stock pursuant to and in accordance with
the conversion procedures set forth in Section 4 hereunder,
mutatis mutandis except
that the Conversion Rate shall be at the EOD Conversion Rate.
The Company covenants and agrees that
it will honor all Notices of Conversion tendered from the Event of
Default Redemption Notice Date through the date all amounts owing
thereon are due and paid in full. The portion of the Event
of Default Redemption Amount converted by the Holder after the
Event of Default Notice Date shall reduce the Event of Default
Redemption Amount of this Note required to be redeemed on the
Company Event of Default Redemption Date. In the event of the
Company’s redemption of any portion of this Note under this
Section 6(b), the
Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest
rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any
redemption premium due under this Section 6(b) is intended by the
parties to be, and shall be deemed, a reasonable estimate of the
Holder’s actual loss of its investment opportunity and not as
a penalty. Upon the payment in full of the Event of Default
Redemption Amount, the Holder shall promptly surrender this Note to
or as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company
hereby waives, any presentment, demand, protest or other notice of
any kind (other than the Holder’s election to declare such
acceleration), and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment of the Event of Default
Redemption Amount hereunder and the Holder shall have all rights as
a Holder of the Note until such time, if any, as the Holder
receives full payment of the Event of Default Redemption Amount
pursuant to this Section
6(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent
thereon.

 

 

 

-21-

 

 

 

Section
7. Optional Redemption; Mandatory
Redemption.

 

a) Optional Redemption. Subject to
the provisions of this Section 7(a), at any time after
the Original Issuance Date, the Company shall have the right to
redeem all, or any part, of the then outstanding principal amount
of this Note, plus accrued but unpaid interest thereon, Make-Whole
Amount, liquidated damages and other amounts owing in respect
thereof through and including the Optional Redemption Date
for a cash redemption price equal
to the Optional Redemption Amount on the Optional Redemption Date (a
“Optional
Redemption”). The Company shall exercise its right
to require an Optional Redemption under this Section 7(a) by delivering a
written notice thereof by facsimile or electronic mail to all, but
not less than all, of the Holders of Notes (the “Optional Redemption
Notice” and the date the Holders of Note received such
notice is referred to as the “Optional Redemption Notice
Date”). The Company may deliver one or more Optional
Redemption Notices hereunder and each such Optional Redemption
Notice shall be irrevocable. Each such Optional Redemption Notice
shall (x) state the date on which the Optional Redemption shall
occur (the “Optional
Redemption Date”) which date shall not be less than
ten (10) calendar days nor more than fifteen (15) calendar days
following the Optional Redemption Notice Date, and (y) state the
aggregate amount of the Notes which are being redeemed in such
Optional Redemption from the Holder and all of the other Holders of
the Notes pursuant to this Section 7(a) and the total
Optional Redemption Amount to be paid by the Company to the Holder
in cash in such Optional Redemption pursuant to this Section 7(a). Notwithstanding
anything herein to the contrary, (i) an Event of Default occurs and
is continuing and/or with the passage of time and/or the giving of
notice or both could occur at any time prior to or on the Optional
Redemption Date, the Company shall provide the Holder a subsequent
notice to that effect, and, the Optional Redemption shall be
cancelled and the applicable Optional Redemption Notice shall be
null and void, and (ii) at any time prior to the date the Optional
Redemption Amount is paid in full, but subject to Section 4(d), the Optional
Redemption Amount may be converted, in whole or in part, by the
Holder, at its option and in its sole discretion, into Common Stock
pursuant to and in accordance with the conversion procedures set
forth in Section 4
hereunder, mutatis
mutandis. The portion of the Optional Redemption Amount
converted by the Holder after the Optional Redemption Notice Date
shall reduce the Optional Redemption Amount of this Note to be
redeemed on the Optional Redemption Date. The Company covenants and agrees that it will
honor all Notices of Conversion tendered from the time of delivery
of the Optional Redemption Notice through the date all amounts
owing thereon are due and paid in full. If the Company
elects to cause an Optional Redemption of this Note pursuant to
this Section 7(a),
then it must simultaneously take the same action with respect to
all of the other Notes. In the event of the Company’s
redemption of any portion of this Note under this Section 7(a), the
Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest
rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any
redemption premium due under this Section 7(a) is intended by the
parties to be, and shall be deemed, a reasonable estimate of the
Holder’s actual loss of its investment opportunity and not as
a penalty. For the avoidance of doubt, the Company shall have no
right to effect an Optional Redemption if any Event of Default has
occurred and is continuing, but any Event of Default shall have no
effect upon the Holder’s right to convert this Note in its
discretion.

 

 

 

-22-

 

 

 

b) Optional Redemption Procedure.
The Optional Redemption Amount is
payable in full in cash on the Optional Redemption Date. If
any portion of the payment pursuant to an Optional Redemption shall
not be paid by the Company by the applicable due date, interest
shall accrue thereon at an interest rate equal to the EOD Interest
Rate. Notwithstanding anything herein contained to the contrary, if
any portion of the Optional Redemption Amount remains unpaid after
such date, the Holder may elect, by written notice to the Company
given at any time thereafter, to invalidate such Optional
Redemption, ab initio, and,
with respect to the Company’s failure to honor the Optional
Redemption, the Company shall have no further right to exercise
such Optional Redemption.

 

c) Mandatory Redemption. If at any
time after the Original Issue Date, the Company closes a Subsequent
Financing, the Company shall redeem in cash from the Holder amounts
equal to the Mandatory Redemption Amount under this Note (each a
“Mandatory
Redemption”) in accordance with the Mandatory
Redemption Payment Amount and Order. The Company shall effectuate
such Mandatory Redemption by delivering written notice thereof (the
“Mandatory
Redemption Notice” and the date such Mandatory
Redemption Notice is deemed delivered hereunder, the
“Mandatory
Redemption Notice Date”) to the Holder. The Mandatory
Redemption Notice shall state (i) the gross proceeds received by
the Company in the Subsequent Financing, (ii) the Mandatory
Redemption Amount (including the calculations used in determining
the Mandatory Redemption Amount), (iii) a detailed breakdown of the
Mandatory Redemption Payment Amount and Order, and (iv) the date on
which the Company is required to pay such Mandatory Redemption
Amount to the Holder in cash (the “Mandatory Redemption
Date”), which date shall be no earlier than fifteen
(15) Business Days following the Mandatory Redemption Notice Date.
Notwithstanding anything herein to the contrary, at any time prior
to the date the Mandatory Redemption Amount is paid in full, but
subject to Section 4(d)
and Section 4(e), the Mandatory Redemption Amount may be
converted, in whole or in part, by the Holder, at its option and in
its sole discretion, into Common Stock pursuant to and in
accordance with the conversion procedures set forth in Section 4 hereunder,
mutatis mutandis. The
Company covenants and agrees that it will honor all Notices of
Conversion tendered from the date of delivery of the Mandatory
Redemption Exercise Notice through the date all amounts owing
thereon are due and paid in full, provided that any such Notice of
Conversion shall first apply to any portion of the Note that is not
subject to the Mandatory Redemption unless the Notice of Conversion
expressly states that it shall apply to a portion of the Note that
is subject to the Mandatory Redemption. The portion of the
Mandatory Redemption Amount converted by the Holder after the
Mandatory Redemption Notice Date shall reduce the amount of this
Note to be redeemed on the Mandatory Redemption Date. The Company covenants and agrees that it will
honor all Notices of Conversion tendered from the time of delivery
of the Mandatory Redemption Notice Date through the date all
amounts owing thereon are due and paid in full. The
Company’s payment of the Mandatory Redemption Proceeds shall
be applied ratably to all of the Holders of the then outstanding
Notes which exercise the right to require a Mandatory Redemption on
the basis of their (or their predecessor’s) initial purchases
of Notes pursuant to the Purchase Agreement. To the extent
redemptions required by this Section 7(c) are deemed or
determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything in this
Section 7(c) to the
contrary, Mandatory Redemptions shall not apply to Exempt
Issuances.

 

d) Mandatory Redemption Procedure.
The payment of cash pursuant to a Mandatory Redemption shall be
payable in full on the Mandatory Redemption Date. If any portion of
the payment pursuant to a Mandatory Redemption shall not be paid by
the Company by the applicable due date, interest shall accrue
thereon at an interest rate equal to the EOD Interest Rate.
Notwithstanding anything to the contrary in this Section 6, in addition to, and
without limiting any other rights hereunder and under the other
Transaction Documents, the Holder may elect, by written notice to
the Company at any time following the Mandatory Redemption Notice
Date through the date of actual payment in full in cash of the
Mandatory Redemption Amount, to rescind such Mandatory
Redemption.

 

 

 

-23-

 

 

 

Section
8. Negative Covenants. As long as
any portion of this Note remains outstanding, unless the Holder
shall have otherwise given prior written consent (which consent may
be withheld, delayed or conditioned in the sole discretion of such
Holder), the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:

 

a) other than
Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, 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;

 

b) other than
Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens, 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;

 

c) 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 (other than in
connection with any reverse stock split reasonably required in
order to satisfy any requirement for listing on a Trading
Market);

 

d) repay, repurchase
or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares
of its Common Stock or Common Stock Equivalents other than as
permitted or required under the Transaction Documents;

 

e) repay, repurchase
or offer to repay, repurchase or otherwise acquire any
indebtedness, other than the Permitted Indebtedness and the Notes
if on a pro-rata basis, other than regularly scheduled principal
and interest payments as such terms are in effect as of the
Original Issue Date, provided that such payments shall not be
permitted if, at such time, or after giving effect to such payment,
any Event of Default exist or occur;

 

f) pay cash dividends
or distributions on any equity securities of the Company and/or the
Subsidiaries;

 

g) other than
transactions and agreements with Ceed2Med, LLC and any of its
Affiliates, enter into any transaction with any Affiliate of the
Company which would be required to be disclosed in any public
filing with the Commission, unless such transaction is made on an
arm’s-length basis and expressly approved by a majority of
the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

 

h) Enter into any
agreement with respect to the foregoing.

 

Section
9. Miscellaneous.

 

a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile or
e-mail, or sent by a nationally recognized overnight courier
service, addressed to the Company, at 80 NE 4th Avenue, Suite 28,
Delray Beach, Florida 33483, Attention: Chief Financial Officer, email
address: kpuzder@exactusinc.com
or an email address or address as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this
Section 9(c), with
a copy, which shall not constitute notice, to Greenberg Traurig,
P.A., 5100 Town Center Circle, Suite 400,| Boca Raton, Florida
33486, email address: rosettob@gtlaw.com.
Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be delivered to the Holder
pursuant to the provisions of Section 5.4 of the Purchase
Agreement, or such other email address or address as the Holder may
specify for such purposes by notice to the Company delivered in
accordance with this Section 9(c). Any notice or
other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the time of transmission, if
such notice or communication is delivered via e-mail at the e-mail
address set forth in this Section prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the time of
transmission, if such notice or communication is delivered via
e-mail at the e-mail address set forth in this Section on a day
that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any subsidiaries,
the Company shall within one (1) Trading Day file such notice with
the Commission pursuant to a Current Report on Form
8-K.

 

 

 

-24-

 

 

 

b) Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of the Company.

 

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

 

d) Governing Law. The parties
hereto expressly and irrevocably agree that this Note shall be
governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all
legal proceedings concerning this Note (whether brought against a
party hereto or its respective Affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively
in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute with regard to this Note, and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such
New York Courts, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. If any
party shall commence an action or proceeding to enforce any
provisions of this Note, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.

 

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

 

f) Amendments. The prior written
consent of a Holder having 50.1% in interest of the aggregate
principal amount of all Notes outstanding at any given time in
question, which shall be calculated based on the principal amount
of all Notes outstanding at the time of such consent, shall be
required for any change, wavier or amendment to the Notes. Any
change, waiver or amendment so approved shall be binding upon all
existing and future holders of this Note and any other Notes;
provided, however, that no such change, waiver or, as applied to
any of the Notes held by any particular holder of Notes, shall,
without the written consent of that particular holder, (i) reduce
the amount of Principal, reduce the amount of accrued and unpaid
Interest, or extend the Maturity Date, of the Notes, (ii)
disproportionally and adversely affect any rights under the Notes
of any holder of Notes; or (iii) modify any of the provisions of,
or impair the right of any holder of Notes under, this Section
9(f).

 

 

 

-25-

 

 

 

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

 

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

 

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

 

j) Payment of Collection, Enforcement and
Other Costs. If (i) this Note is placed in the hands of an
attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action
to collect amounts due under this Note or to enforce the provisions
of this Note, or (ii) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company
creditors’ rights and involving a claim under this Note, then
the Company shall pay the reasonable and documented out-of-pocket
costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements.

 

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

 

l) Secured Obligations. The
obligations of the Company under this Note are secured by all of
the assets of the Company and each of its Subsidiaries pursuant to
the Security Agreement and the Intellectual Property Security
Agreement.

 

[SIGNATURE PAGES FOLLOW]

 

 

-26-

 

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

 

 

 

EXACTUS,
INC., a Nevada
corporation

 

By:  /s/ Emiliano
Aloi                        

Name:
Emiliano Aloi

Title:
President & CEO

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Exactus, Inc. 8% Senior Secured Convertible
Promissory Note]

 

 

 

-27-

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 8% Senior
Secured Convertible Promissory Note, due November 27, 2019 of
Exactus, Inc., a Nevada corporation (the “Company”), into shares of
common stock of the Company (the “Common Stock”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.

 

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

 

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

 

Conversion calculations:

 

Date
to Effect Conversion: __________________

 

Please
confirm the following information:

 

Conversion
Price: ______________

 

Please
check the following box if the Conversion Price is determined
by:

 

EOD
Conversion Price

 

Principal
Amount of Note to be Converted: ____________

 

Payment
of Interest in Common Stock __ Yes __ No

 

If
Yes, $_____ of Interest Accrued on Account of Conversion at
Issue.

 

If
Yes, $_____ of Make-Whole Amount on Account of Conversion at
Issue

 

Number
of Shares of Common Stock to be Issued:

 

Signature: 

 

Name:

 

 

 

Delivery Instructions:

 

 

 

A-1

 

 

 

ANNEX B

 

AMORTIZATION SCHEDULE

 

	

Amortization Schedule - Note 1

	
 

	
 

	
 

	

 

Amortization Redemption

	
 

	
 

	

Day

	

Principal

	

Interest

	

Payment Amount

	

Outstanding Principal

	

Outstanding Interest

	

0

	
 

	
 

	

 $ -

	

 $ 833,333.33

	

 $ 66,666.67

	

30

	
 

	

 $ 5,555.56

	

 $ 5,555.56

	

 $ 833,333.33

	

 $ 61,111.11

	

60

	
 

	

 $ 5,555.56

	

 $ 5,555.56

	

 $ 833,333.33

	

 $ 55,555.56

	

90

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 740,740.74

	

 $ 48,148.15

	

120

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 648,148.15

	

 $ 40,740.74

	

150

	

 $ 92,592.59

	

 $ 7,407.41

	

 $110,000.00

	

 $ 555,555.55

	

 $ 33,333.33

	

180

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 462,962.96

	

 $ 25,925.93

	

210

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 370,370.37

	

 $ 18,518.52

	

240

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 277,777.78

	

 $ 11,111.11

	

270

	

 $ 92,592.59

	

 $ 7,407.41

	

 $ 110,000.00

	

 $ 185,185.18

	

 $ 3,703.70

	

300

	

 $ 92,592.59

	

 $ 3,703.70

	

 $105,925.93

	

 $ 92,592.59

	

 $ -

	

330

	

 $ 92,592.59

	

 $ -

	

 $ 101,851.85

	

 $ (0.00)

	

 $ -

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

 

 

 

 

 

 

B-1

 

 

Schedule 1

 

CONVERSION SCHEDULE

 

This 8% Senior Secured Convertible Promissory Note, due November
26, 2020, in the original principal amount of $8333,333.33 is
issued by Exactus, Inc., a Nevada corporation. This Conversion
Schedule reflects conversions made under Section 4 of the above
referenced Note.

 

Dated:

 

	

Date of Conversion (or for first entry,Original Issue
Date)

	

Amount of Conversion

	

AggregatePrincipalAmountRemainingSubsequent toConversion(or
originalPrincipalAmount)

	

Company Attest

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

 

 

B-2

 

 

 

Schedule 2

 

PERMITTED INDEBTEDNESS AND LIENS

 

“Permitted Indebtedness” means any
Indebtedness.

 

“Permitted Liens” means any Liens arising with respect
to Permitted Indebtedness.

 

 

 

 

 

B-3

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