Document:

Exhibit 10.5

 

FORM OF AMENDED AND RESTATED LOCK-UP AGREEMENT

 

April 12, 2013

 

BioSante Pharmaceuticals, Inc.

111 Barclay Boulevard

Lincolnshire, Illinois 60069

 

Ladies and Gentlemen:

 

This agreement amends and restates in its entirety the lock-up agreement, dated October 3, 2012, between the undersigned and BioSante Pharmaceuticals, Inc., a Delaware corporation (“BioSante”), entered into in connection with the Agreement and Plan of Merger, dated the date thereof, by and between BioSante and ANIP Acquisition Company (d/b/a ANI Pharmaceuticals, Inc.), a Delaware corporation (“ANI”). Reference is made to the Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”), by and among BioSante, ANI Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of BioSante (“Merger Sub”), and ANI, dated as of the date hereof.  Pursuant to the Merger Agreement, BioSante and ANI plan to effect a merger (the “Merger”) in which Merger Sub will be merging with and into ANI, with ANI being the surviving corporation.   Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement.

 

To induce both parties to continue their efforts in connection with the Merger contemplated by the Merger Agreement, the undersigned agrees that, without BioSante’s prior written consent, the undersigned will not, for a period commencing on the closing date of the Merger and ending 180 days after such date (the “Lock-Up Period”), directly or indirectly, or publicly announce an intention to (a) offer, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of any shares of BioSante’s common stock, par value $0.0001 per share, to be received by the undersigned in the Merger (the “Common Stock”), (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing restriction (i) shall not limit the right of the undersigned during the Lock-Up Period to make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into, exercisable for, or exchangeable for shares of Common Stock so long as there are no sales of such shares of Common Stock during the Lock-Up Period and (ii) shall include, without limitation, any securities issued to the undersigned in the Merger in exchange for securities of ANI.

 

Any Common Stock acquired by the undersigned in the open market on or after the closing of the Merger will not be subject to this agreement.  A transfer of Common Stock to an immediate family member or a trust for the benefit of the undersigned or an immediate family member (including by will or intestacy) or a distribution to partners, members or shareholders of the

 

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undersigned may be made, provided that the transferee agrees in writing prior to such transfer to be bound by the terms of this agreement as if it were a party hereto. For purposes of this agreement, “immediate family” means any relationship by blood, marriage or adoption, not more remote than first cousin (including lineal descendants, stepchildren, father, mother, brother or sister of the undersigned or the undersigned’s spouse).

 

The foregoing restriction shall not apply: (1) to bona fide gifts by the undersigned, provided that (a) each resulting transferee of Common Stock executes and delivers to BioSante an agreement certifying that such transferee is bound by the terms of this agreement and has been in compliance with the terms hereof since the date first above written as if it had been an original party hereto and (b) to the extent any interest in Common Stock is retained by the undersigned (or such spouse or family member), such Common Stock shall remain subject to the restrictions contained in this agreement or (2) to sale, transfer or other transaction in or relating to shares of Common Stock in connection with any merger of BioSante with or into any other entity or tender offer by BioSante or any other entity for the Common Stock, in each case which transaction has been approved by at least a majority of BioSante’s Board of Directors.

 

The undersigned agrees and consents to the entry of stop transfer instructions with BioSante’s transfer agent and registrar relating to the transfer of the undersigned’s shares of Common Stock except in compliance with the restrictions described above and authorizes BioSante, during the Lock-Up Period, to cause BioSante’s transfer agent to place a notation on book-entry notations representing the Common Stock.

 

The undersigned represents and warrants that the undersigned has full power and authority to enter into this agreement, and that, upon request, the undersigned will execute any additional documents reasonably necessary to carry out the transactions contemplated hereby.   Any obligations created by this agreement shall be binding upon the heirs, devisees, personal representatives, successors and assigns of the undersigned.

 

The undersigned agrees that in the event of any breach or threatened breach by the undersigned of any covenant, obligation or other provision contained in this agreement, then BioSante shall be entitled (in addition to any other remedy that may be available to BioSante) to (a) a decree or order of specific performance to enforce the observance and performance of such covenant, obligation or other provision and (b) an injunction restraining such breach or threatened breach.

 

Any term or provision of this agreement that is invalid or unenforceable under applicable law, such provision shall be excluded from this agreement and the balance of this agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

The provisions of this agreement may not be amended or waived by the undersigned party without the prior written consent of BioSante.

 

This agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to such State’s principles of conflict of laws.  Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.

 

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Very   truly yours,
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

3Exhibit 4.1

 

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

 

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY
REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 4(d)(ii) AND 16(a) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE
AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT
TO SECTION 4(d)(ii) OF THIS NOTE. 

 

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE
DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. 

 

BOLDFACE GROUP, INC.

12% SECURED CONVERTIBLE NOTE

 

	Issuance Date: April 8, 2013	    Original Principal Amount: U.S. $[__________]

 

FOR
VALUE RECEIVED, BOLDFACE Group, Inc., a Nevada corporation (the “Company”), hereby promises to pay to the
order of [____________________] or its registered assigns (“Holder”)
the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion
or otherwise, the “Principal”) when due, whether upon the Maturity Date, acceleration,
redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”)
on any outstanding Principal at a rate per annum equal to the Interest Rate (as defined below), from the date set out above as
the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date
(as defined below), or the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the
terms hereof).  This Secured Convertible Note (including all Secured Convertible Notes issued in exchange, transfer or replacement
hereof, this “Note”) issued pursuant to the Securities Purchase Agreement (as defined below).

  

    	 

    	 

    

 

1.DEFINITIONS.
 For purposes of this Note, the following terms shall have the following meanings. Capitalized terms used and not otherwise
defined herein that are defined in the Securities Purchase Agreement shall have the meanings given such terms in the Securities
Purchase Agreement.

 

(a)“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.

 

(b)“Calendar
Month” means the period beginning on and including the first of each calendar month and ending on and including the last
day of such calendar month.

 

(c)“Convertible
Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
or exchangeable for Common Stock.

 

(d)“Eligible
Market” means The New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market or the Principal Market.

 

(e)“Fundamental
Transaction” means that (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 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, or (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 or group of Persons whereby such other Person or group acquires more than
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).

 

(f)“GAAP”
means United States generally accepted accounting principles, consistently applied.

 

(g)“Interest
Rate” means twelve percent (12%) per annum, subject to periodic adjustment pursuant to Section 3.

 

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(h)“Maturity
Date” shall mean December 8, 2013; provided, however, the Maturity Date may be extended at the mutual agreement in
writing of the Holder and the Company. 

 

(i)“New
Subsidiary” means, as of any date of determination, any Person in which the Company after the date hereof, directly or
indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person or
(ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing,
collectively, “New Subsidiaries.”

 

(j)“Options”
means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(k)“Parent
Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock
or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(l)“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity  and a government or any department or agency thereof.

 

(m)“Principal
Market” means the OTC Bulletin Board.

 

(n)“Required
Holders” means the holders of the Notes representing at least a majority of the aggregate principal amount of the Notes
then outstanding.

 

(o)“Securities
Purchase Agreement” means that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company
and the initial holder of the Note, pursuant to which the Company issued the Note, as may be amended from time to time.

 

(p)“Successor
Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction
or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor Entity
shall mean such Person’s Parent Entity.

 

2. PRINCIPAL;
PREPAYMENT.  For value received, the Company hereby promises to pay to the order of the Holder, in lawful money of the
United States of America and in immediately available funds the Principal on the Maturity Date. Subject to Section 4(f), the Company
at any time may prepay any portion of the outstanding Principal, accrued and unpaid Interest
or accrued and unpaid Late Charges on Principal and Interest, if any. The Company acknowledges
that the Principal of this Note exceeds the Purchase Price (after taking into account the OID) and that such OID will be fully
earned and charged to the Company as of the Issuance Date and paid to the Holder as part of the Principal as set forth in this
Note.

 

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3.INTEREST; INTEREST RATE.

 

(a)Interest on
this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year and actual days elapsed
and shall be payable in arrears on the Maturity Date (the “Interest Date”).  Interest shall be payable
on the Interest Date, to the record holder of this Note on the Interest Date, in cash.

 

(b)From and after
the occurrence of an Event of Default, the Interest Rate shall be increased to fourteen percent (14%).  In the event that
such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as
of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event
of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and
including the date of cure of such Event of Default.  

 

4.CONVERSION OF NOTES. This
Note shall be convertible into shares of Common Stock on the terms and conditions set forth in this Section 4.

 

(a)Conversion
Right.  Subject to the provisions of Section 4(e), at any time or times on or after the Issuance Date, the Holder shall
be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued,
fully paid and non-assessable shares of Common Stock in accordance
with Section 4(d), at the Conversion Rate (as defined below).  The Company shall not issue any fraction of a share of Common
Stock upon any conversion.  If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up to the nearest whole share.  The Company shall pay any and all
transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance and delivery
of Common Stock upon conversion of any Conversion Amount.

 

(b)Conversion
Rate.  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 4(a)
shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).

 

(i)“Conversion
Amount” means the portion of the Principal to be converted or otherwise with respect to which this determination is being
made, plus all accrued and unpaid Interest with respect to such portion of the Principal amount
and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest.

 

(ii)“Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination, $0.25, subject to adjustment
as provided herein.

 

(c)Right to
Reset the Conversion Price. If the closing price of the Common Stock is less than $0.30 on the earlier of (the “Reset
Date”) (i) Maturity Date or (ii) the date of the completion of a subsequent financing in which the Company raises at
least $5,000,000 in gross proceeds (the “Subsequent Offering”), the Holder shall have a one-time right to reset
the Conversion Price on the Reset Date (the “Reset Right”). If the Holder exercises its Reset Right, (x) with
respect to clause (i) above, the Conversion Price shall equal to 70% of the VWAP for the five (5) consecutive Trading Days immediately
preceding the Reset Date, as proportionately adjusted to reflect any stock splits, stock dividends, combination of shares or like
events, or (y) with respect to clause (ii) above, the Conversion Price shall equal to 70% of the VWAP for the five (5) consecutive
Trading Days immediately after the Reset Date, as proportionately adjusted to reflect any stock splits, stock dividends, combination
of shares or like events.

 

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(d)Mechanics
of Conversion.

 

(i)Optional
Conversion.  To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time, on such
date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company and (B) if required hereunder, surrender this Note to a nationally recognized overnight delivery service for delivery
to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On
or before the next Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent.  On or before the fifth (5th)
Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall
(1) cause the Transfer Agent to (X) provided that the Transfer Agent is participating in the Fast Automated Securities Transfer
Program of DTC credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s
or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified
in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled, and (2) pay to the Holder in cash an amount equal to the accrued and unpaid Interest
on the Conversion Amount up to and including the Conversion Date.  If this Note is physically surrendered for conversion as
required hereunder and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no event later than five (5) Business Days after receipt of this
Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note (in
accordance with Section 16(d)) representing the outstanding Principal not converted.  The Person or Persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.  

 

(ii)Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names
and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered
Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company
and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes,
including, without limitation, the right to receive payments of principal and interest hereunder, notwithstanding notice to the
contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the
Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record
the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount
as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 15. Notwithstanding
anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented
by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included
in a Conversion Notice) requesting physical surrender and reissue of this Note.  The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

 

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(iii)Disputes.
 In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion
of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute
in accordance with Section 21.

 

(e)Limitations
on Conversions.  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, pursuant to Section 4 or otherwise, to the extent that after giving effect to such issuance after conversion
as set forth on the applicable Conversion Notice, 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), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note
with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be
issuable upon (i) conversion of the remaining, unconverted portion of this Note beneficially owned by the Holder or any of its
Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including,
without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence,
for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing
to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible
for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 4(e)
applies, the determination of whether this Note is exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Note is exercisable shall be in the sole discretion of the Holder, and the submission
of a Conversion Notice shall be deemed to be the Holder’s determination of whether this Note is exercisable (in relation
to other securities owned by the Holder together with any Affiliates) and of which portion of this Note is exercisable, in each
case subject to the Beneficial Ownership Limitation, 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(e),
in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may
be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
conversion of this Note. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 4(e), 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 provisions of this Section 4(e) shall continue to apply.
Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.
The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms
of this Section 4(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained 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.

 

(f)In the event
the Company elects to repay all or a part of the Principal and any accrued but unpaid Interest thereon in cash or out of the proceeds
from a Subsequent Offering, the Company shall provide written notice to the Holder of such election to repay, and the Holder shall
have the right to convert all or a part of the Note (as provided herein) within five (5) days from the date of such notice. The
Company shall not repay any of the Principal or any accrued but unpaid Interest thereon during such five-day period.

 

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5.RIGHTS UPON EVENT OF DEFAULT.

 

(a)Event
of Default.  Each of the following events shall constitute an “Event of Default”:

 

(i)the
Company’s failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by
delivery of the required number of shares of Common Stock within ten (10) Trading Days after
the applicable Conversion Date or exercise date (as the case may be);

 

(ii)the
Company’s failure to pay to the Holder any amount of Principal (including, without limitation, any redemption payment), Interest,
Late Charges or other material amounts when and as due under this Note or any other Transaction Document (as defined in the Securities
Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions
contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges
when and as due, in which case only if such failure remains uncured for a period of at least
fifteen (15) days;

 

(iii)the
Company, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief
of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator
or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E)
admits in writing that it is generally unable to pay its debts as they become due;

 

(iv)any
case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or
decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 5(a)(iii)
hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect
to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of
the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of sixty
(60) days;

 

(v)a
final judgment or judgments for the payment of money aggregating in excess of $100,000 are rendered
against the Company and/or any of its Subsidiaries and which judgments are not, within thirty
(30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged
within thirty (30) days after the expiration of such stay; provided, however, any judgment which
is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $100,000
amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of
such insurance or indemnity within thirty (30) days of the issuance of such judgment;

 

(vi)the
Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace
period, any payment with respect to any Indebtedness in excess of $100,000 due to any third party (other than, with respect to
unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or
is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $100,000, which breach
or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer
to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default
or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely
to have a Material Adverse Effect (as defined in the Securities Purchase Agreement) on the Company;

 

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(vii)other
than as specifically set forth in another clause of this Section 5(a), the Company or any Subsidiary breaches any material representation,
warranty or covenant of any Transaction Document (including, without limitation, the Security Documents and the Guaranties), except,
in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured after the
cure period;

  

(viii)any
Material Adverse Effect occurs;

  

(ix)any
material provision of any Transaction Document (including, without limitation, the
Security Documents and the Guaranties) shall at any time for any reason (other than pursuant to the express terms thereof)
cease to be, in a material way, valid and binding on or enforceable against the parties thereto,
or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company
or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability
thereof;

  

(x)the
Security Documents shall for any reason fail or cease to create a separate valid and perfected and, except to the extent permitted
by the terms hereof or thereof, 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);

  

(xi)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 thirty (30) consecutive days,
the cessation or substantial curtailment of revenue producing activities at any facility of the Company or any Subsidiary, if any
such event or circumstance could have a Material Adverse Effect;

 

(xii)the
Company will promptly (but in any event, within 2 Business Days) notify the Collateral Agent (as defined in the Security Agreement)
in writing of the occurrence of any Event of Default, and the failure to so promptly notify the Collateral Agent shall itself be
an Event of Default.

 

    	8

    	 

    

 

(xiii)any
Event of Default (as defined in the other Notes) occurs with respect to any other Notes.

 

(b)Rights Upon
Event of Default.  If any Event of Default specified in clauses 5(a)(iii) or (iv) occurs, then the full principal amount
of this Note, together with any other amounts owing in respect thereof, to the date of the Event of Default, shall become immediately
due and payable without any action on the part of the Holder, and if any other Event of Default occurs, the full principal amount
of this Note, together with any other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder’s
election, immediately due and payable in cash. Commencing five (5) business days after the occurrence of any Event of Default
that results in the eventual acceleration of this Note, interest on this Note shall begin to accrue at the rate of interest specified
in Section 3(b), or such lower maximum amount of interest permitted to be charged under applicable law. All Notes for which
the full amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company.
The Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time
prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment under
this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 

6.RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL. The Company shall not enter into or be party to a Fundamental Transaction
unless (i)  the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction
Documents in accordance with the provisions of this Section 6 pursuant to written agreements in form and substance satisfactory
to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to
the principal amounts then outstanding and the interest rates of the Notes held by such holder,
having similar conversion rights as the Notes and having similar ranking to the Notes, and satisfactory to the Required Holders
and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted
on or listed for trading on an Eligible Market.  Upon the occurrence of any 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.  Upon consummation of the Fundamental Transaction, the Successor Entity shall
deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 7 and 16, which shall continue to be receivable thereafter)
issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction,
such shares of publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity)
which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted
immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note),
as adjusted in accordance with the provisions of this Note.  The provisions of this Section 6 shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

 

    	9

    	 

    

 

7.RIGHTS UPON ISSUANCE OF PURCHASE
RIGHTS AND OTHER CORPORATE EVENTS.

 

(a)Purchase
Rights.  If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record holders of any class 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 taking into account any limitations or restrictions on the convertibility of this Note)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights (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).

 

(b)Other Corporate
Events.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option,
(i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder
would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon
the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of
this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as
the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion
Rate.  Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders.
 The provisions of this Section 7 shall apply similarly and equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this Note.

 

    	10

    	 

    

 

8.CERTAIN ADJUSTMENTS.

 

(a)Stock Dividends
and Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of this
Note), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then in each case the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such
event, and the number of shares issuable upon conversion of this Note shall be proportionately adjusted such that the aggregate
Conversion Price of this Note shall remain unchanged. Any adjustment made pursuant to this Section 8(a) shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

  

		(b)	Subsequent Equity Sales.

 

(i)If
the Company or any Subsidiary thereof, as applicable, at any time while this Note is outstanding, shall sell or grant any option
to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than
the Conversion Price then in effect (such lower price, the “New Issuance Price” and such issuances collectively,
a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to Notes, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance at such
effective price), then simultaneously with the consummation of each Dilutive Issuance the Conversion Price shall be reduced and
only reduced by multiplying the Conversion Price by a fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common Stock which the offering
price for such Dilutive Issuance would purchase at the then Conversion Price, and the denominator of which shall be the sum of
the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares
of Common Stock so issued or issuable in connection with the Dilutive Issuance (the “Adjusted Price”) (subject to
adjustment for stock splits, reverse splits and similar capital adjustments). Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under
this Section 8(b) in respect of an Exempt Issuance.

 

    	11

    	 

    

 

(ii)The
Company shall promptly notify the Holder, in writing, following the issuance or deemed issuance of any Common Stock or Common Stock
Equivalents subject to this Section 8(b), indicating therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes
of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 8(b), upon the occurrence
of any Dilutive Issuance, the Holder is entitled to convert the Note at the Adjusted Price regardless of whether the Holder accurately
refers to the Adjusted Price in the Conversion Notice.

  

(iii)For
clarity, no adjustment of the number of Conversion Shares shall be made upon any adjustment of the Conversion Price pursuant to
this Section 8(b).

  

(iv)If
the purchase or exercise price provided for in any Common Stock Equivalents, or the rate at which any Common Stock Equivalents
are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion
Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect
at such time had such Common Stock Equivalents provided for such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this
Section 8(b)(iv), if the terms of any Common Stock Equivalents that was outstanding as of the date of issuance of this Note are
increased or decreased in the manner described in the immediately preceding sentence, then such Common Stock Equivalents and the
shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of
the date of such increase or decrease.

  

(v)No
adjustment pursuant to this Section 8(b) shall be made if such adjustment would result in an increase of the Conversion Price then
in effect.

  

(c)Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 8(a) above, if at any time
the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, Notes, 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 conversion 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).

 

    	12

    	 

    

 

(d)Pro Rata
Distributions. If the Company, at any time while this Note is outstanding, shall distribute to all holders of Common Stock
(and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or Notes to subscribe
for or purchase any security, then in each such case the Conversion Price shall be adjusted by multiplying the Conversion Price
in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets
or evidence of indebtedness or rights or Notes so distributed applicable to one outstanding share of the Common Stock as determined
by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder
of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record
date mentioned above.

  

(e)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 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, or (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 or group of Persons whereby such other Person or group
acquires more than 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, at the option of the Holder (without regard
to any limitation in 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 exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion
of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the 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. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction,
(2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving
a person or entity not traded on a national securities exchange, the Company or any Successor Entity (as defined below) shall,
at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental
Transaction, purchase this Note from the Holder by paying to the Holder an amount of cash equal
to the Black Scholes Value of the remaining unconverted portion of this Note on the date of the consummation of such Fundamental
Transaction. The Company shall cause any Successor Entity to assume in writing all of the obligations of the Company under this
Note and the other Transaction Documents in accordance with the provisions of this Section 8(f) 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, 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 exercisable
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 an 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.

 

(f)Calculations.
All calculations under this Section 8 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 8, 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 treasury shares, if any) issued and outstanding.

 

    	13

    	 

    

 

(g)Notice to
Holder.

 

(i)Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 8, the Company shall
promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and any resulting adjustment to the
number of Conversion Shares 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 rights or Notes to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Note Register (as defined below) of the Company, at least five (5) calendar days, or such longer
period as may be required by law, 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 Notes, 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 Notes 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 mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current
Report on Form 8-K. The Holder shall remain entitled to convert this Note during the period commencing on the date of such notice
to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

9.[RESERVED].  

 

10. SECURITY. This Note
is secured to the extent and in the manner set forth in the Security Documents (as defined in the Securities Purchase Agreement).

 

    	14

    	 

    

 

11.NONCIRCUMVENTION.
 The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note,
and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required
to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i) shall
not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then
in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of
the Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Notes, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of the Notes then outstanding (without regard to any limitations
on conversion).

 

12.VOTING RIGHTS.  The
Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to Nevada Revised
Statutes, and as expressly provided in this Note.

 

13.COVENANTS.  

 

(a)Rank.
All payments due under this Note (a) shall rank pari passu with all other Notes and (b) shall
be senior to all other Indebtedness of the Company and its Subsidiaries, except for indebtedness with respect to the Permitted
Debt (as defined below).

 

(b)Restriction
on Additional Indebtedness. So long as this Note shall remain in effect and until any outstanding principal and interest and
all fees and all other expenses or amounts payable under this Note have been paid in full, the Company shall not without the written
prior approval of the Required Holders: incur, create, assume, guaranty or permit to exist any indebtedness that ranks senior in
priority to, or pari passu with, the obligations under this Note and the Securities Purchase Agreement, except for (i) indebtedness
existing on the date hereof as provided under the Securities Purchase Agreement or disclosed in the SEC Reports (as defined in
the Securities Purchase Agreement), (ii) indebtedness that ranks senior in priority to or pari passu with the obligations under
this Note and the Purchase Agreement on the Original Issue Date, (iii) indebtedness created as a result of a subsequent financing
if the gross proceeds to the Company of such financing are equal to or greater than the aggregate principal amount of the outstanding
Notes and such Notes are repaid in full upon the closing of such financing, (iv) equipment lease financing created by the Company
or any Subsidiary in the ordinary course of business after the date hereof, where the sole collateral for such financing is the
equipment so leased, and (v) any factoring arrangements entered into by the Company and/or any of its Subsidiaries with any third-party
factor (the indebtedness in clauses (i) through (v) shall be collectively referred to as the “Permitted Debt”).

  

(c)Restricted
Payments.  The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly,
redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or
in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any
Indebtedness, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at
the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an
event constituting an Event of Default has occurred and is continuing or (ii) an event that with
the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

 

    	15

    	 

    

 

(d)Restriction
on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights
of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction
or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers,
conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries that, in the aggregate, do not
have a fair market value in excess of $250,000 in any twelve (12) month period, (ii) sales of inventory in the ordinary course
of business and (iii) repayments of any amount of Permitted Debt.

  

(e)Maturity
of Indebtedness. Except for Permitted Debt, the Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, permit any Indebtedness of the Company or any of the Subsidiaries
to mature or accelerate prior to the Maturity Date.

  

(f)New
Subsidiaries. Simultaneously with the acquisition or formation of each material New Subsidiary, the Company shall cause such
New Subsidiary to execute, and deliver to each holder of Notes, all Security Documents (as defined in
the Securities Purchase Agreement) and Guaranties (as defined in the Securities Purchase Agreement) as requested by the
Holder.

  

(g)Change
in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company
and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The Company shall
not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure
or purpose

 

(h)Internal
Accounting Controls.  So long as this Note is outstanding, the Company and each of its Subsidiaries shall maintain, in
all material respects, a system of internal accounting controls consistent with the internal accounting controls described in Section
3(q) of the Securities Purchase Agreement).

 

14.VOTE TO ISSUE, OR CHANGE THE
TERMS OF, NOTES.  The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting
of the Required Holders shall be required for any change or amendment to this Note.

 

15.TRANSFER.
This Note and any shares of Common Stock issued upon conversion of this Note may only be offered,
sold, assigned or transferred by the Holder without the consent of the Company, provided that the provisions of Section 4.2 of
the Securities Purchase Agreement are complied with in all respects.

 

    	16

    	 

    

 

16.REISSUANCE OF THIS NOTE.

 

(a)Transfer.
 If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will issue,
promptly following the satisfaction of the provisions of Section 4.2 of the Securities Purchase Agreement, and deliver upon the
order of the Holder a new Note (in accordance with Section 16(d)), in the name of the validly registered assigns or transferee,
representing the outstanding Principal being transferred by the Holder and, if less than the
entire outstanding Principal is being transferred, a new Note (in accordance with Section 16(d)) to the Holder representing the
outstanding Principal not being transferred.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of Section 4(d)(ii) and this Section 16(a), following conversion or redemption of any portion
of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

 

(b)Lost, Stolen
or Mutilated Note.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company
shall execute and deliver to the Holder a new Note (in accordance with Section 16(d)) representing the outstanding Principal.

 

(c)Note Exchangeable
for Different Denominations.  This Note is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Note or Notes (in accordance with Section 16(d) and in principal amounts of at least $100,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.

 

(d)Issuance
of New Notes.  Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining
outstanding (or in the case of a new Note being issued pursuant to Section 16(a) or Section 16(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have
an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have
the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest
of this Note, from the Issuance Date.

 

(e)Registered
Instrument. This Note is a registered instrument and is not a bearer instrument. The Note is registered as to both Principal
and Interest with the Company and its Transfer Agent and all payments hereunder shall be made to the named Holder or, in the event
of a transfer, to the transferee identified in the record of ownership of the Note maintained by the Holder on behalf of the Company
and the Transfer Agent. Transfer of this Note may not be effected except in accordance with the provisions of the Note and the
Securities Purchase Agreement.

 

    	17

    	 

    

 

17.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.  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 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 (including, without limitation,
compliance with Section 8).

 

18.PAYMENT OF COLLECTION, ENFORCEMENT
AND OTHER COSTS.  If (a) 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 (b) 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 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.

 

19.CONSTRUCTION; HEADINGS.  This
Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person
as the drafter hereof.  The headings of this Note are for convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

 

20.FAILURE OR INDULGENCE NOT WAIVER.
 No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege.

 

21.DISPUTE RESOLUTION.  In
the case of a dispute as to the determination of the VWAP or the arithmetic calculation of the Conversion Rate, the Company shall
submit the disputed determinations or arithmetic calculations via facsimile within three (3) Business Days of receipt of the Conversion
Notice or other event giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable
to agree upon such determination or calculation within two (2) Business Day2 of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination
of the VWAP to an independent, reputable investment bank selected by the Company and approved by the Holder  (such approval
not to be unreasonably withheld or delayed) or (b) the disputed arithmetic calculation of the Conversion Rate to the Company’s
independent, outside accountant.  The Company, at the Company’s expense, shall cause the investment bank or the accountant,
as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later
than five (5) Business Days from the time it receives the disputed determinations or calculations.  Such investment bank’s
or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

    	18

    	 

    

 

22.NOTICES; PAYMENTS.

 

(a)Notices.
 Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 5.3 of the Securities Purchase Agreement.  The Company shall provide the Holder with prompt written
notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore.
 Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon
any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least ten  days prior to the date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each
case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the
Holder.

 

(b)Payments.
 Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service
to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Schedule of Purchasers attached to the Securities Purchase Agreement); provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed
to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding
day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such
date.  Any amount of Principal or other amounts due under the Transaction Documents, other than Interest, which is not paid
when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount
at the rate of fourteen percent (14%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).

 

    	19

    	 

    

 

23.CANCELLATION.  After
all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically
be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

 

24.CURRENCY. All dollar amounts
referred to in this Note are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Note shall
be paid in U.S. Dollars.

 

25.WAIVER
OF NOTICE.  To the extent permitted by law, the Company hereby irrevocably waives demand,
notice, presentment, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

 

26.GOVERNING
LAW; JURISDICTION; JURY TRIAL.  This Note shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  The
Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, 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 any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper.  The Company 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
to such party at the address it set forth on the signature page hereto 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 manner permitted by law.  In the event that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note.  Nothing contained herein
shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for
such obligations, or to enforce a judgment or other court ruling in favor of the Holder.   THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	20

    	 

    

 

27.MAXIMUM
PAYMENTS. Nothing contained in this Note shall, or shall be deemed to, establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges under this Note exceeds the maximum permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the Company.

 

[Signature page follows]

 

    	21

    	 

    

  

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

	 	BOLDFACE GROUP, INC.
	 	 
	 	By:	 
	 	Name:	Nicole Ostoya
	 	Title:	Chief Executive Officer and President

 

    	 

    	 

    

 

EXHIBIT I

 

BOLDFACE GROUP, INC.

CONVERSION NOTICE

  

Reference is made to
the 12% Secured Convertible Note (the “Note”) issued to the undersigned by BOLDFACE Group, Inc., a Nevada corporation
(the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of common stock, $0.001 par value per share (the “Common
Stock”), of the Company, as of the date specified below.

 

	Date of Conversion:	 
	 	 
	Aggregate Conversion Amount to be converted:	 
	 	 
	Conversion Price:	 
	 	 
	Number of shares of Common Stock to be issued:	 

 

Please issue the Common
Stock into which the Note is being converted in the following name and to the following address: 

 

	Issue to:	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	Facsimile Number:	 
	 	 
	Account Number:	 
	(if electronic book entry transfer)	 
	 	 
	Transaction Code Number:	 
	(if electronic book entry transfer)	 

 

	 	Holder:  	 
	 	 	 
	 	By:	 
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 
	 	 	 
	 	Date:	 

 

    	 

    	 

    

 

EXHIBIT II

 

 

ACKNOWLEDGMENT

 

The Company hereby
acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common
Stock in accordance with the transfer agent instructions dated _____________, 20__ from the Company.

  

	 	BOLDFACE GROUP, INC.
	 	 
	 	By:	
	 	 	Name:
	 	 	Title:

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