Document:

Membership Interest Purchase Agreement (Pro-buyer Short Form; Minority Interest)

MEMBERSHIP INTEREST PURCHASE AGREEMENT

AMONG

MAB RESOURCES HOLDINGS, LLC

AND

JM MAGNA HOLDINGS, LLC

AND

FORTEM RESOURCES INC.

dated as of

April 17, 2017

TABLE OF CONTENTS

ARTICLE 1 PURCHASE AND SALE

1.1

Purchase and Sale

1.2

Purchase Price

1.3

Closing

1.4

Transfer Taxes

1.5

Withholding Taxes

ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS

2.1

Authority of Sellers; Enforceability

2.2

No Conflicts; Consents

2.3

Legal Proceedings

2.4

Operating History

2.5

Ownership of Membership Interests

2.6

Brokers

2.7

Securities Law Acknowledgements

2.8

Securities Law Representations

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER

3.1

Organization and Authority of Buyer; Enforceability

3.2

No Conflicts; Consents

3.3

Buyer’s Securities Law Acknowledgements

3.4

Brokers

3.5

Legal Proceedings

ARTICLE 4 CLOSING DELIVERIES

4.1

Sellers’ Deliveries

4.2

Buyer’s Deliveries

ARTICLE 5 INDEMNIFICATION

5.1

Survival of Representations and Covenants

5.2

Indemnification By Sellers

5.3

Indemnification By Buyer

5.4

Indemnification Procedures

5.5

Payments

5.6

Effect of Investigation

5.7

Cumulative Remedies

ARTICLE 6 MISCELLANEOUS

6.1

Expenses

6.2

Further Assurances

6.3

Notices

6.4

Headings

6.5

Severability

6.6

Entire Agreement

6.7

Successors and Assigns

6.8

No Third-Party Beneficiaries

6.9

Amendment and Modification

6.10

Waiver

6.11

Governing Law

6.12

Submission to Jurisdiction

6.13

Specific Performance

6.14

Counterparts

Exhibits:

			
	Schedule A

	 
	Description of Contractual Rights

	 

	-

	Canadian Investor Questionnaire

	

	-

	United States Accreditor Investor Questionnaire

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of April 17, 2017, is entered into

AMONG:

MAB Resources Holdings, LLC (“MAB”), a limited liability company organized under the laws of the State of Nevada,

AND:

JM Magna Holdings, LLC (“JM Magna” and together with MAB, the “Sellers” and each of them a “Seller”), a limited liability company organized under the laws of the State of Nevada,

AND:

Fortem Resources Inc. (“Buyer”), a Nevada corporation

WHEREAS:

A.

MAB owns 50% of the outstanding membership interests (the “MAB Membership Interest”) of Rolling Rock Resources, LLC, a Nevada limited liability company (the “Company”);

B.

JM Magna owns 50% of the outstanding membership interests (the “JM Magna Membership Interest”) of the Company;

C.

The Company owns certain petroleum, natural gas and general rights as described on and attached to Schedule A of this Agreement (the “Contractual Rights”);

D.

MAB wishes to sell to Buyer, and Buyer wishes to purchase from MAB, the MAB Membership Interest, subject to the terms and conditions set forth herein; and

E.

JM Magna wishes to sell to Buyer, and Buyer wishes to purchase from JM Magna, the JM Magna Membership Interest, subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

PURCHASE AND SALE

1.1

Purchase and Sale

Subject to the terms and conditions set forth herein, at the Closing (as defined herein):

(a)

MAB shall sell to Buyer, and Buyer shall purchase from MAB, all of the MAB Membership Interest, free and clear of any mortgage, pledge, lien, charge, security interest, claim or other encumbrance (“Encumbrance”), for the consideration specified in Section .

(b)

JM Magna shall sell to Buyer, and Buyer shall purchase from JM Magna, all of the JM Magna Membership Interest, free and clear of any Encumbrance, for the consideration specified in Section .

1.2

Purchase Price

The aggregate purchase price for the MAB Membership Interest and the JM Magna Membership Interest (collectively, the “Membership Interests”) shall be US$40,100,000 which shall be payable by the Buyer to the Sellers on the Closing Date as follows:

(a)

the payment of US$100,000 (which the Sellers acknowledge has been paid by the Buyer on the Seller’s behalf to ROSC as a non-refundable deposit pursuant to the terms of the Asset Purchase Agreement, as such terms are defined below); and

(b)

the issuance of an aggregate of 20,000,000 common shares (the “Purchase Shares”) in the capital of Buyer at a deemed value of US$2.00 per Purchase Share, with 10,000,000 Purchase Shares issuable to MAB Resources and 10,000,000 Purchase Shares issuable to JM Magna (collectively, the “Closing Shares”).

1.3

Closing

The purchase, sale and transfer of the Membership Interests as contemplated by this Agreement, and the issuance of the Closing Shares (the “Closing”), shall take place at 12:00 p.m. on the date of this Agreement (the “Closing Date”) at the offices of Clark Wilson LLP, 900 – 885 West Georgia Street, Vancouver, B.C. V6C 3H1.

1.4

Transfer Taxes

Each Seller, individually as to itself and not on a joint and several basis, shall pay, and shall reimburse Buyer for, any sales, use or transfer taxes, documentary charges, recording fees or similar taxes, charges, fees or expenses, if any, that become due and payable as a result of the transactions contemplated by this Agreement.

1.5

Withholding Taxes

Buyer and the Company shall be entitled to deduct and withhold from the Purchase Price all taxes that Buyer and the Company may be required to deduct and withhold under any provision of tax law. All such withheld amounts shall be treated as delivered to Sellers hereunder, as their respective interest may appear.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF SELLERS

Each Seller represents and warrants to Buyer, individually as to itself and not jointly and severally, that the statements contained in this  are true and correct as of the Closing Date.  For purposes of this , “Seller’s knowledge,” “knowledge of Seller” and any similar phrases shall mean the actual or constructive knowledge of MAB and JM Magna, respectively, after due inquiry.

2.1

Authority of Sellers; Enforceability

Each of MAB and JM Magna has full power and authority to enter into this Agreement and the documents to be delivered hereunder, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement and the documents to be delivered hereunder have been duly executed and delivered by each of MAB and JM Magna, and (assuming due authorization, execution and delivery by Buyer) this Agreement and the documents to be delivered hereunder constitute legal, valid and binding obligations of MAB and JM Magna, enforceable against them in accordance with their respective terms.

2.2

No Conflicts; Consents

The execution, delivery and performance by MAB and JM Magna of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not:

(a)

violate, conflict with or constitute a default under the respective Articles of Organization of each Seller or other organizational documents of any of them;

(b)

violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to any of them;

(c)

conflict with, or result in (with or without notice or lapse of time or both) any violation of, or default under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit under any contract or other instrument to which any of them is a party; or

(d)

result in the creation or imposition of any Encumbrance on the Membership Interests or any of them.

Other than the consent of the respective member of each Seller, no consent, approval, waiver or authorization is required to be obtained by any of MAB and JM Magna or the Company from any person or entity (including any governmental authority) in connection with the execution, delivery and performance by Sellers of their obligations under this Agreement and the consummation of the transactions contemplated hereby and thereby.

2.3

Legal Proceedings

There is no claim, action, suit, proceeding or governmental investigation (“Action”) of any nature pending or, to Sellers’ knowledge, threatened against or by MAB and JM Magna:

(a)

relating to or affecting the Membership Interests; or

(b)

that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

2.4

Operating History

Except as contemplated herein and with respect to the Purchase and Sale Agreement dated effective March 1, 2017 between Rockies Standard Oil Company, LLC (“RSOC”) and the Company (the “Asset Purchase Agreement”), as amended, and the transactions contemplated therein, the Company is not a party to any agreement or undertaking, has never commenced operations or received or expended any money or other property and has no assets or liabilities, other than transaction costs incurred in connection with such agreements which will be paid on or prior to Closing. The Company is managed by a sole Manager, Marc A. Bruner, who has managed the Company solely in his capacity as manager.

2.5

Ownership of Membership Interests

(a)

MAB is the sole legal, beneficial, record and equitable owner of the MAB Membership Interest, free and clear of all Encumbrances whatsoever.

(b)

JM Magna is the sole legal, beneficial, record and equitable owner of the JM Magna Membership Interest, free and clear of all Encumbrances whatsoever.

(c)

The Membership Interests constitute 100% of the issued and outstanding debt and/or equity securities of the Company.

(d)

The Membership Interests were issued in compliance with applicable laws. The Membership Interests were not issued in violation of the organizational documents of the Company or any other agreement, arrangement or commitment to which any of the Sellers or the Company is a party and are not subject to or in violation of any pre-emptive or similar rights of any Person.

(e)

Other than the organizational documents of the Company, there are no voting trusts, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Membership Interests.

2.6

Brokers

No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Sellers or any of them.

2.7

Securities Law Acknowledgements

Each of the Sellers acknowledges that:

(a)

none of the Purchase Shares have been or will be registered under the United States Securities Act of 1933, as amended, (the “1933 Act”), or under any securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to any U.S. Person (as defined in Rule 902(k) of Regulation S, promulgated by the Securities and Exchange Commission under the 1933 Act (“Regulation S”)), except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state, provincial and foreign securities laws;

(b)

Buyer has not undertaken, and will have no obligation, to register any of the Purchase Shares under the 1933 Act or any other applicable securities laws;

(c)

Buyer will refuse to register the transfer of any of the Purchase Shares to a U.S. Person not made pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in each case in accordance with applicable laws;

(d)

there are risks associated with the purchase of the Purchase Shares, as more fully described in Buyer’s periodic disclosure filed on SEDAR and EDGAR and forming part of the public record;

(e)

the Sellers have each had a reasonable opportunity to ask questions of, and receive answers from, the Buyer in connection with the distribution of the Purchase Shares hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Buyer;

(f)

any resale of the Purchase Shares by any of the Sellers will be subject to resale restrictions contained in the securities laws applicable to the Buyer, each Seller (as applicable) and any proposed transferee and it is the responsibility of the Sellers to find out what those restrictions are and to comply with such restrictions before selling any of the Purchase Shares;

(g)

the Sellers have been advised to consult their own legal, tax and other advisors with respect to the merits and risks of an investment in the Purchase Shares and with respect to applicable resale restrictions, and each of them is solely responsible (and the Buyer is not in any way responsible) for compliance with:

(i)

any applicable laws of the jurisdiction in which they are formed or deemed resident in connection with the distribution of the Purchase Shares hereunder, and

(ii)

applicable resale restrictions;

(h)

the Sellers each consent to the placement of a legend or legends on any certificate or other document evidencing any of the Purchase Shares setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement, with such legend(s) to be substantially as follows:

THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY IN OR FROM A JURISDICTION OF CANADA UNLESS THE CONDITIONS IN SECTION 13 OF MULTILATERAL INSTRUMENT 51-105, ISSUERS QUOTED IN THE U.S. OVER-THE-COUNTER MARKETS, ARE MET.

and:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED 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.

(i)

the Buyer has advised the Sellers that the Buyer is relying on an exemption from the requirements to provide the Sellers with a prospectus and to sell the Purchase Shares through a person registered to sell securities under provincial securities laws and other applicable securities laws, and, as a consequence of acquiring the Purchase Shares pursuant to such exemption, certain protections, rights and remedies provided by applicable securities laws (including the various provincial securities acts), including statutory rights of rescission or damages, will not be available to the Sellers; and

(j)

no securities commission or similar regulatory authority has reviewed or passed on the merits of any of the Purchase Shares.

2.8

Securities Law Representations

Each of the Sellers, severally but not jointly, hereby represents and warrants that:

(a)

it is a U.S. Person, as that term is defined in Rule 902(k) of Regulation S; and

(b)

it is an “accredited investor”, as that term is defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the 1933 Act and as that term is defined in Section 1.1 of National Instrument 45-106, Prospectus Exemptions, adopted by the Canadian securities regulators, and it has completed and submitted to the Buyer a Canadian Investor Questionnaire and a U.S. Accredited Investor Certificate, each in the form attached to this Agreement as  and , respectively.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers that the statements contained in this  are true and correct as of the date hereof. For purposes of this , “Buyer’s knowledge,” “knowledge of Buyer” and any similar phrases shall mean the actual or constructive knowledge of any director or officer of Buyer, after due enquiry.

3.1

Organization and Authority of Buyer; Enforceability

Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.  Buyer has full corporate power and authority to enter into this Agreement and the documents to be delivered hereunder, to carry out its obligations hereunder and to consummate the transactions contemplated hereby.  The execution, delivery and performance by Buyer of this Agreement and the documents to be delivered hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement and the documents to be delivered hereunder have been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Sellers) this Agreement and the documents to be delivered hereunder constitute legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms.

3.2

No Conflicts; Consents

The execution, delivery and performance by Buyer of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not:

(a)

violate or conflict with the articles of incorporation, by-laws or other organizational documents of Buyer; or

(b)

violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer.

Other than the consent by the board of directors of Buyer to this Agreement and the consummation of the transactions contemplated hereby, no consent, approval, waiver or authorization is required to be obtained by Buyer from any person or entity (including any governmental authority) in connection with the execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby.

3.3

Buyer’s Securities Law Acknowledgements

Buyer acknowledges that:

(a)

none of the Membership Interests have been or will be registered under the 1933 Act or under any securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to any U.S. Person (as defined in Rule 902(k) of Regulation S, except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act, and in each case only in accordance with applicable state, provincial and foreign securities laws;

(b)

Sellers have not undertaken, and will have no obligation, to register any of the Membership Interests under the 1933 Act or any other applicable securities laws;

(c)

there are risks associated with the purchase of the Membership Interests;

(d)

Buyer is acquiring the Membership Interests for Buyer’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution;

(e)

by reason of its, or of its management’s, business and financial experience, Buyer has the capacity to evaluate the merits and risks of its investment in the Membership Interests and to protect its own interests in connection with the transactions contemplated in this Agreement;

(f)

it is an “accredited investor”, as that term is defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the 1933 Act and as that term is defined in Section 1.1 of National Instrument 45-106, Prospectus Exemptions, adopted by the Canadian securities regulators;

(g)

Buyer has had a reasonable opportunity to ask questions of, and receive answers from, the Sellers and the Company in connection with the distribution of the Membership Interests hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;

(h)

any resale of the Membership Interests by the Buyer will be subject to resale restrictions contained in the securities laws applicable to the Buyer, the Company and any proposed transferee and it is the responsibility of the Buyer to find out what those restrictions are and to comply with such restrictions before selling any of the Membership Interests;

(i)

the Buyer has been advised to consult the Buyer’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Membership Interests and with respect to applicable resale restrictions, and it is solely responsible (and the Sellers are not in any way responsible) for compliance with applicable resale restrictions;

(j)

the Buyer consents to the placement of a legend or legends on any certificate or other document evidencing any of the Membership Interests setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement, with such legend(s) to be substantially as follows:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED 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.

no securities commission or similar regulatory authority has reviewed or passed on the merits of any of the Membership Interests.

3.4

Brokers

No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.

3.5

Legal Proceedings

There is no Action pending or, to Buyer’s knowledge, threatened against or by Buyer or any affiliate of Buyer that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.

3.6

Limited Due Diligence on the Company’s Assets

Buyer acknowledges, agrees and accepts that the Company is performing a limited due diligence on the assets and interests that may be acquired by the Company under the Asset Purchase Agreement, and that such due diligence review is not completed as of the date of execution of this Agreement. Specifically, the Company will only review (i) the unit and lease files related to the “Federal Units” (as such term is defined in the Asset Purchase Agreement) that are maintained by and in the possession of ROSC, (ii) the well files that are maintained by and in the possession of ROSC, only for the currently producing or shut in wells located within the “Federal Units,” and (iii) in the sole discretion of the Company, certain publically recorded or filed instruments in applicable county filing offices or the applicable state office of the United States Bureau of Land Management, in either case only related to interests within the “Federal Units.” In the event the Company acquires assets under the Asset Purchase Agreement, it shall acquire such assets on an “as is, where is” basis without any warranty of any kind except for a special warranty of title from ROSC pursuant to the terms of the Asset Purchase Agreement.

3.7

Conditional Acquisition of Assets

Buyer acknowledges, agrees and accepts that the acquisition of the assets and interests by the Company under the Asset Purchase Agreement is conditional in the sole discretion of the Company, including but not limited to the Company’s election to terminate the Asset Purchase Agreement on or before April 17, 2017 due to the assertion by the Company of one or more “Title Defects” (as such term is defined in the Asset Purchase Agreement). Buyer has received a complete copy of the Asset Purchase Agreement and has reviewed it and understands its terms.

ARTICLE 4

CLOSING DELIVERIES AND CONDITION

4.1

Sellers’ Deliveries

At the Closing, Sellers shall deliver to Buyer the following:

(a)

Written consent from the sole member of MAB authorizing the transfer of the MAB Membership Interest to Buyer.

(b)

Written consent from the sole member of JM Magna authorizing the transfer of the JM Magna Membership Interest to Buyer.

(c)

Written consent from all of the members of the Company authorizing the transfer of the Membership Interests to Buyer.

(d)

An Assignment of Membership Interest from each of MAB and JM Magna transferring all of the Membership Interests to Buyer.

(e)

A Canadian Accredited Investor Questionnaire in the form attached hereto as  from each Seller.

(f)

A U.S. Accredited Investor Certificate in the form attached hereto as  from each Seller.

(g)

A revised Members’ Schedule reflecting the Buyer’s purchase of the Membership Interests and ownership interest in the Company.

4.2

Buyer’s Deliveries

At the Closing, Buyer shall deliver the following to Sellers:

(a)

A Share Certificate representing 10,000,000 Purchase Shares registered to MAB.

(b)

A Share Certificate representing 10,000,000 Purchase Shares registered to JM Magna.

(c)

A certificate of the Secretary of Buyer certifying as to the resolutions of the board of directors of Buyer, duly adopted and in effect, which authorizes the execution, delivery and performance of this Agreement and the transactions contemplated hereby.

4.3

Mutual Condition to Closing

Sellers and Buyer may rescind the transactions under this Agreement upon mutual agreement in the event that the Company elects to terminate the Asset Purchase Agreement on or before April 17, 2017 due to the assertion by the Company of one or more “Title Defects” (as such term is defined in the Asset Purchase Agreement). In the event the Company elects such termination and the Sellers and Buyer have made certain closing deliveries pursuant to Sections 4.1 and 4.2 above, such closing deliverables shall be returned to the providing party and any Closing under this Agreement shall be deemed not to have occurred.

ARTICLE 5

INDEMNIFICATION

5.1

Survival of Representations and Covenants

All representations, warranties, covenants and agreements contained herein and all related rights to indemnification shall survive the Closing  for a period of two years, except that the representations and warranties in Section 2.1, 2.2, 3.1 and 3.2 shall survive the Closing indefinitely.

5.2

Indemnification By Sellers

Subject to the survival period stated in Section 5.1, each Seller shall, on an individual basis and not on a joint and several basis, defend, indemnify and hold harmless Buyer, its affiliates (including the Company from and after the Closing Date) and their respective stockholders, directors, officers and employees from and against all claims, judgments, damages, liabilities, settlements, losses, costs and expenses, including attorneys’ fees and disbursements (a “Loss”), arising from or relating to:

(a)

any inaccuracy in or breach of any of the representations or warranties of such Seller contained in this Agreement or any document to be delivered hereunder; or

(b)

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by such Seller pursuant to this Agreement or any document to be delivered hereunder.

5.3

Indemnification By Buyer

Subject to the survival period stated in Section 5.1, Buyer shall defend, indemnify and hold harmless Sellers, their respective affiliates and their respective members, directors, officers and employees from and against all Losses arising from or relating to: 

(a)

any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement or any document to be delivered hereunder; or

(b)

any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement or any document to be delivered hereunder.

5.4

Indemnification Procedures

Whenever any claim shall arise for indemnification hereunder, the party entitled to indemnification (the “Indemnified Party”) shall promptly provide written notice of such claim to the other party (the “Indemnifying Party”). In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any Action by a person or entity who is not a party to this Agreement, the Indemnifying Party, at its sole cost and expense and upon written notice to the Indemnified Party, may assume the defense of any such Action with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be entitled to participate in the defense of any such Action, with its counsel and at its own cost and expense. If the Indemnifying Party does not assume the defense of any such Action, the Indemnified Party may, but shall not be obligated to, defend against such Action in such manner as it may deem appropriate, including, but not limited to, settling such Action, after giving notice of it to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate and no action taken by the Indemnified Party in accordance with such defense and settlement shall relieve the Indemnifying Party of its indemnification obligations herein provided with respect to any damages resulting therefrom. The Indemnifying Party shall not settle any Action without the Indemnified Party’s prior written consent (which consent shall not be unreasonably withheld or delayed).

5.5

Payments

Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this , the Indemnifying Party shall satisfy its obligations within 15 Business Days of such final, non-appealable adjudication by wire transfer of immediately available funds. The parties hereto agree that should an Indemnifying Party not make full payment of any such obligations within such 15 Business Day period, any amount payable shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication to but excluding the date such payment has been made at a rate per annum equal to the then prevailing prime lending rate of interest charged by Toronto-Dominion Bank to commercial customers in the City of Vancouver, British Columbia. Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed, without compounding.

5.6

Effect of Investigation

Buyer’s right to indemnification or other remedy based on the representations, warranties, covenants and agreements of Sellers contained herein will not be affected by any investigation conducted by Buyer with respect to, or any knowledge acquired by Buyer at any time, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement.

5.7

Cumulative Remedies

The rights and remedies provided in this  are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise.

ARTICLE 6

MISCELLANEOUS

6.1

Expenses

All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

6.2

Further Assurances

Following the Closing, each of the parties hereto shall, and shall cause their respective affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

6.3

Notices

All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given:

(a)

when delivered by hand (with written confirmation of receipt);

(b)

when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); or

(c)

on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient.

Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section ):

(d)

If to MAB Resources Holdings, LLC:

1155 Blake Street Suite #1002

Denver, CO 80202

Attention:

Marc A. Bruner

Email:

(e)

If to JM Magna Holdings, LLC:

153 Sierra Court

Maple, Ontario

Canada  L6A 2L8

Attention:

Jaime Melo

Email:

(f)

If to Buyer:

Fortem Resources Inc.

815 8th Avenue S.W., Suite 700

Calgary, AB T2P 3P2

Attention: Michael Caetano

E-mail: 

6.4

Headings

The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

6.5

Severability

If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

6.6

Entire Agreement

This Agreement and the documents to be delivered hereunder constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in documents to be delivered hereunder, the statements in the body of this Agreement will control.

6.7

Successors and Assigns

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

6.8

No Third-Party Beneficiaries

Except as provided in , this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

6.9

Amendment and Modification

This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto.

6.10

Waiver

No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

6.11

Governing Law

This Agreement shall be governed by and construed in accordance with the internal laws of the State of Utah and the federal laws of the United States of America applicable therein without giving effect to any choice or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction).

6.12

Submission to Jurisdiction

Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the courts of the State of Utah located in the city of Salt Lake City, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.

6.13

Specific Performance

The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

6.14

Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[remainder of the page left intentionally blank]

- 2 -

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

FORTEM RESOURCES INC.

Per:

/s/ Michael Caetano

Authorized Signatory

Name:  

Michael Caetano

Title:    Chief Executive Officer

MAB RESOURCES HOLDINGS, LLC

Per:

/s/ Marc A. Bruner

Authorized Signatory

Name:  Marc A. Bruner

Title:    

Managing Member

JM MAGNA HOLDINGS, LLC

Per:

/s/ Jamie Melo

Authorized Signatory

Name:  

Jamie Melo

Title:    

Managing Member

- 3 -

Schedule A – Contractual Rights

Contractual Rights

Company holds certain rights pursuant to a Purchase and Sale Agreement dated effective March 1, 2017 (the “Agreement”) between the Company and Rockies Standard Oil Company, LLC, as amended, all of which rights are qualified in their entirety by the terms of the Agreement, as attached hereto.

[Copy of the Agreement attached]

Exhibit A

CANADIAN INVESTOR QUESTIONNAIRE

(ALBERTA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, NEW BRUNSWICK,

NOVA SCOTIA, ONTARIO, PRINCE EDWARD ISLAND, QUEBEC, AND SASKATCHEWAN)

		
	TO:

	Fortem Resources Inc. (the “Issuer”)

	RE:

	Acquisition of Common Shares (the “Purchase Shares”) of the Issuer

Capitalized terms used in this Canadian Questionnaire (this “Questionnaire”) and not specifically defined have the meaning ascribed to them in the Membership Interest Purchase Agreement between the undersigned (the “Seller”) and the Issuer to which this  is attached.

In connection with the acquisition by the Seller of the Purchase Shares, the Seller hereby represents, warrants and certifies to the Issuer that the Seller:

(i)

is acquiring the Purchase Shares as principal; and

(ii)

(A)

is resident in or is subject to the laws of one of the following (check one):

			
	o Alberta

	o New Brunswick

	
o

Prince Edward Island

	o British Columbia

	o Nova Scotia

	o Quebec

	o Manitoba

	o Ontario

	o Saskatchewan

	o Newfoundland and Labrador

	o Yukon

	o Northwest Territories

	o United States: _________________________ (List State of Residence)

or

(B)

o is resident in a country other than Canada or the United States.

In connection with the acquisition of the Purchase Shares, the Seller hereby represents, warrants, covenants and certifies that the Seller meets one or more of the following criteria:

				
	
I.

SELLER ACQUIRING UNDER THE “ACCREDITED INVESTOR” EXEMPTION

	 
	the Seller is not a trust company or trust company registered under the laws of Prince Edward Island that is not registered or authorized under the Trust and Loan Companies Act (Canada) or under comparable legislation in another jurisdiction of Canada,

	 
	 the Seller is an “accredited investor” within the meaning of NI 45-106, by virtue of satisfying the indicated criterion below (YOU MUST INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S)) (see certain guidance with respect to accredited investors that starts on page 9, below)

	 
	o

	(i)

	except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,

	 
	o

	(ii)

	an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (ix),

	 
	o

	(iii)

	an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),

	 
	o

	(iv)

	an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000,

	 
	o

	(v)

	an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000,

	 
	o

	(vi)

	an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year,

	 
	o

	(vii)

	an individual who, either alone or with a spouse, has net assets of at least $5,000,000,

	 
	o

	(viii)

	a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements and that has not been created or used solely to purchase or hold securities as an accredited investor as defined in this paragraph (viii),

	 
	o

	(ix)

	an investment fund that distributes or has distributed its securities only to

(i)

a person that is or was an accredited investor at the time of the distribution,

(ii)

a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] of NI 45-106, or 2.19 [Additional investment in investment funds] of NI 45-106, or

(iii)

a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106,

	 
	o

	(x)

	an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,

	 
	o

	(xi)

	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,

	 
	o

	(xii)

	a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,

	 
	o

	(xiii)

	a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,

	 
	o

	(xiv)

	an entity organized in a foreign jurisdiction that is analogous to the entity referred to in paragraph (i) in form and function,

	 
	o

	(xv)

	a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors, and

Guidance On Accredited Investor Exemptions for Corporations, Trusts and Other Entities

Accredited investors that are corporations, trusts or other entities include:

(a)

a corporation, trust or other entity, other than an investment fund, that has net assets (please see the guidance below regarding calculating net assets) of at least $5,000,000 as shown on its most recently prepared financial statements in accordance with applicable generally accepted accounting principles and that has not been created or used solely to purchase or hold securities as an accredited investor;

(b)

a corporation, trust or other entity in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors; and

(c)

a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

Net Assets

For the purposes of Section (a) above, “net assets” means all of the subscriber’s total assets minus all of the subscriber’s total liabilities. The minimum net asset threshold of $5,000,000 specified in Section (a) above must be shown on the entity’s most recently prepared financial statements. The financial statements must be prepared in accordance with applicable generally accepted accounting principles.

The Seller agrees that the above representations and warranties will be true and correct both as of the execution of this Questionnaire and as of the Closing and acknowledges that they will survive the completion of the acquisition of the Purchase Shares.

The Seller acknowledges that the foregoing representations and warranties are made by the Seller with the intent that they be relied upon in determining the suitability of the Seller to acquire the Purchase Shares and that this Questionnaire is incorporated into and forms part of the Agreement and the undersigned undertakes to immediately notify the Issuer of any change in any statement or other information relating to the Seller set forth herein which takes place prior to the closing time of the acquisition of the Purchase Shares.

The Seller undertakes to immediately notify the Issuer of any change in any statement or other information relating to the Seller set forth in the Agreement or in this Questionnaire which takes place prior to the Closing.

By completing this Questionnaire, the Seller authorizes the indirect collection of this information by each applicable regulatory authority or regulator and acknowledges that such information is made available to the public under applicable laws.

DATED as of  day of , 2017.

By: 

      Signature of Authorized Signatory of Seller

Print Name and Title of Authorized Signatory of Seller

- 2 -

Exhibit B

TO MEMBERSHIP INTEREST PURCHASE AGREEMENT

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

Capitalized terms used in this U.S. Questionnaire (this “Questionnaire”) and not specifically defined have the meaning ascribed to them in the Membership Interest Purchase Agreement between the undersigned (the “Seller”) and Fortem Resources Inc. (the “Issuer”) to which this  is attached.

This Questionnaire applies only to persons that are U.S. Purchasers. A “U.S. Purchaser” is: (a) any U.S. Person, (b) any person acquiring the Purchase Shares on behalf of any U.S. Person, (c) any person that receives or received an offer of the Purchase Shares while in the United States, or (d) any person that is in the United States at the time the Seller’s buy order was made or this Agreement was executed or delivered.

The Seller understands and agrees that none of the Purchase Shares have been or will be registered under the 1933 Act, or applicable state, provincial or foreign securities laws, and the Purchase Shares are being offered and sold to the Seller in reliance upon the exemption provided in Section 4(2) of the 1933 Act and Rule 506 of Regulation D under the 1933 Act for non-public offerings. The Purchase Shares are being offered and sold within the United States only to “accredited investors” as defined in Rule 501(a) of Regulation D. The Purchase Shares offered hereby are not transferable except in accordance with the restrictions described herein. 

The Seller represents, warrants, covenants and certifies (which representations, warranties, covenants and certifications will survive the Closing) to the Issuer (and acknowledges that the Issuer is relying thereon) that:

1.

it is not resident in Canada;

2.

it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Purchase Shares and it is able to bear the economic risk of loss of its entire investment;

3.

the Issuer has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the sale of the Purchase Shares and it has had access to such information concerning the Issuer as it has considered necessary or appropriate in connection with its investment decision to acquire the Purchase Shares;

4.

it is acquiring the Purchase Shares for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Purchase Shares in violation of the United States securities laws;

5.

it (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time;

6.

if the Seller is an individual (that is, a natural person and not a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

		
	___________

	a natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds US$1,000,000. For purposes of this category, “net worth” means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value of a person’s primary home) over total liabilities. Total liabilities excludes any mortgage on the primary home in an amount of up to the home’s estimated fair market value as long as the mortgage was incurred more than 60 days before the Purchase Shares are purchased, but includes (i) any mortgage amount in excess of the home’s fair market value and (ii) any mortgage amount that was borrowed during the 60 day period before the Closing Date for the purpose of investing in the Purchase Shares,

	___________

	a natural person who had an individual income in excess of US$200,000 in each of the two most recent years, or joint income with their spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year, or

	___________

	a director or executive officer of the Issuer;

7.

if the Seller is a corporation, partnership, trust or other entity), then it satisfies one or more of the categories indicated below (please place an “X” on the appropriate lines):

		
	___________

	an organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Purchase Shares, with total assets in excess of US$5,000,000,

	___________

	a “bank” as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of US$5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors,

	___________

	a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States),

	___________

	a trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act, or

	___________

	an entity in which all of the equity owners satisfy the requirements of one or more of the categories set forth in Section 6 of this Questionnaire;

8.

it has not purchased the Purchase Shares as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, internet, television or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

9.

if the Seller decides to offer, sell or otherwise transfer any of the Purchase Shares, it will not offer, sell or otherwise transfer any of such Purchase Shares, directly or indirectly, unless:

(a)

the sale is to the Issuer,

(b)

the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act and in compliance with applicable local laws and regulations in which such sale is made;

(c)

the sale is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws, or

(d)

the Purchase Shares are sold in a transaction that does not require registration under the 1933 Act or any applicable state laws and regulations governing the offer and sale of securities, and

(e)

it has, prior to such sale pursuant to subsection (c) or (d), furnished to the Issuer an opinion of counsel of recognized standing reasonably satisfactory to the Issuer, to such effect;

10.

it understands and acknowledges that, upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the 1933 Act or applicable U.S. state laws and regulations, the certificates representing the Purchase Shares, and all securities issued in exchange therefor or in substitution thereof, will bear, in addition such legends as are required by applicable securities laws.

11.

it understands and agrees that there may be material tax consequences to the Seller of an acquisition or disposition of the Purchase Shares. The Issuer gives no opinion and makes no representation with respect to the tax consequences to the Seller under United States, state, local or foreign tax law of the Seller’s acquisition or disposition of the Purchase Shares. In particular, no determination has been made whether the Issuer will be a “passive Foreign investment company” (“PFIC”) within the meaning of Section 1291 of the United States Internal Revenue Code;

12.

it consents to the Issuer making a notation on its records or giving instructions to any transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described in this Questionnaire and the Membership Interest Purchase Agreement;

13.

it is resident in the United States of America, its territories and possessions or any state of the United States or the District of Columbia (collectively the “United States”), is a “U.S. Person” as such term is defined in Regulation S or was in the United States at the time the Purchase Shares were offered or the Membership Interest Purchase Agreement was executed; and

14.

it understands that the Issuer has no obligation to register any of the Purchase Shares or to take action so as to permit sales pursuant to the 1933 Act (including Rule 144 thereunder).

The Seller undertakes to notify the Issuer immediately of any change in any representation, warranty or other information relating to the Seller set forth herein which takes place prior to the closing time of the acquisition of the Purchase Shares.

Dated , 2017.

			
	 
	 
	X

	 
	 
	Signature of Authorized Signatory

	 
	 
	 

	 
	 
	Name of Seller (please print)

	 
	 
	 

	 
	 
	Name of Authorized Signatory (please print)Exhibit
4.1

 

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

 

Principal
Amount:
$165,000

Date:
April 17, 2017

 

FORM
OF SECURED CONVERTIBLE
PROMISSORY
NOTE

 

PositiveID
Corp., (hereinafter
called the “Company”),
hereby promises
to pay to the order
of GHS Investments, LLC, a Nevada Limited
Liability Company, or its registered
assigns (the
“Holder”)
the sum of $165,000 on the Maturity Date (as defined below), together
with any interest
as set forth
herein, and to pay
interest
on the unpaid principal
balance
hereof
at the rate
of Ten percent
(10%) (the
“Interest Rate”)
per annum from
the date hereof
(the “Issue Date”)
until the same becomes
due and payable,
whether at
maturity or upon acceleration
or by prepayment
or otherwise. This Note is being issued
with a fifteen thousand dollar ($15,000) original issuance discount (“OID”) to offset transaction, diligence and legal
costs.

 

The
principal sum (and corresponding interests) due to the Holder shall be prorated based on the consideration actually paid by the
Holder in accordance with the Securities Purchase Agreement of same date. The Company is not required to repay any unfunded portion
of this Note. The Maturity Date for each funded tranche shall be Twelve (12) months from the date on which the funds are received
by the Company.

 

This
Note may not be prepaid
in whole or in part except
as otherwise explicitly
set forth
herein.. Interest
shall commence
accruing
on the date that the Note is fully
paid and shall
be computed on the basis
of a 365-day year
and the actual
number of days elapsed.
All payments due
hereunder
(to the extent
not converted
into common stock)
shall be made in lawful
money of the United States
of America. Following any Event of Default,
interest shall accrue at the lesser of Twenty Percent (20%) per annum or the maximum interest permitted by Law.

 

    	1 

    	 

    

 

All
payments
shall be made
at such address
as the Holder shall
hereafter
give to the Company by
written
notice made
in accordance
with the provisions of this Note. Whenever
any amount expressed
to be due by the terms of this Note is
due on any day which
is not a business day, the
same shall instead
be due on the next
succeeding
day which
is a business day and,
in the case of any interest
payment
date which
is not the date on which
this Note is paid in full, the extension
of the due date thereof
shall not be taken
into account for
purposes
of determining the
amount of interest due on such
date. As used
in this Note, the term
“business day”
shall mean
any day
other than
a Saturday,
Sunday or a day on which
commercial
banks in the city
of New York,
New York
are authorized
or required
by law or executive
order to remain
closed. Each
capitalized
term used herein,
and not otherwise defined,
shall have
the meaning ascribed
thereto in the supporting documents of same date (attached hereto).

 

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

 

The
following terms
shall apply
to this Note:

 

ARTICLE
I. CONVERSION
RIGHTS

 

1.1
Conversion Right.
The Holder shall have
the right and at
any time from the execution of this Note
to convert all
or any part
of the outstanding and
unpaid principal
amount of this Note into fully
paid and non- assessable
shares
of Common Stock,
as such Common
Stock exists
on the Issue Date, or any
shares of
capital
stock or other securities
of the Company into which such
Common Stock
shall hereafter
be changed
or reclassified
at the conversion
price (the “Conversion
Price”)
determined
as provided
herein (a “Conversion”);
provided, however,
that in no event
shall the Holder be entitled
to convert
any portion
of this Note in excess
of that portion of this Note upon
conversion
of which the sum of (1)
the number of shares
of Common Stock
beneficially
owned by
the Holder and its affiliates
(other than
shares of Common
Stock which
may be deemed
beneficially
owned through
the ownership of the unconverted
portion of the Notes
or the unexercised
or unconverted
portion of any
other security
of the Company subject to a limitation
on conversion
or exercise
analogous
to the limitations contained
herein) and (2)
the number of
shares of
Common Stock
issuable upon the conversion
of the portion of this Note with respect
to which the determination
of this proviso is being made,
would result in beneficial
ownership by
the Holder and its affiliates
of more than 4.99%
of the outstanding shares of Common
Stock. For
purposes
of the proviso to the immediately
preceding
sentence,
beneficial
ownership shall
be determined
in accordance
with Section 13(d)
of the Securities
Exchange
Act of 1934, as amended
(the “Exchange
Act”),
and Regulations
13D-G thereunder.
The number of shares
of Common Stock
to be issued upon each conversion
of this Note shall be determined
by dividing the Conversion
Amount (as defined
below) by the applicable
Conversion Price
then in effect on the date
specified
in the notice of conversion,
(the “Notice
of Conversion”),
delivered to the Company
by the Holder in accordance
with the Sections below;
provided that
the Notice of Conversion
is submitted by facsimile
or e-mail (or
by other means
resulting in, or reasonably
expected
to result in, notice)
to the Company before
6:00 p.m., New York, New
York time on such conversion
date (the “Conversion
Date”). Notwithstanding the foregoing,
the term “4.99%” above shall be replaced with “9.99%” following any Event of Default if the Holder, in
its sole discretion and in writing, elects to demand the replacement. If the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until decreased by the Holder in
writing.

 

    	2 

    	 

    

 

The
number of shares
of Common Stock
to be issued upon each conversion
of this Note shall be determined
by dividing the Conversion
Amount (as defined
below) by the applicable
Conversion Price
then in effect on the date
specified
in the notice of conversion,
(the “Notice
of Conversion”),
delivered to the Company by
the Holder in accordance
with the Sections below.

 

The
term “Conversion
Amount” means, with respect
to any conversion
of this Note, the sum of (1)
the principal
amount of this Note to be converted
in such conversion
plus (2) at the Company’s
option, accrued
and unpaid interest,
if any, on such
principal
amount at the interest
rates provided
in this Note to the Conversion
Date,
plus (3) at the Company’s
option, Default Interest,
if any, on the amounts
referred
to in the immediately
preceding
clauses
(1) and/or
(2) plus (4) at
the Holder’s option,
any amounts
owed to the Holder.

 

1.2
Conversion Price.

 

(a)
Calculation
of Conversion
Price.
Holder, at its discretion, shall have the right to convert this Note in its entirety or in part(s) into common stock of the Company
valued at a thirty-seven and a half percent (37.5%) discount off of the lowest closing bid price for the Company’s common
stock during the twenty (20) trading days immediately preceding a conversion date, as reported by Quotestream Media.

 

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

 

1.3
Authorized
Shares. The Company
covenants
that during
the period the conversion
right
exists the Company
will reserve
from its authorized
and unissued Common
Stock a sufficient
number of shares, free
from preemptive
rights, to provide
for the issuance
of Common Stock
upon the full conversion
of this Note. The Company
is required
at all times
to have authorized
and reserved
three times the number
of shares that
is actually issuable
upon full conversion
of the Note (based
on the Conversion Price
of the Notes in effect
from time to time)(the
“Reserved
Amount”). The Reserved
Amount shall be increased
from time to time in accordance
with the Company’s obligations.

 

    	3 

    	 

    

 

The
Company represents
that upon issuance,
such shares
will be duly and validly
issued, fully
paid and non-assessable.
In addition, if the Company
shall issue any
securities
or make any
change
to its capital structure
which would change
the number of
shares of Common Stock
into which the Notes shall
be convertible at
the then current
Conversion Price,
the Company shall at
the same time make proper
provision so that
thereafter there
shall be a sufficient
number of shares
of Common Stock
authorized
and reserved,
free from
preemptive rights,
for conversion
of the outstanding Notes.

 

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

 

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

 

1.4
Method of Conversion.

 

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

 

(b)
Surrender
of Note Upon Conversion.
Notwithstanding anything
to the contrary
set forth
herein,
upon conversion of this
Note in accordance
with the terms hereof,
the Holder shall not be required
to physically
surrender this Note to the
Company unless the entire
unpaid principal
amount of this Note is so converted.
The Holder and the Company
shall maintain
records
showing the principal
amount so converted
and the dates
of such conversions
or shall use such other
method, reasonably
satisfactory
to the Holder and the Company,
so as not to require
physical
surrender
of this Note upon each
such conversion.
In the event of any
dispute or discrepancy,
such records
of the Holder shall, prima facie,
be controlling and
determinative
in the absence
of manifest error.
The Holder and any
assignee,
by acceptance
of this Note, acknowledge
and agree
that, by reason
of the provisions of this paragraph,
following conversion
of a portion of this Note,
the unpaid and
unconverted
principal
amount of this Note represented
by this Note may be
less than the amount
stated on the face
hereof.

 

    	4 

    	 

    

 

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

 

(d)
Delivery
of Common Stock
Upon Conversion. Upon receipt
by the Company from
the Holder of a facsimile transmission
or e-mail (or
other reasonable
means of communication)
of a Notice of Conversion
meeting the requirements
for conversion
as provided
in this Section, the Company
shall issue and deliver
or cause to be issued
and delivered
to or upon the order of the Holder
certificates
for the Common Stock
issuable upon such conversion
within three (3) business
days after
such receipt
(the “Deadline”)
(and, solely
in the case of conversion
of the entire
unpaid principal
amount hereof,
surrender
of this Note) in accordance
with the terms hereof
and the Purchase
Agreement.

 

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

 

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

 

    	5 

    	 

    

 

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

 

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

 

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

 

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

 

    	6 

    	 

    

 

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

 

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

 

1.6
Effect of Certain
Events.

 

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

 

    	7 

    	 

    

 

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

 

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

 

    	8 

    	 

    

 

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

 

(e)
Purchase
Rights.
If, at
any time when
any Notes
are issued and
outstanding, the Company
issues any
convertible securities
or rights to purchase
stock, warrants,
securities
or other property
(the “Purchase
Rights”)
pro rata to the record
holders of any
class of Common
Stock, then
the Holder of this Note will be entitled
to acquire, upon the terms
applicable to such
Purchase
Rights, the aggregate
Purchase
Rights which
such Holder could
have acquired
if such Holder had
held the number of shares
of Common Stock
acquirable upon

 

complete
conversion of this Note (without
regard
to any limitations
on conversion contained
herein) immediately
before
the date on which a record
is taken
for the grant,
issuance or
sale of such Purchase
Rights or,
if no such record
is taken,
the date as of which
the record holders
of Common Stock
are to be determined
for the grant,
issue or sale of such Purchase
Rights.

 

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

 

1.7
Security As Security for the Company’s obligations contained herein and in all Notes issued by the Company to the
Holder, the Holder shall be granted an unconditional secured interest in and to, any and all property of the Company and its subsidiaries,
of any kind or description, tangible or intangible, whether now existing or hereafter arising or acquired until the balance of
all Notes has been reduced to $0. However such security interest shall be behind the security interests previously in place with
three other creditors as set forth in the Security Agreement dated August 11, 2016 (“Security Agreement”.

 

    	9 

    	 

    

 

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

 

1.9
Prepayment.
Company may prepay this Note, in accordance with the following schedule: If within 60 calendar days from the execution of this
Note, 120% of all outstanding principal and interest due on each outstanding Note in one payment; After 60 calendar days from
the execution of the note and within 120 days from execution, 127.5% of all outstanding principal and interest due on each outstanding
Note in one payment. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding
amounts due on each outstanding Note in one payment. After 180 days from the date of execution the Note shall only be prepaid
upon written approval from the Holder.

 

ARTICLE
II. CERTAIN
COVENANTS

 

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

 

    	10 

    	 

    

 

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

 

2.3
Borrowings.
So long as the Company
shall have any
obligation
under this Note, the Company
shall not, without providing
the Holder with the right of first
refusal, create,
incur, assume
guarantee,
endorse,
contingently
agree
to purchase
or otherwise become
liable upon the obligation
of any person,
firm, partnership,
joint venture
or corporation,
except
by the endorsement
of negotiable
instruments for
deposit or collection,
or suffer to exist
any liability
for borrowed
money, except
(a) borrowings
in existence
or committed on the date
hereof and
of which the Issuer has
informed
Holder in writing
prior to the date
hereof,
(b) indebtedness
to trade creditors
or financial
institutions incurred in the ordinary
course of business
or (c) borrowings,
the proceeds
of which shall be used
to repay this Note.
Holder shall have 3 business days from receipt of the terms of any potential borrowings to confirm if they want to provide such
financing on similar terms.

 

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

 

2.5
Advances and Loans.
So long as the Company
shall have
any obligation
under this Note, the Company
shall not, without the Holder’s
written consent,
lend money, give
credit or make
advances
to any person,
firm, joint venture
or corporation,
including, without limitation,
officers, directors,
employees,
subsidiaries and
affiliates
of the Company, except
loans, credits or advances
(a) in existence
or committed on the date
hereof and which
the Company has
informed
Holder in writing prior
to the date hereof,
(b) made in the ordinary
course of business
or (c)
not in excess
of $50,000.

 

ARTICLE
III. EVENTS OF DEFAULT

 

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

 

3.1
Failure to Pay
Principal
or Interest.
The Company fails to pay
the principal
hereof or interest
thereon when
due on this Note, whether
at maturity,
upon acceleration
or otherwise.

 

    	11 

    	 

    

 

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

 

3.3
Breach
of Covenants.
The Company breaches
any covenant
or other term
or condition contained
in this Note and any
collateral
documents including
but not limited to the Purchase
Agreement.

 

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

 

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

 

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

 

    	12 

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.15
Replacement
of Transfer
Agent. In the event
that the Company
proposes to replace
its transfer
agent,
the Company fails to provide,
prior to the effective
date of such
replacement,
a fully executed
Irrevocable
Transfer
Agent Instructions
in a form as
initially delivered
pursuant
to the Purchase
Agreement
(including but not limited
to the provision to irrevocably
reserve
shares of Common
Stock in the
Reserved
Amount) signed by
the successor transfer
agent
to Company and the Company.

 

    	13 

    	 

    

 

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

 

Upon
the occurrence
and during
the continuation of any
Event of Default
specified
in Section 3.1 (solely
with respect
to failure to pay
the principal
hereof or interest
thereon when due at
the Maturity
Date),
the Note shall become immediately
due and payable
and the Company shall
pay to the Holder,
in full satisfaction
of its obligations
hereunder,
an amount equal
to the Default Sum (as
defined
herein). UPON
THE OCCURRENCE
AND DURING THE CONTINUATION
OF ANY EVENT OF DEFAULT
SPECIFIED
IN SECTION
3.2, THE NOTE SHALL BECOME
IMMEDIATELY
DUE AND PAYABLE
AND THE COMPANY SHALL
PAY TO THE
HOLDER, IN FULL
SATISFACTION
OF ITS OBLIGATIONS
HEREUNDER, AN AMOUNT
EQUAL TO: (Y) THE
DEFAULT
SUM (AS DEFINED
HEREIN);
MULTIPLIED
BY (Z) TWO
(2).
Upon the occurrence
and during
the continuation
of any
Event of Default
specified
in Sections 3.1 (solely
with respect
to failure
to pay the principal
hereof or interest
thereon
when due on this Note
upon a Trading Market
Prepayment
Event pursuant
to Section 1.7 or
upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or
3. 15 exercisable
through the delivery
of written notice
to the Company by such
Holders (the “Default
Notice”),
and upon the occurrence
of an Event of Default
specified
the remaining
sections of Articles
III (other
than failure
to pay the principal
hereof
or interest thereon at
the Maturity
Date specified
in Section 3,1 hereof),
the Note shall become immediately
due and payable
and the Company shall
pay to the Holder, in full
satisfaction of its
obligations hereunder,
an amount equal
to the greater
of (i) 150% times the sum
of (w) the then outstanding
principal
amount of this Note plus (x)
accrued and
unpaid interest on the unpaid
principal
amount of this Note to the date of payment
(the “Mandatory
Prepayment
Date”)
plus (y) Default
Interest,
if any,
on the amounts referred
to in clauses
(w) and/or (x)
plus (z) any
amounts owed to the Holder
pursuant to Sections
1.3 and 1.4(g)
hereof
(the then outstanding
principal
amount of this Note to the date of
payment
plus the amounts referred
to in clauses
(x),
(y) and
(z) shall
collectively
be known as the “Default
Sum”) or (ii)
the “parity
value”
of the Default
Sum to be prepaid,
where parity
value means
(a) the highest
number of shares
of Common Stock
issuable upon conversion
of or otherwise pursuant
to such Default
Sum in accordance
with Article
I, treating
the Trading
Day immediately
preceding
the Mandatory
Prepayment
Date as the “Conversion
Date” for
purposes of determining
the lowest applicable
Conversion
Price,
unless the Default
Event arises
as a result of a breach
in respect
of a specific Conversion
Date in which
case such
Conversion
Date shall be the Conversion
Date), multiplied
by (b) the highest
Closing Price
for the Common Stock
during the period
beginning
on the date of first
occurrence
of the Event of Default
and ending one day
prior to the Mandatory
Prepayment
Date (the “Default
Amount”) and all
other amounts payable
hereunder
shall immediately
become due and
payable,
all without demand,
presentment
or notice, all of which
hereby
are expressly
waived,
together
with all costs, including,
without limitation, legal
fees
and expenses,
of collection, and
the Holder shall be entitled
to exercise
all other rights
and remedies
available
at law or in equity.

 

    	14 

    	 

    

 

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

 

ARTICLE
IV. MISCELLANEOUS

 

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

 

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

 

    	15 

    	 

    

 

If
to the Company, to:

 

 

 

 

 

If
to the Holder:

 

GHS
Investments, LLC.

420
Jericho

Turnpike Suite 207

Jericho,
NY 11753

 

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

 

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

 

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

 

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

 

    	16 

    	 

    

 

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

 

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

 

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

 

    	17 

    	 

    

 

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

 

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

 

	 	PositiveID Corp.
			 
	 	By:	
	 	Print:	 
	 	Title/Date:	 

 

    	18

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