Document:

Exhibit

EXHIBIT 10.22

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is executed as of this 16th day of November, 2015, by and between Kohl’s Department Stores, Inc. and Kohl’s Corporation (collectively referred to in this Agreement as “Company”) and Sona Chawla (“Executive”).  
The Company desires to employ Executive, and Executive desires to be employed by the Company, on the terms and conditions set forth herein.
The parties believe it is in their best interests to make provision for certain aspects of their relationship during and after the period in which Executive is employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Company and Executive (the “Parties”), the Parties agree as follows:

ARTICLE I
EMPLOYMENT
1.1    Term of Employment.  The Company employs Executive, and Executive accepts employment by the Company, for the three (3) year period commencing on November 30, 2015 (the “Initial Term”), subject to earlier termination as hereinafter set forth in Article III, below.  This Agreement shall be automatically extended for one (1) day each day during the term (the Initial Term as so extended, the “Renewal Term”) unless the Company shall give the Executive written notice of intention not to renew, in which case this Agreement shall terminate as of the end of the Initial Term or said Renewal Term, as applicable or unless this Agreement is earlier terminated as set forth in Article III, below.  If this Agreement is extended, the terms of this Agreement during such Renewal Term shall be the same as the terms in effect immediately prior to such extension (including the early termination provisions set forth in Article III, below), subject to any such changes or modifications as mutually may be agreed between the Parties as evidenced in a written instrument signed by both the Company and Executive.  If Executive’s employment is terminated for any reason specified in Section 3.1, below, after Company has provided a notice of non-renewal under this Section 1.1, such termination will be treated as a termination under the applicable provision of Section 3.1 and not as a termination due to non-renewal under this Section 1.1.  

1.2    Position and Duties.  Executive shall be employed in the position of Chief Operating Officer, and shall be subject to the authority of, and shall report to, the Company’s Chief Executive Officer and/or Board of Directors (the “Board”).  Executive’s duties and responsibilities shall include all those customarily attendant to the position of Chief Operating Officer and such other duties and responsibilities as may be assigned from time to time by Executive’s supervisor and/or the Company’s Board.  Executive shall devote Executive’s entire business time, attention and energies exclusively to the business interests of the Company while employed by the Company except as otherwise specifically approved in writing by Executive’s supervisor and/or the Company’s Board.  During the Initial Term and the Renewal Term, Executive may not participate on the board of directors or any similar governing body of any for-profit entity other than the Company, unless first approved in writing by the Company’s Board.  

ARTICLE II
COMPENSATION AND OTHER BENEFITS
2.1    Base Salary.  During the Initial Term and the Renewal Term, the Company shall pay Executive an annual base salary as described in Exhibit A (a copy of which is attached hereto and incorporated herein), payable in accordance with the normal payroll practices and schedule of the Company (“Base Salary”).  The Base Salary shall be subject to adjustment from time to time as determined by the Board.

2.2    Benefit Plans and Fringe Benefits.  During the Initial Term and the Renewal Term, Executive will be eligible to participate in the plans, programs and policies including, without limitation, group medical insurance, fringe benefits, paid vacation, expense reimbursement and incentive pay plans, which the Company makes available to senior executives of the Company in accordance with the eligibility requirements, terms and conditions of such plans, programs and policies in effect from time to time.  Executive acknowledges and agrees that the Company may amend, modify or terminate any of such plans, programs and policies at any time at its discretion.

2.3    Equity Plans or Programs.  During the Initial Term and the Renewal Term, Executive may be eligible to participate in stock option, phantom stock, restricted stock or other similar equity incentive plans or programs which the Company may establish from time to time.  The terms of any such plans or programs, and Executive’s eligibility to participate in them, shall be established by the Board at its sole discretion.  Executive acknowledges and agrees that the Company may amend, modify or terminate any of such plans or programs at any time at its discretion.

In no event will the reimbursements or in-kind benefits to be provided by the Company pursuant to this Agreement in one taxable year affect the amount of reimbursements or in-kind benefits to be provided in any other taxable year, nor will Executive’s right to reimbursement or in-kind benefits be subject to liquidation or exchange for another benefit.  Further, any reimbursements to be provided by the Company pursuant to this Agreement shall be paid to the Executive no later than the calendar year following the calendar year in which the Executive incurs the expenses.
ARTICLE III
TERMINATION
3.1    Right to Terminate; Automatic Termination.

(a)    Termination Without Cause.  Subject to Section 3.2, below, the Company may terminate Executive’s employment and all of the Company’s obligations under this Agreement at any time and for any reason.

(b)    Termination For Cause.  Subject to Section 3.2, below, the Company may terminate Executive’s employment and all of the Company’s obligations under this Agreement at any time for Cause (defined below) by giving notice to Executive stating the basis for such termination, effective immediately upon giving such notice or at such other time thereafter as the Company may designate.  “Cause” shall mean any of the following:  (i) Executive’s continuous failure to substantially perform Executive’s duties after a written demand for substantial performance is delivered to Executive that specifically identifies the manner in which the Company believes that Executive has not substantially performed his/her duties, and Executive has failed to demonstrate substantial efforts to resume substantial performance of Executive’s duties on a continuous basis within thirty (30) calendar days after receiving such demand; (ii) Executive’s violation of a material provision of “Kohl’s Ethical Standards and Responsibilities” which is materially injurious to the Company, monetarily or otherwise; (iii) any dishonest or fraudulent conduct which results, or is intended to result, in gain to Executive or Executive’s personal enrichment at the expense of the Company; (iv) Executive’s failure to permanently relocate her family to the Greater Milwaukee area by September 1, 2016; or (v) any material breach of this Agreement by Executive after a written notice of such breach is delivered to Executive that specifically identifies the manner in which the Company believes that Executive has breached this Agreement, and Executive has failed to cure such breach within thirty (30) calendar days after receiving such demand; provided, however, that no cure period shall be required for breaches of Articles IV, V, VI or VII, below, of this Agreement; or (vi) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, of any crime.  Notwithstanding the conviction of a crime as described in the preceding subsection (vi), the Board, in its sole discretion, may waive such termination in the event it determines that such crime does not discredit the Company or is not detrimental to the Company's reputation or goodwill, and any decision by the Board with respect to such waiver shall be final.

(c)    Termination for Good Reason.  Subject to Section 3.2, below, Executive may terminate Executive’s employment and all of the Company’s obligations under this Agreement at any time for Good Reason (defined below) by giving written notice to the Company stating the basis for such termination, effective immediately upon giving such notice.  “Good Reason” shall mean any of the following: (i) the Company gives Executive written notice of non-renewal pursuant to Section 1.1; (ii) a material reduction in Executive’s status, title, position, responsibilities or Base Salary; (iii) any material breach by the Company of this Agreement; (iv) any purported termination of the Executive’s employment for Cause which does not comply with the terms of this Agreement; or (v) a mandatory relocation of Executive’s employment with the Company from the Milwaukee, Wisconsin area, except for travel reasonably required in the performance of Executive’s duties and responsibilities.  Notwithstanding the foregoing, no termination shall be for Good Reason unless Executive has provided the Company with written notice of the conduct alleged to have caused Good Reason within thirty (30) calendar days of such conduct and at least thirty (30) calendar days have elapsed after the Company’s receipt of such written notice from Executive, during which the Company has failed to demonstrate substantial efforts to cure any such alleged conduct.

(d)    Termination by Death or Disability.  Subject to Section 3.2, below, Executive’s employment and the Company’s obligations under this Agreement shall terminate automatically, effective immediately and without any notice being necessary, upon Executive’s death or a determination of Disability of Executive.  For purposes of this Agreement, “Disability” means the Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable 

physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) has been, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.   A determination of Disability shall be made by the Company, which may, at its sole discretion, consult with a physician or physicians satisfactory to the Company, and Executive shall cooperate with any efforts to make such determination.  Any such determina-tion shall be conclusive and binding on the parties.  Any determination of Disability under this Section 3.1(d) is not intended to alter any benefits any party may be entitled to receive under any disability insurance policy carried by either the Company or Executive with respect to Executive, which benefits shall be governed solely by the terms of any such insurance policy.

(e)    Termination by Resignation.  Subject to Section 3.2, below, Executive’s employment and the Company’s obligations under this Agreement shall terminate automatically, effective immediately upon Executive’s provision of written notice to the Company of Executive’s resignation from employment with the Company or at such other time as may be mutually agreed between the Parties following the provision of such notice.

(f)    Separation of Service.  A termination of employment under this Agreement shall only occur to the extent Executive has a “separation from service” from Company in accordance with Section 409A of the Code.  Under Section 409A, a “separation from service” occurs when Executive and the Company reasonably anticipate that no further services will be performed by Executive after a certain date or that the level of bona fide services Executive would perform after such date (whether as an employee or as a consultant) would permanently decrease to no more than 20 percent of the average level of bona fide services performed by Executive over the immediately preceding 36-month period.

3.2    Rights Upon Termination.

(a)    Termination By Company for Cause, By Company’s Non-Renewal or By Executive Due to Resignation Other Than For Good Reason .  If Executive’s employment is terminated by the Company pursuant to Section 3.1(b), above, by the Company due to non-renewal pursuant to Section 1.1, above, or by Executive pursuant to Section 3.1(e), above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) any unpaid Base Salary with respect to the period prior to the effective date of termination together with payment of any vacation that Executive has accrued but not used through the date of termination; (ii) reimbursement of expenses to which Executive is entitled under Section 2.2, above; and (iii) Executive’s unpaid bonus, if any, attributable to any complete fiscal year of the Company ended before the date of termination (in the aggregate, the “Accrued Benefits”).  Any such bonus payment shall be made at the same time as any such bonus is paid to other similarly situated executives of the Company.  Furthermore, under this Section 3.2(a), vesting of any Company stock options granted to Executive ceases on the effective date of termination, and any unvested stock options lapse and are forfeited immediately upon the effective date of termination.

(b)    Termination Due to Executive’s Death.   If Executive’s employment is terminated due to Executive’s death pursuant to Section 3.1(d), above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) Accrued Benefits; (ii) Health Insurance Continuation (defined below); and (iii) a share of any bonus attributable to the fiscal year of the Company during which the effective date of termination occurs determined as follows: the product of (x) the average bonuses paid or payable, including any amounts that were deferred in respect of the three (3) fiscal years immediately preceding the fiscal year in which the effective date of termination occurs and (y) a fraction, the numerator of which is the number of days completed in the fiscal year in which the effective date of termination occurs through the effective date of termination and the denominator of which is three hundred sixty-five (365) (the “Historic Pro Rata Bonus”).  The Pro Rata Bonus or  the Historic Pro Rata Bonus shall be paid at the same time as any such bonuses are paid to other similarly situated executives of the Company.  Upon termination due to  the Executive’s death, Executive shall also be entitled to a severance payment equal to fifty percent (50%) of Executive’s Base Salary payable for one (1) year following the effective date of termination pursuant to normal payroll practices.  Furthermore, under this Section 3.2(b), if Executive’s termination is due to Executive’s death, all Company stock options granted to Executive shall immediately vest upon the date of Executive’s death.

(c)    Termination Due to Disability.  If Executive’s employment is terminated due to Executive’s Disability pursuant to Section 3.1(d), above, Executive shall have no further rights against the Company hereunder, except for the right to receive (i) Accrued Benefits; (ii) Health Insurance Continuation (defined below); (iii) the Historic Pro Rata Bonus; and (iv) a Severance Benefit.  The Historic Pro Rata Bonus payment shall be made at the same time as any such bonuses are paid to other similarly situated executives of the Company.  For purposes of this Section 3.2(c), “Severance Benefit” means six (6) months of Base Salary, payable in equal installments during the six (6) month period following Executive’s exhaustion of any short-term disability benefits provided by the Company, in accordance with the normal payroll practices and schedule of 

the Company.  The amount of such Severance Benefit shall be reduced by any compensation (including any payments from the Company or any benefit plans, policies or programs sponsored by the Company) earned or received by Executive during the six (6) month period following the date of termination and the six (6) month period during which Executive receives the Severance Benefit, and Executive agrees to reimburse the Company for the amount of any such reduction.  Executive acknowledges and agrees that, upon the cessation, if any, of such Disability during the period of the payment of the Severance Benefit, he/she has an obligation to use his/her reasonable efforts to secure other employment consistent with Executive’s status and experience and that his/her failure to do so, as determined at the sole discretion of the Board, is a breach of this Agreement.  Furthermore, under this Section 3.2(c), vesting of any Company stock options granted to Executive shall cease on the effective date of termination, and any unvested stock options shall lapse and be forfeited as of such date.

(d)    Termination By Company Without Cause or By Executive for Good Reason.
i.    No Change of Control.  If Executive’s employment is terminated by the Company pursuant to Section 3.1(a), above, or by Executive pursuant to Section 3.1(c), above, and such termination does not occur three (3) months prior to or within one (1) year after the occurrence of a Change of Control (defined below), Executive shall have no further rights against the Company hereunder, except for the right to receive (A) Accrued Benefits; (B) a Severance Payment (defined below); (C) the Pro Rata Bonus (defined below); provided, however, that the Pro Rata Bonus payment shall be made at the same time as any such bonuses are paid to other similarly situated executives of the Company; (D) outplacement services from an outplacement service company of the Company’s choosing at a cost not to exceed Twenty Thousand Dollars ($20,000.00), payable directly to such outplacement service company (“Outplacement Services”); and (E) Health Insurance Continuation (defined below).  

For purposes of this Section 3.2(d)(i), “Severance Payment” means an amount equal to the sum of:
(x) Executive’s Base Salary for the remainder of the then current Initial Term or Renewal Term of this Agreement, but not to exceed two and nine-tenths (2.9) years; plus
(y) an amount equal to the average (calculated at the sole discretion of the Company) of bonuses paid or payable, including any amounts that were deferred, in respect of the three (3) fiscal years immediately preceding the fiscal year in which the effective date of termination occurs.   
The Severance Payment shall be paid to Executive in a lump sum within forty (40) days after the effective date of termination, subject to Section 3.2(e) below.
For purposes of this Section 3.2(d)(i), the “Pro Rata Bonus” means an amount equal to the product of:
(x) the bonus attributable to the fiscal year of the Company during which the Executive’s termination occurs equal in amount to the bonus the Executive would have received for the full fiscal year had the Executive’s employment not terminated and determined, where applicable, by taking into account the actual performance of the Company at year-end; and
(y) a fraction, the numerator of which is the number of days completed in the fiscal year in which the effective date of termination occurs through the effective date of termination and the denominator of which is three hundred sixty-five (365).   
Furthermore, under this Section 3.2(d)(i), vesting of any Company stock options granted to Executive prior to the date of termination shall continue as scheduled until the term of this Agreement expires, after which such vesting ceases and any unvested stock options lapse and are forfeited.
ii.    Change of Control.  If Executive’s employment is terminated by the Company pursuant to Section 3.1(a), above, or by the Executive pursuant to Section 3.1(c), above, and such termination occurs within three (3) months prior to or one (1) year after the occurrence of a Change of Control (defined below), Executive shall have no further rights against the Company hereunder, except for the right to receive (A) Accrued Benefits; (B) a Severance Payment (defined below); (C) the Historic Pro Rata Bonus; provided, however, that such bonus payments shall be made at the same time as any such bonuses are paid to other similarly situated executives of the Company; (D) Health Insurance Continuation (defined below) for the period of time equal to the remainder of the then-current Renewal Term, but not to exceed two and nine-tenths (2.9) years following the effective date of Executive’s termination; and (E) Outplacement Services.  

For purposes of this Section 3.2(d)(ii), “Severance Payment” means an amount equal to the sum of:
(x) Executive’s Base Salary for the period of time equal to the remainder of the then-current Renewal Term, but not to exceed two and nine-tenths (2.9) years; plus
(y) an amount equal to the average (calculated at the sole discretion of the Company) of bonuses paid or payable, including any amounts that were deferred, in respect of the three (3) fiscal years immediately preceding the fiscal year in which the effective date of termination occurs, times the number of years, rounded to the nearest tenth, remaining in the then-current Renewal Term, but not to exceed two and nine-tenths (2.9).  
The Severance Payment shall be paid to Executive in a lump sum within forty (40) days after the effective date of termination, subject to Section 3.2(e) below.
Furthermore, under this Section 3.2(d)(ii), vesting of any Company stock options granted to Executive prior to termination shall occur immediately upon the date of termination.
iii.    Definition - Change of Control.  “Change of Control” means the occurrence of (1) the acquisition (other than from the Company) by any person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), other than the Company, a subsidiary of the Company or any employee benefit plan or plans sponsored by the Company or any subsidiary of the Company, directly or indirectly, of beneficial ownership (within the meaning of Exchange Act Rule 13d-3) of thirty-three percent (33%) or more of the then outstanding shares of common stock of the Company or voting securities representing thirty-three percent (33%) or more of the combined voting power of the Company’s then outstanding voting securities ordinarily entitled to vote in the election of directors unless the Incumbent Board (defined below), before such acquisition or within thirty (30) days thereafter, deems such acquisition not to be a Change of Control; or (2) individuals who, as of the date of this Agreement, constitute the Board (as of such date, “Incumbent Board”) ceasing for any reason to constitute at least a majority of such Board; provided, however, that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the shareholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be for purposes of this Agreement, considered as though such person were a member of the Incumbent Board but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest which was (or, if threatened, would have been) subject to Exchange Act Rule 14a-12(c); or (3) the consummation of any merger, consolidation or share exchange of the Company with any other corporation, other than a merger, consolidation or share exchange which results in more than sixty percent (60%) of the outstanding shares of the common stock, and voting securities representing more than sixty percent (60%) of the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors, of the surviving, consolidated or resulting corporation being then beneficially owned, directly or indirectly, by the persons who were the Company’s shareholders immediately prior to such transaction in substantially the same proportions as their ownership, immediately prior to such transaction, of the Company’s then outstanding Common Stock or then outstanding voting securities, as the case may be; or (4) the consummation of any liquidation or dissolution of the Company or a sale or other disposition of all or substantially all of the assets of the Company.

Following the occurrence of an event which is not a Change of Control whereby there is a successor company to the Company, or if there is no such successor whereby the Company is not the surviving corporation in a merger or consolidation, the surviving corporation or successor holding company (as the case may be), for purposes of this Agreement, shall thereafter be referred to as the Company.
iv.    Definition - Health Insurance Continuation.  For purposes of Sections 3.2 (b), 3.2 (c), 3.2(d)(i) and 3.2(d)(ii) above, the term “Health Insurance Continuation” means that, in the event the Executive's employment with the Company is terminated for any reason other than (A) a termination for Cause, (B) the Company’s non-renewal, or (C) a voluntary termination by the Executive for any reason other than "Good Reason" or other than approved by the Board of Directors of the Company, the Company shall continue to provide health insurance and a supplemental executive medical plan, as applicable, with coverage for Executive and Executive’s dependants eligible for coverage under such insurance and medical plans (the “Executive’s Eligible Dependants”), substantially the same as that covering Executive and Executive’s Eligible Dependants as of the date of the effective 

date of termination (collectively the “Health Insurance Benefits”).   In the event of Executive’s death, the Health Insurance Benefits shall continue to be provided to Executive’s Eligible Dependants, in each case for as long as each individual would have continued to qualify as an eligible dependant under the terms of the applicable insurance and medical plans had Executive been living. The Company’s responsibility to provide Health Insurance Continuation shall at all times be contingent upon:

		
	(1)
	The Health Insurance Benefits being reasonably available to the Company with respect to Executive and Executive’s Eligible Dependants, as the case may be; and

		
	(2)
	Following the termination of Executive’s employment with the Company, Executive or Executive’s Eligible Dependants, as the case may be, shall reimburse the Company for all premiums paid for Executive’s Health Insurance Benefits, as determined by the Company in good faith from time to time.  The Company shall provide Executive a quarterly invoice for such reimbursement, and amounts due hereunder may be withheld from other amounts payable to Executive. 

Any Health Insurance Continuation provided for herein will cease forever on the date on which Executive becomes eligible for health insurance coverage under another employer’s group health insurance plan, and, within five (5) calendar days of Executive becoming eligible for health insurance coverage under another employer’s group health insurance plan, Executive agrees to inform the Company of such fact in writing.

In no event will the Health Insurance Continuation to be provided by the Company pursuant to this Agreement in one taxable year affect the amount of Health Insurance Continuation to be provided in any other taxable year, nor will Executive’s right to Health Insurance Continuation be subject to liquidation or exchange for another benefit.  
(e)    Delay of Payments if Required by Section 409A.  If amounts paid to Executive pursuant to any Subsection of Section 3.2 would be subject to a penalty under Section 409A of the Internal Revenue Code because Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i), such payments will be delayed until a date which is six (6) months after Executive’s termination of employment, at which point any such delayed payments will be paid to Executive in a lump sum.  

(f)    Other Equity Awards.  Future vesting of any equity awards not specifically addressed in this Section 3.2 shall be determined in accordance with the terms of the equity award agreement and the Long Term Compensation Plan pursuant to which such awards were made.

3.3    Return of Records.  Upon termination of employment, for whatever reason, or upon request by the Company at any time, Executive shall immediately return to the Company all documents, records, and materials belonging and/or relating to the Company, and all copies of all such materials.  Upon termination of employment, for whatever reason, or upon request by the Company at any time, Executive further agrees to destroy such records maintained by Executive on Executive’s own computer equipment.

3.4    Release.  As a condition to the receipt of any amounts or benefits after termination of employment for whatever reason, Executive, or his/her personal representative, shall be required to execute a written release agreement in a form satisfactory to the Company containing, among other items, a general release of claims against the Company and, as an additional condition to the receipt of such amounts or benefits, Executive shall refuse to exercise any right to revoke such release agreement during any applicable rescission period.  Such written release under this Section 3.4  (A) shall be delivered to Executive within three (3) business days after the date of termination of Executive’s employment, and (B) must be executed by Executive and the rescission period must expire without revocation of such release within 40 days following the date of termination of employment or Executive shall forfeit the compensation and benefits provided under this Agreement that are conditioned upon the release. Where any payment or benefit under the Agreement constitutes a nonqualified deferred compensation arrangement within the meaning of Section 409A of the Code, to the extent that (i) Executive is not a “specified employee” as defined in Section 409A of the Code and (ii) such payments would otherwise be paid or provided to Executive within the 40-day period following the date of termination of employment, such payment(s) or benefit(s) shall commence following Executive’s execution of the written release and the expiration of the applicable rescission period, except where the 40-day period following the date of termination of employment spans two different calendar years, in which case such payment(s) or benefit(s) will not commence until the later calendar year during the 40-day period.  

ARTICLE IV

CONFIDENTIALITY
4.1    Acknowledgments.  Executive acknowledges and agrees that, as an integral part of its business, the Company has expended a great deal of time, money and effort to develop and maintain confidential, proprietary and trade secret information to compete against similar businesses and that this information, if misused or disclosed, would be harmful to the Company’s business and competitive position in the marketplace.  Executive further acknowledges and agrees that in Executive’s position with the Company, the Company provides Executive with access to its confidential, proprietary and trade secret information, strategies and other confidential business information that would be of considerable value to competitive businesses.  As a result, Executive acknowledges and agrees that the restrictions contained in this Article IV are reasonable, appropriate and necessary for the protection of the Company’s confidential, proprietary and trade secret information.  For purposes of this Article IV, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.

4.2    Confidentiality During Employment.  During the term of Executive’s employment under this Agreement, Executive will not directly or indirectly use or disclose any Confidential Information or Trade Secrets (defined below) except in the interest and for the benefit of the Company.  

4.3    Trade Secrets Post-Employment.  After the termination, for whatever reason, of Executive’s employment with the Company, Executive will not directly or indirectly use or disclose any Trade Secrets.  Nothing in this Agreement shall limit or supersede any common law, statutory or other protections of trade secrets where such protections provide the Company with greater rights or protections for a longer duration than provided in this Agreement.

4.4    Confidential Information Post-Employment.  For a period of two (2) years following termination, for whatever reason, of Executive’s employment with the Company, Executive will not directly or indirectly use or disclose any Confidential Information, unless such information ceases to be deemed Confidential Information by means of one of the exclusions set forth in Section 4.5(c), below.

4.5    Definitions.

(a)    Trade Secret.  The term “Trade Secret” shall have that meaning set forth under applicable law.

(b)    Confidential Information.  The term “Confidential Information” shall mean all non-Trade Secret information of, about or related to the Company, whether created by, for or provided to the Company, which is not known to the public or the Company’s competitors, generally, including, but not limited to:  (i)   strategic growth plans, pricing policies and strategies, employment records and policies, operational methods, marketing plans and strategies, advertising plans and strategies, product development techniques and plans, business acquisition and divestiture plans, resources, vendors, sources of supply, suppliers and supplier contractual relationships and terms, technical processes, designs, inventions, research programs and results, source code, short-term and long-range planning, projections, information systems, sales objectives and performance, profit and profit margins, and seasonal plans, goals and objectives; (ii) information that is marked or otherwise designated or treated as confidential or proprietary by the Company; and (iii) information received by the Company from others which the Company has an obligation to treat as confidential.

(c)    Exclusions.  Notwithstanding the foregoing, the term “Confidential Information” shall not include, and the obligations set forth in this Article IV shall not apply to, any information which: (i) can be demonstrated by Executive to have been known by Executive prior to Executive’s employment by the Company; (ii) is or becomes generally available to the public through no act or omission of Executive; (iii) is obtained by Executive in good faith from a third party who discloses such information to Executive on a non-confidential basis without violating any obligation of confidentiality or secrecy relating to the information disclosed; or (iv) is independently developed by Executive outside the scope of Executive’s employment without use of Confidential Information or Trade Secrets.

ARTICLE V
RESTRICTED SERVICES OBLIGATION
5.1    Acknowledgments.  Executive acknowledges and agrees that the Company is one of the leading retail companies in the United States, with department stores throughout the United States, and that the Company compensates executives like Executive to, among other things, develop and maintain valuable goodwill and relationships on the Company’s behalf (including relationships with customers, suppliers, vendors, employees and other associates) and to maintain business information for the Company’s exclusive ownership and use.  As a result, Executive acknowledges and agrees that the restrictions contained in this Article V are reasonable, appropriate and necessary for the protection of the Company’s goodwill, 

customer, supplier, vendor, employee and other associate relationships and Confidential Information and Trade Secrets.  Executive further acknowledges and agrees that the restrictions contained in this Article V will not pose an undue hardship on Executive or Executive’s ability to find gainful employment.  For purposes of this Article V, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.

5.2    Restricted Services Obligation.  In addition to the obligations Executive  owes to the Company while an employee of the Company, for the one (1) year period following termination, for whatever reason, of Executive’s employment with the Company, Executive will not, directly or indirectly, provide Restricted Services (defined below) to or on behalf of any Competitor (defined below) to or for the benefit of any market in the continental United States and any other geographic market that the Company is, or is taking material steps to do business.

5.3    Definitions.

(a)    Restricted Services.  “Restricted Services” shall mean services of any kind or character comparable to those Executive provided to the Company during the eighteen (18) month period immediately preceding Executive’s last date of employment with the Company.

(b)    Competitor.  The term “Competitor” means Amazon.com, Inc., Belk, Inc., Bon-Ton Stores, Inc., Burlington Stores, Inc., Dillard’s, Inc., J.C. Penney Company, Inc., Macy’s, Inc., Nordstrom Co., Ross Stores, Inc., Sears Holdings Corporation, Stage Stores, Inc., Target Corporation, The Gap, Inc., The TJX Companies, Inc. and Walmart Stores, Inc., including any successors, subsidiaries or affiliates of such entities.  

ARTICLE VI
BUSINESS IDEAS; NON-DISPARAGEMENT
6.1    Assignment of Business Ideas.  Executive shall immediately disclose to the Company a list of all inventions, patents, applications for patent, copyrights, and applications for copyright in which Executive currently holds an interest.  The Company will own, and Executive hereby assigns to the Company, all rights in all Business Ideas.  All Business Ideas which are or form the basis for copyrightable works shall be considered “works for hire” as that term is defined by United States Copyright Law.  Any works that are not found to be “works for hire” are hereby assigned to the Company.  While employed by the Company and for one (1) year thereafter, Executive will promptly disclose all Business Ideas to the Company and execute all documents which the Company may reasonably require to perfect its patent, copyright and other rights to such Business Ideas throughout the world.  After Executive’s employment with the Company terminates, for whatever reason, Executive will cooperate with the Company to assist the Company in perfecting its rights to any Business Ideas including executing all documents which the Company may reasonably require.  For purposes of this Article VI, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.

6.2    Business Ideas.  The term “Business Ideas” as used in this Agreement means all ideas, inventions, data, software, developments and copyrightable works, whether or not patentable or registrable, which Executive originates, discovers or develops, either alone or jointly with others while Executive is employed by the Company and for one (1) year thereafter and which are (a) related to any business known by Executive to be engaged in or contem-plated by the Company, (b) originated, discovered or developed during Executive’s working hours during his/her employment with the Company, or (c) originated, discovered or developed in whole or in part using materials, labor, facilities, Confidential Information, Trade Secrets, or equipment furnished by the Company.

6.3    Non-Disparagement.  Executive agrees not to engage at any time in any form of conduct or make any statements or representations, or direct any other person or entity to engage in any conduct or make any statements or representations, that disparage, criticize or otherwise impair the reputation of the Company, its affiliates, parents and subsidiaries and their respective past and present officers, directors, stockholders, partners, members, agents and employees.  Nothing contained in this Section 6.3 shall preclude Executive from providing truthful testimony or statements pursuant to subpoena or other legal process or in response to inquiries from any government agency or entity.

ARTICLE VII
EMPLOYEE NON-SOLICITATION
During the term of Executive’s employment with the Company and for one (1) year thereafter, Executive shall not directly or indirectly encourage any Company employee to terminate his/her employment with the Company unless Executive does so in the course of performing his/her duties for the Company and such encouragement is in the Company’s best interests. 

 For purposes of this Article VII, the term “Company” means Kohl’s Department Stores, Inc. and its parent companies, subsidiaries and other affiliates.

ARTICLE VIII
GENERAL PROVISIONS
8.1    Notices.  Any and all notices, consents, documents or communications provided for in this Agreement shall be given in writing and shall be personally delivered, mailed by registered or certified mail (return receipt requested) or sent by courier, confirmed by receipt, and addressed as follows (or to such other address as the addressed party may have substituted by notice pursuant to this Section 8.1):

		
	(a)
	If to the Company:

Kohl’s Department Stores, Inc.
N56 W17000 Ridgewood Drive
Menomonee Falls, WI  53051
Attn:  Kevin Mansell, Chairman, President and CEO

		
	(b) 
	If to Executive:

Any notice to be given to the Executive may be addressed to him/her at the address as it appears on the payroll records of the Company or any subsidiary thereof.

Such notice, consent, document or communication shall be deemed given upon personal delivery or receipt at the address of the party stated above or at any other address specified by such party to the other party in writing, except that if delivery is refused or cannot be made for any reason, then such notice shall be deemed given on the third day after it is sent.
8.2    Executive Disclosures and Acknowledgments.

(a)    Prior Obligations.  Attached as Exhibit B is a list of prior obligations (written and oral), such as confidentiality agreements or covenants restricting future employment or consulting, that Executive has entered into which may restrict Executive’s ability to perform Executive’s duties as an employee for the Company.

(b)    Confidential Information of Others.  Executive certifies that Executive has not, and will not, disclose or use during Executive’s time as an employee of the Company, any confidential information which Executive acquired as a result of any previous employment or under a contractual obligation of confidentiality or secrecy before Executive became an employee of the Company.

(c)    Scope of Restrictions.  By entering into this Agreement, Executive acknowledges the nature of the Company’s business and the nature and scope of the restrictions set forth in Articles IV, V and VII, above, including specifically Wisconsin’s Uniform Trade Secrets Act, presently § 134.90,  Wis. Stats.   Executive acknowledges and represents that the scope of such restrictions are appropriate, necessary and reasonable for the protection of the Company’s business, goodwill, and property rights.  Executive further acknowledges that the restrictions imposed will not prevent Executive from earning a living in the event of, and after, termination, for whatever reason, of Executive’s employment with the Company.  Nothing herein shall be deemed to prevent Executive, after termination of Executive’s employment with the Company, from using general skills and knowledge gained while employed by the Company.

(d)    Prospective Employers.  Executive agrees, during the term of any restriction contained in Articles IV, V and VII, above, to disclose such provisions to any future or prospective employer.  Executive further agrees that the Company may send a copy of this Agreement to, or otherwise make the provisions hereof known to, any such employer.  

8.3    Effect of Termination.  Notwithstanding any termination of this Agreement, the Executive, in consideration of his/her employment hereunder, shall remain bound by the provisions of this Agreement which specifically relate to periods, activities or obligations upon or subsequent to the termination of the Executive’s employment.  

8.4    Confidentiality of Agreement.  Executive agrees that, with the exception of disclosures pursuant to Section 8.2(d), above, Executive will not disclose, directly or indirectly, any non-public terms of this Agreement to any third party; 

provided, however, that following Executive’s obtaining a promise of confidentiality for the benefit of the Company from Executive’s tax preparer, accountant, attorney and spouse, Executive may disclose such terms to such of these individuals who have made such a promise of confidentiality.  This provision shall not prevent Executive from disclosing such matters in testifying in any hearing, trial or other legal proceeding where Executive is required to do so.

8.5    Cooperation.  Executive agrees to take all reasonable steps during and after Executive’s employment with the Company to make himself/herself available to and to cooperate with the Company, at its request, in connection with any legal proceedings or other matters in which it is or may become involved.  Following Executive’s employment with the Company, the Company agrees to pay reasonable compensation to Executive and to pay all reasonable expenses incurred by Executive in connection with Executive’s obligations under this Section 8.5.

8.6    Effect of Breach.  In the event that Executive breaches any provision of this Agreement or any restrictive covenant agreement between Company and Executive which is entered into subsequent to this Agreement, Executive agrees that the Company may suspend all payments to Executive under this Agreement (including any Severance Payment), recover from Executive any damages suffered as a result of such breach and recover from Executive any reasonable attorneys’ fees or costs it incurs as a result of such breach.  In addition, Executive agrees that the Company may seek injunctive or other equitable relief, without the necessity of posting bond, as a result of a breach by Executive of any provision of this Agreement.

8.7    Entire Agreement.  This Agreement contains the entire understanding and the full and complete agreement of the Parties and supersedes and replaces any prior understandings and agreements among the Parties with respect to the subject matter hereof, including without limitation the Original Agreement.

8.8    Headings.  The headings of sections and paragraphs of this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any of its provisions.

8.9    Consideration.  Execution of this Agreement is a condition of Executive’s employment with the Company and Executive’s continued employment by the Company, and the benefits provided to Executive under this Agreement as well as those described in the Company’s November 12, 2015 offer of employment, constitute the consideration for Executive’s undertakings hereunder.

8.10    Amendment.  This Agreement may be altered, amended or modified only in writing, signed by both of the Parties hereto.

8.11    Assignability.  This Agreement and the rights and duties set forth herein may not be assigned by Executive, but may be assigned by the Company, in whole or in part.  This Agreement shall be binding on and inure to the benefit of each party and such party’s respective heirs, legal representatives, successors and assigns.

8.12    Severability.  The obligations imposed by, and the provisions of, this Agreement are severable and should be construed independently of each other.  If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall not affect the validity of any other provision.

8.13    Waiver of Breach.  The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

8.14    Governing Law; Construction.  This Agreement shall be governed by the internal laws of the State of Wisconsin, without regard to any rules of construction concerning the draftsman hereof.

8.15    Section 409A Compliance.  The Company and Executive intend that any amounts or benefits payable or provided under this Agreement comply with the provisions of Section 409A of the Internal Revenue Code and the treasury regulations relating thereto so as not to subject Executive to the payment of the tax, interest and any tax penalty which may be imposed under Code Section 409A.  The provisions of this Agreement shall be interpreted in a manner consistent with such intent.  In furtherance thereof, to the extent that any provision hereof would otherwise result in Executive being subject to payment of tax, interest and tax penalty under Code Section 409A, the Company and Executive agree to amend this Agreement in a manner that brings this Agreement into compliance with Code Section 409A and preserves to the maximum extent possible the economic value of the relevant payment or benefit under this Agreement to Executive.

8.16    Consistency With Applicable Law.  Executive acknowledges and agrees that nothing in this Agreement 

prohibits Executive from reporting possible violations of law to any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of federal, state or local laws or regulations.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year written above.

KOHL’S DEPARTMENT STORES, INC.:

By:      /s/ Kevin Mansell                    
Kevin Mansell
Chairman, President and Chief Executive Officer

EXECUTIVE:

By:      /s/ Sona Chawla                    
Sona Chawla

EXHIBIT A

BASE COMPENSATION

Executive’s annual base compensation as of the date of this Agreement is One Million One Hundred Thousand and no/100 Dollars ($1,100,000).        

EXHIBIT B

PRIOR OBLIGATIONS

Executive’s obligations set forth in “Walgreen Co. Restrictive Covenant Agreement”, as provided to Company’s executive search consultant.Exhibit 4.1

 

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

 

Original Issue Date: March [_], 2016

 

Purchase Price: $[____]

Principal Amount: $[____]

 

 

CONVERTIBLE
SECURED PROMISSORY NOTE

DUE
September[__], 2016

 

THIS CONVERTIBLE SECURED
PROMISSORY NOTE is one of a series of duly authorized and validly issued Convertible Secured Promissory Notes of MassRoots, Inc.,
a Delaware corporation, (the “Company”), having its principal place of business at 1624 Market Street, Suite
201, Denver, Colorado 80202, designated as its Convertible Secured Promissory Note due September [__], 2016 (this Note, the “Note”
and, collectively with the other Notes of such series, the “Notes”).

 

FOR VALUE RECEIVED, the
Company promises to pay to [____] or its registered assigns (the “Holder”), or shall have paid pursuant to
the terms hereunder, the principal sum of $[____], without interest, on September [__], 2016 (the “Maturity Date”)
or such earlier date as this Note is required or permitted to be repaid as provided hereunder. This Note is subject to the following
additional provisions:

 

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

 

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

 

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

 

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

     

     

    

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

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

 

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

 

“Change of Control Transaction”
means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal
entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50%
of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued
together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or
consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior
to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such
transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders
of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity
immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the
members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of
Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any
date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are
members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which
it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

“Conversion”
shall have the meaning ascribed to such term in Section 4.

 

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

 

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

 

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

 

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

 

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

 

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

 

“DTC”
means the Depository Trust Company.

 

“DTC/FAST
Program” means the DTC’s Fast Automated Securities Transfer Program.

 

“DWAC”
means Deposit Withdrawal at Custodian as defined by the DTC.

 

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

 

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

     

     

    

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

 

“Mandatory
Default Amount” means the payment of 130% of the outstanding principal amount of this Note, in addition to the payment
of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

 

“New
York Courts” shall have the meaning set forth in Section 7(d).

 

“Note
Register” means the records of the Company regarding registration and transfers of this Note.

 

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

 

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

 

“Permitted
Indebtedness” means the indebtedness evidenced by the Notes and the Existing Debt (as defined in the Security Agreement
dated as of the date hereof).

 

“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien
and (c) Liens incurred in connection with Permitted Indebtedness.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of March [__], 2016 among the Company and the original
Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

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

 

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

 

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

 

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

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

     

     

    

“VWAP”
means, for or as of any date, the dollar volume-weighted average price for such security on the Trading Market (or, if the Trading
Market is not the principal trading market for such security, then on the principal securities exchange or securities market on
which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New
York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time,
as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

Section 2.Prepayment.
At any time upon five (5) days notice written notice to the Holder, (a “Prepayment Notice”), the Company may
prepay any portion of the principal amount of this Note. If the Company exercises its right to prepay the Note, the Company shall
within three (3) days after such five-day period (the “Prepayment Period”), make payment to the Holder of an
amount in cash equal to the sum of the then outstanding principal amount of this Note that it desires to prepay, multiplied by
(a) 1.2, during the first ninety (90) days after the execution of this Note, or (b) 1.35, at any point thereafter ( (a) and (b)
of this Section 2, together, the “Prepayment Multiplier”). If the Company does not make such payment within
the relevant Prepayment Period, it shall be required to deliver a new Prepayment Notice, and repeat the procedures set forth in
this Section 2, prior to pre-paying any portion of this Note. The Holder may continue to convert the Note from the date of its
receipt of any Prepayment Notice until the beginning of the Prepayment Period. If the Company participates in any Subsequent Financing
(as defined in the Purchase Agreement), or sells any of its assets other than in the ordinary course, while any portion of this
Note remains outstanding, any proceeds of such Subsequent Financing or asset sale must be applied toward repayment of this Note,
subject to the Prepayment Multiplier, within three (3) days of the closing of such Subsequent Financing or asset sale. 

 

Section 3.Registration
of Transfers and Exchanges.

 

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

 

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

 

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

     

     

    

Section 4.Conversion.

 

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

 

b)            
Conversion Price. The conversion price in effect on any Conversion Date shall be equal to the lower of (i) one dollar ($1.00),
and (ii) a 25% discount to the price at which the Company next issues Common Stock or Common Stock Equivalents after the date
of this Note (the “Conversion Price”). Notwithstanding any other provision of this Section 4(b), in the event
that any principal amount of the Note remains outstanding after the Maturity Date, the Conversion Price shall be sixty five percent
(65%) of the average of the three lowest daily VWAPS during the fifteen (15) days prior to the Maturity Date. All such determinations
to be appropriately adjusted for any stock dividend, stock split,stock combination, reclassification or similar transaction that
proportionately decreases or increases the Common Stock during such measuring period. Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof and the Holder shall have the right
to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant
to any other Section hereof or under applicable law.

 

 c) Mechanics of Conversion.

 

i.                  Conversion Shares
Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion
Price.

 

ii.                  Delivery of Certificate
Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares
which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be
free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing
the number of Conversion Shares being acquired upon the conversion of this Note. All certificate or certificates required to be
delivered by the Company under this Section 4(c) shall be delivered electronically through the Depository Trust Company or another
established clearing corporation performing similar functions. If the Conversion Date is prior to the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date, then the Conversion Shares shall bear a restrictive legend
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.”

 

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

 

iv.                  Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon
conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however,
that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.
In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, the
Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to
Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the
Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this
Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of
the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the
absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section
4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the
fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date
until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right
to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to
deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.

     

     

    

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

 

vi.                  Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will, within 72 hours after the Closing, at all times reserve and
keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to
the greater of (i) 300% of the Required Minimum, or (ii) 19.9% of the current shares outstanding in the Company, in the name of
the Holders, for the sole purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this
Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly
issued, fully paid and nonassessable (subject to such Holder’s compliance with its obligations under the Section 4.17 of
the Purchase Agreement).

 

vii.                  Fractional Shares.
No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction
of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either
pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price
or round up to the next whole share.

 

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

     

     

    

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

     

     

    

Section 5.Certain Adjustments.

 

a)             
Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by
way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event
of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares
of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 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. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any
sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such
lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (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 warrants, 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 lower 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), then the Conversion Price shall be
reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an
Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this Section 5(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 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of
Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether
the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

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

     

     

    

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

 

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, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off
or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business
combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the
Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the
conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any
limitation in Section 4(d) 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 (1) 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. The Company
shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the
other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e)
pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the
Holder 

     

     

    

(without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this
Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon
conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental
Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of
protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which
is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.

 

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

 

g)            
Notice to the Holder.

 

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

 

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

     

     

    

Section 6.Events of
Default.

 

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

 

i.                  any default in the payment
of (A) the principal amount of this Note and (B) other amounts owing to the Holder of this Note in excess of $5,000, as and when
the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise);

 

ii.                  the Company shall fail
to observe or perform any other material covenant or material agreement contained in the Notes (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below)
which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become
aware of such failure;

 

iii.                  a material default
or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur
under (A) any of the Transaction Documents;

 

iv.                  any material representation
or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in
any material respect as of the date when made or deemed made;

 

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

 

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

 

vii.                  the Common Stock shall
not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation
for trading thereon within five Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System
is no longer available or “chilled”;

 

viii.                  the Company shall
be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or substantially
all of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of
Control Transaction);

 

ix.                  the Company shall fail
for any reason to deliver certificates via DWAC to a Holder prior to the third Trading Day after a Conversion Date pursuant to
Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s
intention to not honor requests for conversions of any Notes in accordance with the terms hereof;

 

x.                  the Company fails to
file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance
with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), provided that the Company shall have five (5) Trading Days to cure such
failure;

     

     

    

xi.                  if the Borrower or any
Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment
for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title
11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute of any other jurisdiction or foreign country, or (v) file a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against
it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of
effecting any of the foregoing;

 

xii.                  if any order, judgment
or decree shall be entered, without the application, approval or consent of the Borrower or any Significant Subsidiary, by any
court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Borrower or any Subsidiary,
or appointing a receiver, trustee, custodian or liquidator of the Borrower or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;

 

xiii.                  the occurrence of
any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Borrower or any Subsidiary
having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and
any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;

 

xiv.                  the Company shall fail
to maintain sufficient reserved shares pursuant to Section 4(c)(vi) of this Note; or

 

xv.                  any monetary judgment,
writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property
or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed
for a period of 45 calendar days.

 

b)            
Remedies Upon Event of Default. If any Event of Default occurs, then the outstanding principal amount of this Note, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that results
in the eventual acceleration of this Note, the Note shall accrue interest at an interest rate equal to the lesser of 2% per month
(24% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount,
the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind,
and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.

     

     

    

Section 7.Miscellaneous.

 

a)              Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with
this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to
each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile
number or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading
Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)            
Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, and liquidated damages, as applicable, on this Note
at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
This Note ranks pari passu with all other Notes now or hereafter issued under the Purchase Agreement and the Existing
Debt. 

 

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

 

d)             Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party
hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state
and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or
such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

     

     

    

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

 

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

 

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

 

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

 

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

 

j)              
Secured Obligation. The obligations of the Company under this Note are secured pursuant to the Security Agreement dated
as of the date hereof, between the Company and the Secured Parties (as defined therein). 

 

*********************

 

(Signature Pages
Follow)

    	 

    	 

    

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

 

 

	 	MASSROOTS, INC.
	 	 	 
	 	 	 
	 	By: 	 
	 	 	Name:
	 	 	Title:
	 	Facsimile No. for delivery of Notices:	 

 

 

    	 

    	 

    

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned
hereby elects to convert principal under the Convertible Promissory Note due September [__], 2016 of MassRoots, Inc., a Delaware
corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged
to the holder for any conversion, except for such transfer taxes, if any.

 

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

 

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

 

Conversion calculations:

Date to Effect
Conversion:

 

Principal Amount of Note
to be Converted:

Number of shares of Common
Stock to be issued:

Signature:

Name:

DWAC Instructions:

 

Broker No: __________________________________

 

Account No: _________________________________

     

     

    

Schedule 1

 

CONVERSION SCHEDULE

 

This Convertible Promissory Note due
on September [__], 2016 in the original principal amount of $[___] is issued by MassRoots, Inc. a Delaware corporation. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced Note.

 

Dated:

 

 

	Date of Conversion (or for first entry, Original Issue Date)	Amount of Conversion	Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)	Company Attest

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