Document:

Exhibit 10.5

 

EXECUTION COPY

 

 

University of Pennsylvania

 

Third Amendment to the Amended and Restated
Patent License Agreement

 

This Third Amendment
(the “Third Amendment”) is made and entered into as of December 12, 2011 (the “Effective Date”) by and
between The Trustees of the University of Pennsylvania (hereinafter referred to as “Penn”) and Advaxis, Inc., a corporation
organized and existing under the laws of Delaware (hereinafter referred to as “Company”) having a place of business
at 305 College Road East, Princeton, NJ 08540.

 

WHEREAS, Penn and Company
entered into an Amended and Restated License Agreement dated February 13, 2007 (the “Agreement”); and

 

WHEREAS, Penn and Company
entered into a First Amendment to the Agreement dated March 26, 2007 (the “First Amendment”); and

 

WHEREAS, Penn and Company
entered into a Second Amendment to the Agreement dated May 10, 2010 (the “Second Amendment”); and

 

WHEREAS, Company desires
to further amend the Agreement to add docket numbers W5279 and X5631 (hereinafter referred to as the “Additional Penn Dockets”)
developed under the supervision of, or in collaboration with, Dr. Yvonne Paterson;

 

All terms not specifically
defined herein will have the meaning ascribed to them in the Agreement, as amended.

 

Now, therefore, in
consideration of the foregoing premises, and intending to be legally bound hereby, the parties hereto agree as follows:

 

	 	1)	Attachment 1 - List of Intellectual Property is deleted in its entirety and replaced with Exhibit 1 to this Third Amendment, which includes the Additional Penn Dockets.

 

	 	2)	On the Effective Date of this Third Amendment Company shall pay to Penn a non-refundable, non-assessable option exercise fee of $20,000.

 

	 	3)	Within thirty (30) days of the execution of this Third Amendment, Company agrees to pay all historical patent expenses associated with this Third Amendment, if any, that adds the Additional Dockets. These expenses include, but are not limited to, all historically accrued patent and licensing expenses, attorney’s fees, official fees and all other charges incident to the preparation, prosecution and maintenance of the Penn Patent Rights that were incurred and docketed by Penn relating to the Additional Penn Dockets on or before the Effective Date of this Third Amendment.

 

	 	4)	This section reaffirms Company’s obligations to reimburse Penn for all documented attorney’s fees, expenses, official fees and other charges incident to the preparation, prosecution, maintenance and licensing of Penn Patent Rights pursuant to the terms of the Agreement, as amended.

 

    	 

    	 

    

 

EXECUTION COPY

 

	 	5)	Except as specifically modified or amended hereby, the Agreement, as amended by the First Amendment and the Second Amendment, shall remain in full force and effect.

 

	 	6)	No provision of this Amendment may be modified or amended except expressly in a writing signed by all parties nor shall any term be waived except expressly in a writing signed by the party charged therewith.

 

	 	7)	This Third Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which taken constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties, intending
to be legally bound, have caused this Third Amendment to be executed by their duly authorized representatives.

 

	THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
	By:	/s/ Michael J. Cleare	 
	Name:	Michael J. Cleare, PhD	 
	Title:	Executive Director	 
	Date:	12/07/11	 

 

	ADVAXIS, INC.	 
	By:	/s/ John Rothman	 
	Name:	John Rothman	 
	Title:	Executive VP: Science & Operations	 
	Date:	December 2, 2011	 

 

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Exhibit 1

List of Intellectual Property

 

	D751	Live, Recombinant Listeria Monocytogenes Vaccines and Production of Cytotoxic T-Cell Response

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	02/07/1994	 	08/192,857	 	 	 	CIP	 	Abandoned	 	US
	10/31/1990	 	07/606,546	 	 	 	Utility	 	Abandoned	 	US
	03/26/1993	 	08/038,356	 	 	 	CIP	 	Abandoned	 	US
	12/30/1994	 	08/366,477	 	5,830,702	 	Continuation	 	Issued	 	US

 

	H1219	Specific Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine Vector

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	11/03/1995	 	PCT/U51995/014741	 	11/03/1995	 	PCT	 	Expired	 	WPO
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	Germany
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	Switzerland
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	Liechtenstein
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	Belgium
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	Ireland
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	France
	11/03/1995	 	95939926.2	 	0790835	 	EPOValidated	 	Issued	 	UK
	11/03/1995	 	515534/96	 	3995712	 	National Phase	 	Issued	 	Japan
	11/08/1994	 	08/336,372	 	6,051,237	 	Utility	 	Issued	 	US
	11/03/1995	 	95939926.2	 	0790835	 	National Phase	 	Issued	 	EPO
	11/03/1995	 	2,204,666	 	2,204,666	 	National Phase	 	Issued	 	Canada
	05/10/2007	 	2007-125462	 	 	 	Divisional	 	Filed	 	Japan

 

Methods and compositions for Immunotherapy
of cancer  

	03/27/2000	 	09/535,212	 	6,565,852	 	CIP	 	Issued	 	US
	05/20/2003	 	10/441,851	 	7,135,188	 	Continuation	 	Filed	 	US

 

	J1598	Bacterial Vaccines Comprising Auxotrophic, Attenuated Strains of $1(Listeria)Expressing Heterologous Antigens

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	11/13/1998	 	PCT/US1998/024357	 	 	 	PCT	 	Expired	 	WPO

 

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	 	Immunogenic Compositions Comprising DAL/DAT Double-Mutant, Auxotrophic, Attenuated Strains of Listeria and their Methods of Use

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	11/13/1998	 	2,309,790	 	05083948	 	National Phase	 	Issued	 	Canada
	11/18/1997	 	08/972,902	 	6,099,848	 	Utility	 	Issued	 	US
	11/13/1998	 	14108/99	 	730296	 	National Phase	 	Issued	 	Australia
	10/07/2008	 	12/216,806	 	 	 	Continuation	 	Filed	 	US
	11/13/1998	 	98957980.0	 	1032417	 	National Phase	 	Issued	 	EPO
	11/13/1998	 	98957980.0	 	 	 	EPOValidated	 	Issued	 	France
	11/13/1998	 	98957980.0	 	698 41 437.

3-08	 	EPOValidated	 	Issued	 	Germany
	11/13/1998	 	98957980.0	 	 	 	EPOValidated	 	Issued	 	UK

 

	 	Isolated nucleic adds comprising Listeria dal and dat genes

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	03/07/2000	 	09/520,207	 	6,504,020	 	Divisional	 	Issued	 	US
	05/01/2002	 	10/136,253	 	6,635,749	 	Divisional	 	Issued	 	US

 

	 	A Bacterial Vaccine Vector and Methods of Use Thereof

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	09/11/2003	 	10/660,194	 	7,488,487	 	Continuation	 	Issued	 	US

 

	L2134	Compositions, Methods, and Kits for Enhancing the Immunogenicity of a Bacterial Vaccine Vector

 

	File Date	 	Serial No.	 	Patent No.	 	App, Type	 	Status	 	Country
	01/09/2003	 	60/439,009	 	 	 	Provisional	 	Expired	 	US
	01/04/2001	 	60/259,738	 	 	 	Provisional	 	Expired	 	US
	 	 	20044204751	 	 	 	National Phase	 	Abandoned	 	Australia
	 	 	06104227 1	 	 	 	National Phase	 	Abandoned	 	Hong Kong
	01/08/2004	 	PCT/US2004/000366	 	 	 	PCT	 	Expired	 	WPO
	01/08/2004	 	04700858.6	 	 	 	EPO	 	Abandoned	 	EPO
	 	 	2,512,812	 	 	 	National Phase	 	Abandoned	 	Canada
	 	 	169553	 	 	 	National Phase	 	Abandoned	 	Israel
	01/08/2008	 	2006-500840	 	 	 	National Phase	 	Abandoned	 	Japan
	04/27/2006	 	10/541,614	 	 	 	National Phase	 	Filed	 	US

 

	02876	Compositions and Methods for Enhancing the Immunogenicity of Antigens
	 	 
	Q3610	Antibiotic Resistance Free DNA Vaccines

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	08/13/2004	 	60/601,493	 	 	 	Provisional	 	Expired	 	US
	 	 	05810446.4	 	 	 	EPO	 	Abandoned	 	EPO
	 	 	2007-525862	 	 	 	National Phase	 	Filed	 	Japan
	08/15/2005	 	2,577,270	 	 	 	National Phase	 	Abandoned	 	Canada
	08/15/2005	 	PCT/US2005/028896	 	 	 	PCT	 	Expired	 	WPO
	08/15/2005	 	2005271247	 	 	 	National Phase	 	Abandoned	 	Australia
	08/15/2005	 	11/203,408	 	 	 	Utility	 	Filed	 	US

 

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	Q3614	Methods for Constructing Antibiotic Resistance Free Vaccines

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	08/15/2005	 	PCT/US2005/028895	 	 	 	PCT	 	Expired	 	WPO
	08/13/2004	 	60/601,492	 	 	 	Provisional	 	Expired	 	US
	08/15/2005	 	2005271246	 	 	 	National Phase	 	Abandoned	 	Australia
	08/15/2005	 	2,577,306	 	 	 	National Phase	 	Abandoned	 	Canada
	08/15/2005	 	2007-525861	 	 	 	National Phase	 	Filed	 	Japan
	08/15/2005	 	05808671.1	 	 	 	EPO	 	Filed	 	EPO
	08/15/2005	 	11/203,415	 	 	 	Utility	 	Filed	 	US

 

	 	Antibiotic Resistance Free Vaccines and Methods for Constructing and Using Same

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	04/16/2007	 	11/785,249	 	 	 	CIP	 	Filed	 	US
	04/27/2007	 	11/818,965	 	 	 	CIP	 	Filed	 	US
	04/15/2008	 	08742912.2	 	 	 	National Phase	 	Filed	 	EPO
	04/15/2008	 	2010-504068	 	 	 	National Phase	 	Filed	 	Japan
	04/15/2008	 	PCT/U508/04861	 	 	 	PCT	 	Expired	 	WPO

 

	 	A technique for constructing antibiotic resistant free vaccine strains of plasmid L monocytogenes that express antigen from a high copy number

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	4/27/2007	 	60/924,033	 	 	 	Provisional	 	Expired	 	US

 

	R3702	Listeria-Based and Llo-Based Vaccines

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	 	 	2,581,331	 	 	 	National Phase	 	Abandoned	 	Canada
	09/14/2005	 	PCT/US2005/032682	 	 	 	PCT	 	Expired	 	WPO
	 	 	2007-533537	 	 	 	National Phase	 	Filed	 	Japan
	 	 	2005289957	 	 	 	National Phase	 	Abandoned	 	Australia
	11/10/2005	 	60/735,184	 	 	 	Provisional	 	Expired	 	US
	 	 	05811815.9	 	 	 	National Phase	 	Filed	 	EPO
	09/24/2004	 	10/949,667	 	7,794,729	 	CIP	 	Issued	 	US
	09/13/2005	 	11/223,945	 	7,820,180	 	CIP	 	Issued	 	US

 

	 	LLO-encoding DNA/nucleic acid vaccines and methods comprising same

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	11/13/2006	 	12/084,829	 	 	 	National Phase	 	Abandoned	 	US
	11/13/2006	 	PCT/U506/43987	 	 	 	PCT	 	Expired	 	WPO

 

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	54225	Compositions and Methods for Treatment of Non-Hodgkins Lymphoma

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	05/02/2006	 	11/415,271	 	 	 	CIP	 	Filed	 	US
	05/02/2007	 	PCT/US2007/10635	 	 	 	PCT	 	Expired	 	WPO

 

	 	Compositions and Methods for Enhancing the Immunogenicity of Antigens

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	03/07/2008	 	08726578.1	 	 	 	National Phase	 	Filed	 	EPO
	03/07/2008	 	2009-552749	 	 	 	National Phase	 	Filed	 	Japan

 

	 	Compositions and Methods for Treatment of Cervical Cancer

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	03/08/2007	 	11/715,497	 	 	 	CIP	 	Filed	 	US
	03/07/2008	 	PCT/US2008/03067	 	 	 	PCT	 	Expired	 	US

 

	S4243	Methods and Compositions for Treating IgE-Mediated Diseases

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	08/06/2007	 	07811120.0	 	 	 	National Phase	 	Filed	 	EPO
	08/06/2007	 	2009-523812	 	 	 	National Phase	 	Abandoned	 	Japan
	08/04/2006	 	60/835,420	 	 	 	Provisional	 	Expired	 	US
	08/06/2007	 	PCT/US2007/017479	 	 	 	PCT	 	Expired	 	WPO
	08/06/2007	 	11/882,782	 	 	 	Utility	 	Abandoned	 	US

 

	T4531	Detoxified Non-Hemolytic LLO (by Site-Direct Mutagenesis) as a Protein Carrier for Antigens to Enhance Immunogenicity

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	06/23/2008	 	12/213,696	 	 	 	CIP	 	Filed	 	US
	06/22/2009	 	PCT/US09/413085	 	 	 	PCT	 	Flied	 	WPO

 

	U4810	Compositions Comprising Angiogenic Factors and Methods of use Thereof

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	03/04/2009	 	61/157,367	 	 	 	Provisional	 	Filed	 	US
	03/04/2010	 	PCT/US10/26257	 	 	 	PCT	 	Filed	 	WPO

 

	W5279	ISG 15 is a novel tumor antigen that can be used as a target for immunotherapy

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	4/19/10	 	61/325473	 	 	 	Provisional	 	Filed	 	US
	TBD	 	TBD	 	 	 	Utility	 	In Prep	 	US

 

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	X5631	The use of Listeria vaccine vectors to reverse vaccine unresponsiveness in parasitically infected individuals

 

	File Date	 	Serial No.	 	Patent No.	 	App Type	 	Status	 	Country
	10/01/2010	 	61/388,822	 	 	 	Provisional	 	Filed	 	US
	11/03/2010	 	61/409,730	 	 	 	Provisional	 	Filed	 	US

 

    	7NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.

 

	Principal Amount: $40,000	Issue Date: May 4, 2010
	Purchase Price: $40,000	 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
ALL AMERICAN PET COMPANY, INC., a Maryland corporation (hereinafter called the “Borrower”), hereby promises
to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”)
the sum of $40,000 together with any interest as set forth herein, on February 4, 2011 (the “Maturity Date”), and to
pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum
from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein
with the prior written consent of the Holder which may be withheld for any reason or no reason. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date
thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the Issue Date, shall be computed
on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into
common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in
lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to
the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day
which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full,
the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on
such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day
on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities
Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

    	 

    	 

    

 

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

 

The following terms
shall apply to this Note:

 

Article
I. CONVERSION RIGHTS

 

1.1           Conversion
Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is
One Hundred Eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date
of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the
remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of
this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares
of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at
the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of
this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion
of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion
or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion
of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership
by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause
(1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion
limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in
such notice of waiver).. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in
the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower
by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile (or by other
means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such
conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion
of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s
option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion
Date, provided, however, that the Company shall have the right to pay any or all interest in cash plus (3) at the Borrower’s
option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

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1.2           Conversion
Price.

 

(a)          Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as
defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating
to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by
the Market Price (as defined herein)(representing a discount rate of 45%).  “Market Price”
means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day
period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the
“Conversion Date”). “Trading Price” means, for any security as of any date, the closing bid price on the
Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service
(“Reporting Service”) mutually acceptable to Borrower and Holder and hereafter designated by Holders of a majority
in interest of the Notes and the Borrower or, if the OTCBB is not the principal trading market for such security, the closing bid
price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no
closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market
makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading
Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market
value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the
calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day”
shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded. 

 

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

 

1.3           Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have
authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common
Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that
its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and
conditions of this Note.

 

    	4

    	 

    

 

If, at any time a Holder
of this Note submits a Notice of Conversion, and the Borrower does not have sufficient authorized but unissued shares of Common
Stock available to effect such conversion in accordance with the provisions of this Article I (a “Conversion Default”),
the Borrower shall issue to the Holder all of the shares of Common Stock which are then available to effect such conversion. The
portion of this Note which the Holder included in its Conversion Notice and which exceeds the amount which is then convertible
into available shares of Common Stock (the “Excess Amount”) shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof until (and at the Holder’s option at any
time after) the date additional shares of Common Stock are authorized by the Borrower to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the Conversion Price on the Conversion Default Date (as defined
below) and (ii) the Conversion Price on the Conversion Date thereafter elected by the Holder in respect thereof. In addition, the
Borrower shall pay to the Holder payments (“Conversion Default Payments”) for a Conversion Default in the amount of
(x) the sum of (1) the then outstanding principal amount of this Note plus (2) accrued and unpaid interest on the
unpaid principal amount of this Note through the Authorization Date (as defined below) plus (3) Default Interest, if any,
on the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24, multiplied by (z) (N/365), where N =
the number of days from the day the holder submits a Notice of Conversion giving rise to a Conversion Default (the “Conversion
Default Date”) to the date (the “Authorization Date”) that the Borrower authorizes a sufficient number of shares
of Common Stock to effect conversion of the full outstanding principal balance of this Note. The Borrower shall use its best efforts
to authorize a sufficient number of shares of Common Stock as soon as practicable following the earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower otherwise becomes aware that there are or likely will be insufficient authorized
and unissued shares to allow full conversion thereof and (ii) a Conversion Default. The Borrower shall send notice to the Holder
of the authorization of additional shares of Common Stock, the Authorization Date and the amount of Holder’s accrued Conversion
Default Payments. The accrued Conversion Default Payments for each calendar month shall be paid in cash or shall be convertible
into Common Stock (at such time as there are sufficient authorized shares of Common Stock) at the applicable Conversion Price,
at the Borrower’s option, as follows:

 

(a)          In
the event Holder elects to take such payment in cash, cash payment shall be made to Holder by the fifth (5th) day of
the month following the month in which it has accrued; and

 

(b)          In
the event Holder elects to take such payment in Common Stock, the Holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of conversion) at any time after the fifth day of the month following the month in which
it has accrued in accordance with the terms of this Article I (so long as there is then a sufficient number of authorized shares
of Common Stock).

 

The Holder’s election
shall be made in writing to the Borrower at any time prior to 6:00 p.m., New York, New York time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no election is made, the Holder shall be deemed to have
elected to receive cash. Nothing herein shall limit the Holder’s right to pursue actual damages (to the extent in excess
of the Conversion Default Payments) for the Borrower’s failure to maintain a sufficient number of authorized shares of Common
Stock, and each holder shall have the right to pursue all remedies available at law or in equity (including degree of specific
performance and/or injunctive relief).

 

1.4           Method
of Conversion.

 

(a)          Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to
time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means
of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower. 

 

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

 

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

 

(d)          Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the
Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common
Stock issuable upon such conversion within three (3) business days after such receipt (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note) (such second business day being hereinafter referred to as the
“Deadline”) in accordance with the terms hereof and the Purchase Agreement (including, without limitation, in accordance
with the requirements of [Section 2(g)] of the Purchase Agreement that certificates for shares of Common Stock issued on or after
the effective date of the Registration Statement upon conversion of this Note shall not bear any restrictive legend).

 

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(e)          Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations
under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the
right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder
shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same,
any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce
the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection
with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice
of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

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

 

(g)          Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this
Note is more than three (3) business days after the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note.

 

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

 

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

 

The legend set forth
above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i)
the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act and the shares are so sold or transferred, (ii) such Holder provides the Borrower or its transfer agent with reasonable
assurances that the Common Stock issuable upon conversion of this Note (to the extent such securities are deemed to have been acquired
on the same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock issuable upon conversion of this Note,
such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may
be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately
sold.

 

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1.6           Effect
of Certain Events.

 

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

 

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

 

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

 

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(d)          Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance. Excluded from this subdivision are shares of stock issues by the
Company for current consideration to various individuals or entities, who perform valuable, necessary and vital services to the
Company.

 

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

 

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

 

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

 

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

 

1.7           Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note
and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower
can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum
Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued (the
date of which is hereinafter referred to as the “Maximum Conversion Date”), if the Borrower fails to eliminate any
prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common
Stock in excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in lieu of any further right to
convert this Note, and in full satisfaction of the Borrower’s obligations under this Note, the Borrower shall pay to the
Holder, within fifteen (15) business days of the Maximum Conversion Date (the “Trading Market Prepayment Date”), an
amount equal to 150% times the sum of (a) the then outstanding principal amount of this Note immediately following
the Maximum Conversion Date, plus (b) accrued and unpaid interest on the unpaid principal amount of this Note to the Trading
Market Prepayment Date, plus (c) Default Interest, if any, on the amounts referred to in clause (a) and/or (b) above, plus
(d) any optional amounts that may be added thereto at the Maximum Conversion Date by the Holder in accordance with the terms hereof
(the then outstanding principal amount of this Note immediately following the Maximum Conversion Date, plus the amounts
referred to in clauses (b), (c) and (d) above shall collectively be referred to as the “Remaining Convertible Amount”).
In the event that the sum of (x) the aggregate number of shares of Common Stock issued upon conversion of this Note and the other
Notes issued pursuant to the Purchase Agreement plus (y) the aggregate number of shares of Common Stock that remain issuable
upon conversion of this Note and the other Notes issued pursuant to the Purchase Agreement, represents at least one hundred percent
(100%) of the Maximum Share Amount (the “Triggering Event”), the Borrower will use its best efforts to seek and obtain
Shareholder Approval (or obtain such other relief as will allow conversions hereunder in excess of the Maximum Share Amount) as
soon as practicable following the Triggering Event and before the Maximum Conversion Date. As used herein, “Shareholder Approval”
means approval by the shareholders of the Borrower to authorize the issuance of the full number of shares of Common Stock which
would be issuable upon full conversion of the then outstanding Notes but for the Maximum Share Amount.

 

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1.8           Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of
such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower’s failure to convert this Note.

 

Article
II. CERTAIN COVENANTS

 

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

 

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

 

2.3           Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
create, incur, assume or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the
date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors
or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to
repay this Note. Excluded from the prohibitions contained in this paragraph are borrowings in the aggregate of less than $250,000.00.

 

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

 

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

 

2.6           Contingent
Liabilities. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, which shall not be unreasonably withheld, assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection and except assumptions, guarantees, endorsements and contingencies (a) in existence
or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, and (b) similar
transactions in the ordinary course of business.

 

    	13

    	 

    

 

Article
III.  EVENTS OF DEFAULT

 

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

 

3.1           Failure
to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon acceleration or otherwise;

 

3.2           Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens that it will not
honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms
of this Note, fails to transfer or cause its transfer agent to transfer (electronically or in certificated form) any certificate
for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note, or fails to remove any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate
for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note (or makes any announcement, statement or threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any announcement, statement or threat not to honor its obligations shall
not be rescinded in writing) for three (3) days after the Borrower shall have been notified thereof in writing by the Holder;

 

3.3           Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder;

 

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

 

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

 

3.6           Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld; excluded from the prohibitions
contained in this paragraph are such judgments as scheduled, listed and or reported on the most recently filed 10-K for the period
ending December 31, 2009;

 

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

 

3.8           Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
Exchange; 

 

3.9           Failure
to Comply with the Exchange Act.  The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act; or

 

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

 

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

 

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

 

3.13         Financial
Statement Restatement.  The restatement of any financial statements filed by the Borrower with the SEC for
any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result
of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.

 

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

 

    	15

    	 

    

 

Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the Default Sum (as defined herein). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.2, 3.3, 3.4, 3.6, or 3.8 exercisable
through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence
of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest
thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times
the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred
to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value”
of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless
the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default
Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment
or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses,
of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

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

 

Article
IV. MISCELLANEOUS

 

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

 

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

 

    	16

    	 

    

 

If to the
Borrower, to:

ALL AMERICAN PET COMPANY, INC.

9601 Wilshire Boulevard - Suite
M200

Beverly Hills, CA 90210

Attn: BARRY
SCHWARTZ, President

facsimile:

 

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

 

[enter
name of law firm]

Attn: [attorney
name]

[enter
address line 1]

[enter
city, state, zip]

facsimile:
[enter fax number]

 

If to the
Holder:

ASHER ENTERPRISES,
INC.

1 Linden
Pl., Suite 207

Great Neck,
NY. 11021

Attn: Curt
Kramer, President

facsimile:
516-498-9894

 

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

 

Naidich Wurman
Birnbaum & Mayday LLP

80 Cuttermill
Road, Suite 410

Great Neck,
NY 11021

Attn: Bernard
S. Feldman, Esq.

facsimile:
516-466-3555

 

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

 

4.4           Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with
a bona fide margin account or other lending arrangement.

 

    	17

    	 

    

 

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

 

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

 

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

 

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

 

    	18

    	 

    

 

4.9           Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or
winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower
shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.10.

 

4.10         Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic
loss and without any bond or other security being required.

 

IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer this May 4, 2010.

 

	 	ALL AMERICAN PET COMPANY, INC.
	 	 	 
	 	By:	 
	 	 	BARRY SCHWARTZ
	 	 	President

 

    	19

    	 

    

 

EXHIBIT A

 

NOTICE
OF CONVERSION 

(To be Executed by the Registered Holder

in order to Convert the Notes)

 

The undersigned hereby
irrevocably elects to convert $__________ principal amount of the Note (defined below) into shares of common stock, $0.001 par
value per share (“Common Stock”), of ALL AMERICAN PET COMPANY, INC., a Maryland corporation (the “Borrower”)
according to the conditions of the convertible note of the Borrower dated as of ___________ (the “Notes”), as of the
date written below. If securities 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. No fee will be charged to the Holder
for any conversion, except for transfer taxes, if any. A copy of each Note is attached hereto (or evidence of loss, theft or destruction
thereof).

 

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

 

	Name of DTC Prime Broker:	 

 

	Account Number:	 

 

In lieu of receiving
shares of Common Stock issuable pursuant to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are
based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is
necessary, on an attachment hereto:

 

	Name:	 

 

	Address:	 

 

The undersigned represents
and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the
Notes shall be made pursuant to registration of the securities under the Securities Act of 1933, as amended (the “Act”),
or pursuant to an exemption from registration under the Act.

 

	Date of Conversion: ___________________________
	Applicable Conversion Price: ____________________
	Number of Shares of Common Stock to be Issued Pursuant to
	Conversion of the Notes: ______________
	Signature: ___________________________________
	Name: ______________________________________
	Address: ____________________________________

 

    	20

    	 

    

 

The Borrower shall issue and deliver shares
of Common Stock to an overnight courier not later than three business days following receipt of the original Note(s) to be converted,
and shall make payments pursuant to the Notes for the number of business days such issuance and delivery is late.

 

    	21

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