Document:

SUBSIDIARY
GUARANTEE

 

This
Subsidiary Guarantee, dated as of January 27, 2016 (this “Guarantee”), is made by each of the signatories hereto
(together with any other entity that may become a party hereto as provided herein, the “Guarantors”), in favor
of the purchasers signatory (together with their permitted assigns, the “Secured Parties”) to that certain
Securities Purchase Agreement (the “Purchase Agreement”), dated as of the date hereof, among Epic Stores Corp.,
a Nevada corporation (the “Company”) and the Secured Parties.

 

W
I T N E S S E T H:

WHEREAS,
pursuant to the Purchase Agreement, the Company has agreed to sell and issue to the Secured Parties, and the Secured Parties have
agreed to purchase from the Company the Notes (as defined in the Purchase Agreement), subject to the terms and conditions set
forth therein;

WHEREAS,
each Guarantor will directly benefit from the extension of credit to the Company represented by the issuance of the Notes; and

WHEREAS,
as a material inducement to the Secured Parties to enter into the Purchase Agreement and all the other agreements to be entered
into in connection therewith, the Secured Parties have requested the Guarantors and the Company to enter into this Guarantee;

NOW,
THEREFORE, in consideration of the premises, each Guarantor hereby agrees with the Secured Parties as follows:

1.                 
Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement and used herein shall have the meanings
given to them in the Purchase Agreement. The words “hereof,” “herein,” “hereto” and “hereunder”
and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision
of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. The meanings given to
terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The following terms shall
have the following meanings:

“Guarantee”
means this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise modified from time to time.

“Obligations”
means, in addition to all other costs and expenses of collection incurred by Secured Parties in enforcing any of such Obligations
and/or this Guarantee, all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company or any Guarantor
to the Secured Parties, including, without limitation, all obligations under this Guarantee, the Note, that certain Security Agreement
(the “Security Agreement”), dated as of the date hereof, among the Company, the Guarantors and the Secured
Parties, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith,
in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect,

    	 	1	 

    	 	 	 

    

absolute
or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid,
to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as
a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified
from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Company or any Guarantor from time to time under or in connection with
this Guarantee, the Notes, the Security Agreement, and any other instruments, agreements or other documents executed and/or delivered
in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of
the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company or any Guarantor.  

2.                    
Guarantee. 

(a)               
Guarantee. 

(i)                
The Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantee to the Secured Parties and their respective
successors, endorsees, transferees and assigns, the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. 

(ii)              
Anything herein or in any other Transaction Document to the contrary notwithstanding, the maximum liability of each Guarantor
hereunder and under the other Transaction Documents shall in no event exceed the amount which can be guaranteed by such Guarantor
under applicable federal and state laws, including laws relating to the insolvency of debtors, fraudulent conveyance or transfer
or laws affecting the rights of creditors generally (after giving effect to the right of contribution established in Section 2(b)).

(iii)            
Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Secured Parties
hereunder.

(iv)            
The guarantee contained in this Section 2 shall remain in full force and effect until all the Obligations and the obligations
of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by indefeasible payment in full. 

    	 	2	 

    	 	 	 

    

(v)              
No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the
Secured Parties from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding
any such payment (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected
from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor
hereunder until the Obligations are indefeasibly paid in full.

(vi)            
Notwithstanding anything to the contrary in this Guarantee, with respect to any defaulted non-monetary Obligations the specific
performance of which by the Guarantors is not reasonably possible (e.g. the issuance of the Company's Common Stock), the Guarantors
shall only be liable for making the Secured Parties whole on a monetary basis for the Company's failure to perform such Obligations
in accordance with the Transaction Documents. 

(b)              
Right of Contribution. Subject to Section 2(c), each Guarantor hereby agrees that to the extent that a Guarantor shall
have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's
right of contribution shall be subject to the terms and conditions of Section 2(c). The provisions of this Section 2(b) shall
in no respect limit the obligations and liabilities of any Guarantor to the Secured Parties and each Guarantor shall remain liable
to the Secured Parties for the full amount guaranteed by such Guarantor hereunder.

(c)               
No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any
Guarantor by the Secured Parties, no Guarantor shall be entitled to be subrogated to any of the rights of the Secured Parties
against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Secured Parties
for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from
the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Secured
Parties by the Company on account of the Obligations are indefeasibly paid in full. If any amount shall be paid to any Guarantor
on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Agent (as defined in the Security Agreement) in the exact form received
by such Guarantor (duly indorsed by such Guarantor to the Agent, if required), applied against the Obligations, whether matured
or unmatured, in such order as the Secured Parties may determine.

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(d)              
Amendments, Etc. With Respect to the Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for
payment of any of the Obligations made by the Secured Parties may be rescinded by the Secured Parties and any of the Obligations
continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security
or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by the Secured Parties, and the Purchase Agreement
and the other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Secured Parties may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Secured Parties for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. The Secured Parties shall have no obligation to protect, secure, perfect or insure
any Lien at any time held by them as security for the Obligations or for the guarantee contained in this Section 2 or any property
subject thereto. 

(e)               
Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual
of any of the Obligations and notice of or proof of reliance by the Secured Parties upon the guarantee contained in this Section
2 or acceptance of the guarantee contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in
this Section 2; and all dealings between the Company and any of the Guarantors, on the one hand, and the Secured Parties, on the
other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in
this Section 2. Each Guarantor waives to the extent permitted by law diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor understands
and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee
of payment and performance without regard to (a) the validity or enforceability of the Purchase Agreement or any other Transaction
Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto
at any time or from time to time held by the Secured Parties, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance or fraud by Secured Parties) which may at any time be available to or be asserted by the Company or any
other Person against the Secured Parties, or (c) any other circumstance whatsoever (with or without notice to or knowledge of
the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the
Company for the Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Secured Parties may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies
as they may have against the Company, any other Guarantor or any other Person or against

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any
collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Secured
Parties to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other
Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset,
or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of
offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the Secured Parties against any Guarantor. For the purposes
hereof, “demand” shall include the commencement and continuance of any legal proceedings.

(f)               
Reinstatement. The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case
may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned
by the Secured Parties upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

(g)              
Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Secured Parties without set-off
or counterclaim in U.S. dollars at the address set forth or referred to in the signature pages to the Purchase Agreement.

3.                 
Representations and Warranties. Each Guarantor hereby makes the following representations and warranties to Secured Parties
as of the date hereof:

(a)               
Organization and Qualification. The Guarantor is an entity, duly incorporated or otherwise organized, validly existing
and in good standing under the laws of the applicable jurisdiction set forth on Schedule 3(a), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Guarantor
has no subsidiaries other than those identified as such on the Disclosure Schedules to the Purchase Agreement. The Guarantor is
duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of any of this Guarantee in any material respect, (y) have a material adverse effect on the results
of operations, assets, prospects, or financial condition of the Guarantor or (z) adversely impair in any material respect the
Guarantor's ability to perform fully on a timely basis its obligations under this Guarantee (a “Material Adverse Effect”).

(b)              
Authorization; Enforcement. The Guarantor has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this Guarantee, and otherwise to carry out its obligations hereunder. The execution and delivery
of this Guarantee by the Guarantor and the consummation by it of the

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transactions
contemplated hereby have been duly authorized by all requisite corporate action on the part of the Guarantor. This Guarantee has
been duly executed and delivered by the Guarantor and constitutes the valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.

(c)               
No Conflicts. The execution, delivery and performance of this Guarantee by the Guarantor and the consummation by the Guarantor
of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its certificate or
articles of incorporation, by-laws or other organizational documents (ii) conflict with, constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the Guarantor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to
which the Guarantor is subject (including federal and state securities laws and regulations), or by which any material property
or asset of the Guarantor is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Guarantor is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which, individually or in the aggregate, do not have a Material
Adverse Effect.

(d)              
Consents and Approvals. The Guarantor is not required to obtain any consent, waiver, authorization or order of, or make
any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other Person
in connection with the execution, delivery and performance by the Guarantor of this Guarantee.

(e)               
Purchase Agreement. The representations and warranties of the Company set forth in the Purchase Agreement as they relate
to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct as of each time such representations
are deemed to be made pursuant to such Purchase Agreement, and the Secured Parties shall be entitled to rely on each of them as
if they were fully set forth herein, provided that each reference in each such representation and warranty to the Company's knowledge
shall, for the purposes of this Section 3, be deemed to be a reference to such Guarantor's knowledge. 

(f)               
Foreign Law. If applicable, each Guarantor has consulted with appropriate foreign legal counsel with respect to any of
the above representations for which non-U.S. law is applicable. Such foreign counsel has advised each applicable Guarantor that
such counsel knows of no reason why any of the above representations

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would
not be true and accurate. Such foreign counsel was provided with copies of this Guarantee and the Transaction Documents prior
to rendering its advice.

4.                 
Covenants. 

(a)         
Each Guarantor covenants and agrees with the Secured Parties that, from and after the date of this Guarantee until the Obligations
shall have been indefeasibly paid in full, such Guarantor shall take, and/or shall refrain from taking, as the case may be, each
commercially reasonable action that is necessary to be taken or not taken, as the case may be, so that no Event of Default (as
defined in the Notes) is caused by the failure to take such action or to refrain from taking such action by such Guarantor. 

(b)        
So long as any of the Obligations are outstanding, unless Secured Parties holding at least 67% of the aggregate principal amount
of the then outstanding Notes shall otherwise consent in writing, each Guarantor will not directly or indirectly on or after the
date of this Guarantee:

                                                                   
i.                       
enter into, create, incur, assume or suffer to exist any indebtedness for borrowed money of any kind, including but not limited
to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom;

                                                                 
ii.                       
enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits therefrom except for Permitted Liens (as defined
in the Security Agreement);

                                                               
iii.                       
amend its certificate or articles of incorporation, bylaws or other charter documents so as to adversely affect any rights of
any Secured Party;

                                                               
iv.                       
repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its securities
or debt obligations; 

                                                                 
v.                       
pay cash dividends on any equity securities of the Company;

                                                               
vi.                       
enter into any transaction with any Affiliate of the Guarantor which would be required to be disclosed in any public filing of
the Company with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority
of the disinterested directors of the Company (even if less than a quorum otherwise required for approval of the Board of Directors);
or

                                                             
vii.                       
enter into any agreement with respect to any of the foregoing.

 

 

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5.                 
Miscellaneous.

(a)               
Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise
modified except in writing by the Secured Parties.

(b)              
Notices. All notices, requests and demands to or upon the Secured Parties or any Guarantor hereunder shall be effected
in the manner provided for in the Purchase Agreement, provided that any such notice, request or demand to or upon any Guarantor
shall be addressed to such Guarantor at its notice address set forth on Schedule 5(b).

(c)               
No Waiver by Course of Conduct; Cumulative Remedies. The Secured Parties shall not by any act (except by a written instrument
pursuant to Section 5(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default under the Transaction Documents, including any Event of Default (as defined in the Notes). No
failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Secured Parties of any
right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Secured Parties
would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by law.

(d)              
Enforcement Expenses; Indemnification.

(i)                
Each Guarantor agrees to pay, or reimburse the Secured Parties for, all its reasonable costs and expenses incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Guarantee
and the other Transaction Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and
disbursements of counsel to the Secured Parties.

(ii)              
Each Guarantor agrees to pay, and to save the Secured Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable in
connection with any of the transactions contemplated by this Guarantee.

(iii)            
Each Guarantor agrees to pay, and to save the Secured Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Guarantee to the extent the Company would be required to do so pursuant
to the Purchase Agreement.

    	 	8	 

    	 	 	 

    

(iv)            
The agreements in this Section 5(d) shall survive repayment of the Obligations and all other amounts payable under the Purchase
Agreement and the other Transaction Documents. 

(e)               
Successor and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure
to the benefit of the Secured Parties and their respective successors and assigns; provided that no Guarantor may assign, transfer
or delegate any of its rights or obligations under this Guarantee without the prior written consent of the Secured Parties.

(f)               
Set-Off. Each Guarantor hereby irrevocably authorizes the Secured Parties at any time and from time to time while an Event
of Default (as defined in the Notes) or other default under any of the Transaction Documents shall have occurred and be continuing,
without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set off
and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Secured Parties to or for the credit
or the account of such Guarantor, or any part thereof in such amounts as the Secured Parties may elect, against and on account
of the obligations and liabilities of such Guarantor to the Secured Parties hereunder and claims of every nature and description
of the Secured Parties against such Guarantor, in any currency, whether arising hereunder, under the Purchase Agreement, any other
Transaction Document or otherwise, as the Secured Parties may elect, whether or not the Secured Parties have made any demand for
payment and although such obligations, liabilities and claims may be contingent or unmatured. The Secured Parties shall notify
such Guarantor promptly of any such set-off and the application made by the Secured Parties of the proceeds thereof, provided
that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Secured
Parties under this Section 5(f) are in addition to the other rights and remedies (including, without limitation, other rights
of set-off) which the Secured Parties may have.

(g)              
Counterparts. This Guarantee may be executed by two or more of the parties to this Guarantee on any number of separate
counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same
instrument. 

(h)              
Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. 

(i)                
Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation hereof.

    	 	9	 

    	 	 	 

    

(j)                
Integration. This Guarantee and the other Transaction Documents represent the agreement of the Guarantors and the Secured
Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties
by the Secured Parties relative to the subject matter hereof and thereof not expressly set forth or referred to herein or in the
other Transaction Documents.

(k)              
Governing Laws. All questions concerning the construction, validity, enforcement and interpretation of this Guarantee shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each of the Company and the Guarantors agree that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Guarantee (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan. Each of the Company and each Guarantor hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the
jurisdiction of any such court or that such proceeding is improper. Each party hereto hereby irrevocably waives personal service
of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Guarantee
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising
out of or relating to this Guarantee or the transactions contemplated hereby.

(l)                
Acknowledgements. Each Guarantor hereby acknowledges that:

(i)                
it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Transaction Documents
to which it is a party; 

(ii)              
the Secured Parties have no fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Guarantee
or any of the other Transaction Documents, and the relationship between the Guarantors, on the one hand, and the Secured Parties,
on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and 

(iii)            
no joint venture is created hereby or by the other Transaction Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Guarantors and the Secured Parties. 

    	 	10	 

    	 	 	 

    

(m)            
Additional Guarantors. The Company shall cause each of its subsidiaries formed or acquired on or subsequent to the date
hereof to become a Guarantor for all purposes of this Guarantee by executing and delivering an

Assumption Agreement in the form of Annex 1 hereto.

(n)              
Release of Guarantors. Each Guarantor will be released from all liability hereunder concurrently with the indefeasible
repayment in full of all amounts owed under the Purchase Agreement, the Notes and the other Transaction Documents. 

(o)              
Seniority. The Obligations of each of the Guarantors hereunder rank senior in priority to any other Indebtedness (as defined
in the Purchase Agreement) of such Guarantor. 

(p)              
WAIVER OF JURY TRIAL. EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE SECURED PARTIES, HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.

 

[Signature
Pages Follow]

    	 	11	 

    	 	 	 

    

 

IN
WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first
above written.

	
        EPIC STORES LLC

         

        By: /s/ Brian Davidson

             
        Name: Brian Davidson

             
        Title: CEO

	
	
        EPIC
        STORES 2, llC

         

        By: /s/ Brian Davidson

            
         Name: Brian Davidson

             
        Title: CEO

         

	
	
        EPIC
        STORES III, LLC

         

        By: /s/ Brian Davidson

            
         Name: Brian Davidson

             
        Title: CEO

	

Consented
and agreed to:

	 

        EPIC
        STORES CORP.

         

         

	By:
        /s/ Brian Davidson

             
        Name: Brian Davidson

             
        Title:  CEO

    	 	12	 

    	 	 	 

    

DISCLOSURE
SCHEDULES

 

Subsidiary
Guarantee

 

 

Schedule
3(a) Organization and Qualification

 

Schedule
5(b) Notices 

 

    	 	13	 

    	 	 	 

    

ANNEX
1

TO

SUBSIDIARY
GUARANTEE

 

FORM
OF ASSUMPTION AGREEMENT

 

Assumption
Agreement, dated as of ____ __, ______ made by ______________________________, a ______________ [corporation] (the “Additional
Guarantor”), in favor of the Secured Parties, as defined in the Guarantee referred to below. All capitalized terms not
defined herein shall have the meaning ascribed to them in the Purchase Agreement (as defined below).

 

W
I T N E S S E T H :

 

WHEREAS,
Epic Stores Corp., a Nevada corporation (the “Company”) and the Secured Parties have entered into a Securities
Purchase Agreement, dated as of January 27, 2016 (as amended, supplemented or otherwise modified from time to time, the “Purchase
Agreement”);

 

WHEREAS,
in connection with the Purchase Agreement, the Subsidiaries of the Company (other than the Additional Guarantor) have entered
into the Subsidiary Guarantee, dated as of January 27, 2016 (as amended, supplemented or otherwise modified from time to time,
the “Guarantee”) in favor of the Secured Parties;

 

WHEREAS,
the Guarantee requires the Additional Guarantor to become a party to the Guarantee; and

 

WHEREAS,
the Additional Guarantor has agreed to execute and

deliver this Assumption Agreement in order to become a party to the Guarantee;

 

NOW,
THEREFORE, IT IS AGREED:

 

1.                 
Guarantee. By executing and delivering this Assumption Agreement, the Additional Guarantor, as provided in Section 5(m)
of the Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder with the same force and effect as if originally
named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor thereunder. The information set forth in Annex 1 hereto is hereby added to the information set
forth in the Disclosure Schedules to the Guarantee. The Additional Guarantor hereby represents and warrants that each of the representations
and warranties contained in Section 3 of the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor
(after giving effect to this Assumption Agreement) as if made on and as of such date.

 

    	 	14	 

    	 	 	 

    

2.                 
Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

 

 

IN
WITNESS WHEREOF, the undersigned has caused this Assumption

Agreement to be duly executed and delivered as of the date first above written.

[ADDITIONAL GUARANTOR]

By: 

Name:

Title:

 

    	 	15	 

    	 	 	 

    

ANNEX
1

TO

ASSUMPTION
AGREEMENT

 

DISCLOSURE
SCHEDULES

    	 	16NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original
Issue Date: January 27, 2016

Fixed
Conversion Price (subject to adjustment herein): $0.98

 

$500,000

 

 

8%
SENIOR CONVERTIBLE PROMISSORY NOTE

DUE
January 27, 2017

 

THIS
8% SENIOR CONVERTIBLE PROMISSORY NOTE is a duly authorized and validly issued 8% Senior Convertible Promissory Note of Epic Stores
Corp., a Nevada corporation (the “Company”), having its principal place of business at 20805 North 19th Avenue,
#2, Phoenix, Arizona 85027, designated as its 8% Senior Convertible Promissory Note due January 27, 2017 (the “Note”).

 

FOR
VALUE RECEIVED, the Company promises to pay to Old Main Capital, LLC or its registered assigns (the “Holder”)
(having its principal place of business at 3109 Stirling Road, Suite 100, Fort Lauderdale, FL 33312), or shall have paid pursuant
to the terms hereunder, the principal sum of $500,000 on January 27, 2017 (the “Maturity Date”) or such earlier
date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject
to the following additional provisions:

 

Section
1.Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following
terms shall have the following meanings:

 

    	 	1	 

     

    

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

 

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

 

“Alternate
Conversion Price” means 50% of the lowest VWAP in the thirty (30) days prior to the Conversion Date.

 

“Amortization
Conversion Rate” means the lower of (a) the Fixed Conversion Price or (b) 54% of the lowest VWAP in the ten (10) consecutive
Trading Days ending on the Trading Day that is immediately prior to the applicable Conversion Date.

 

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

 

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

 

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

 

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

 

“Board
of Directors” means the board of directors of the Company.

 

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

 

    	 	2	 

     

    

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

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of 33% of the voting securities of the Company (other than by means of conversion of the Note), (b) the Company merges
into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect
to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate
voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially
all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50%
of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within
a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members
of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of
the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	3	 

     

    

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

 

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

 

“DTC”
means the Depository Trust Company.

 

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

 

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

 

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

 

“Equity
Conditions” means, during the period in question, (a) no Event of Default shall have occurred, (b) the Company has timely
filed (or obtained extensions in respect thereof and filed within the applicable grace period) all reports other than Form 8-K
reports required to be filed by the Company after the date hereof pursuant to the Exchange Act, (c) on any date that the Company
desires to make a payment of interest and/or principal, the average daily dollar volume of the Common Stock for the previous twenty
(20) Trading Days must be greater than $15,000, (d) the Common Stock must be DWAC Eligible and not subject to a “DTC chill”
and (e) the Conversion Shares must be delivered via an “Automatic Conversion” of principal and/or interest.

 

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

 

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

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors, advisors or
independent contractors of the Company pursuant to any stock or option plan or equity incentive plan duly adopted for such purpose,
(b) shares of Common Stock, warrants or options to employees, officers, directors, advisors or independent contractors of the
Company for compensatory purposes, (c) securities upon the exercise or exchange of or conversion of any Securities issued hereunder
and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the
date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number
of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (d) securities issuable
pursuant to any contractual antidilution obligations of the Company in effect as of the date of this Agreement,

    	 	4	 

     

    

provided
that such obligations have not been materially amended since the date of this Agreement, (e) shares of Common Stock issued for
consideration other than cash pursuant to a merger, consolidation, acquisition, or similar business combination approved by the
Board of Directors and (f) securities issued pursuant to acquisitions or strategic transactions approved by the Board of Directors,
except for a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.

 

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

 

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

 

“Late
Fees” shall have the meaning set forth in Section 2(c).

 

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

 

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

 

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

 

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

 

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

 

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

 

“Registration
Statement” means a registration statement covering the resale of the Conversion Shares by the Holder.

 

“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Note, including the Conversion Shares issuable upon conversion in full of the Note and the Conversion
Shares issuable as payment of interest on the Note, ignoring any conversion limits set forth therein, and assuming that the conversion
price is at all times on and after the date of determination 100% of the then conversion price on the Trading Day immediately
prior to the date of determination. 

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or

    	 	5	 

     

    

regulation
hereafter adopted by the Commission having substantially the same effect as such Rule.

 

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

 

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

 

“Subsidiary”
means any subsidiary of the Company, including any direct or indirect subsidiary of the Company formed or acquired after the date
hereof. 

 

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

 

“Trading
Day” means any day on which the principal Trading Market is open for trading, including any day on which the principal
Trading Market is open for trading for a period of time less than the customary time.

 

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

 

“Transfer
Agent” means Clear Trust LLC, the current transfer agent of the Company, with a mailing address of 16540 Pointe Village
Drive, Suite 210, Lutz, Florida 33558, and any successor transfer agent of the Company. 

 

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

 

Section
2.Amortization and Interest.

 

    	 	6	 

     

    

a)                 
Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note at the rate of 8% per annum. All interest payments hereunder will be payable in cash,
or subject to the Equity Conditions, in cash or Common Stock in the Company’s discretion. Accrued and unpaid interest shall
be due and payable on each Conversion Date and on the Maturity Date, or as otherwise set forth herein. 

 

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

 

c)                 
Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal
to the lesser of 24% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including the date of actual payment in full. 

 

d)                
Prepayment. At any time upon ten (10) days written notice to the Holder, but subject to the Holder’s conversion rights
set forth herein, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest.
If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal
to the sum of the then outstanding principal amount of this Note and interest multiplied by 130%. The Holder may continue to convert
the Note from the date notice of the prepayment is given until the date of the prepayment. 

 

e)                 
Amortization and Installment Payments. At the earlier of the six (6) month anniversary of the Original Issue Date or the
date the Registration Statement is declared effective by the Commission, the Company shall redeem one-sixth (1/6th) of the face
amount of this Note and any accrued but unpaid interest on a monthly basis in accordance with the Amortization Schedule attached
hereto as Schedule 2 (each, an “Amortization Payment”).  Each Amortization Payment shall, at the
option of the Company, be made in cash or, subject to the Equity Conditions, in Common Stock pursuant to the Amortization Conversion
Rate. Notwithstanding any provision in this Note to the contrary, the Company will not be required to make any Amortization Payment
to the extent any such Amortization Payment would result in the Company making aggregate Amortization Payments in an amount greater
than the balance of the Note. Any outstanding unpaid principal and accrued interest on this Note as of the Maturity Date will
be due and payable on the Maturity Date and may be paid in cash or, in the Company’s discretion, subject to the Equity Conditions,
in Common Stock. 

 

Section
3.Registration of Transfers and Exchanges.

    	 	7	 

     

    

 

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

 

b)                 
Transfers and Exchanges. The Holder may only transfer or exchange this Note in compliance with applicable federal and state
securities laws and regulations. 

 

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

 

Section
4.Conversion.

 

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

 

b)                 
Conversion Price. The conversion price in effect on any Conversion Date shall be equal to 94% of the average of the daily
VWAP during the ten (10) Trading Days

    	 	8	 

     

    

prior
to the Original Issue Date (the “Fixed Conversion Price”). Notwithstanding anything herein to the contrary,
at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s option
and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common Stock
at the Alternate Conversion Price. All such foregoing determinations will be appropriately adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock
during such measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.

 

		c)	Mechanics
                                         of Conversion.

 

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

 

                                                                 
ii.                       
Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates
representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule
144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably
acceptable to the Company (which opinion the Company will be responsible for obtaining at its own cost) shall be free of restrictive
legends and trading restrictions representing the number of Conversion Shares being acquired upon the conversion of this Note,
and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected to pay accrued interest in cash).
All certificate or certificates required to be delivered by the Company under this Section 4(c) shall be delivered electronically
through the DTC or another established clearing corporation performing similar functions. If the Conversion Date is prior to the
date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the
Conversion Shares shall bear a restrictive legend in the following form, as appropriate:

 

“THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE

    	 	9	 

     

    

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.”

 

Notwithstanding
the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public
information requirements, the Company, upon request of the Holder and at the expense of the Company, shall obtain a legal opinion
to allow for such sales under Rule 144.

 

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

 

                                                               
iv.                       
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Note shall elect to convert any or all of the outstanding principal or interest amount hereof, the Company
may not refuse

    	 	10	 

     

    

conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Note shall have been sought. If the injunction is not granted, the Company shall promptly comply with all
conversion obligations herein. In the absence of seeking such injunction, the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, or at the option of the
Holder, as an amount added to the outstanding balance of the Note, as liquidated damages and not as a penalty, $1,000 per Trading
Day for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section
6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall
have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce
damages pursuant to any other Section hereof or under applicable law.

 

                                                                 
v.                       
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available
to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery
Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the
Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by
(2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the
principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder
the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements
under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the

    	 	11	 

     

    

Conversion
Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of
the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence
of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required
pursuant to the terms hereof.

 

                                                               
vi.                       
Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 500% of the Required
Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder, not less than such
aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section
5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable, and, at such times as a Registration Statement covering such shares is then effective under the Securities Act,
will be registered for public resale in accordance with such Registration Statement.

 

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

 

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

    	 	12	 

     

    

the
Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice
of Conversion.

 

d)                
Holder’s Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this
Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates,
and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination
of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of
which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice
of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other
securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of
the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii)
a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s
transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder,
the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect
to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date
as of which such number

    	 	13	 

     

    

of
outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the
number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable
upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may
increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation
provisions of this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st
day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained
herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this Note.

 

Section
5.Certain Adjustments.

 

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

 

b)                 
Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable,
sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces
any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock at an effective price per share that is lower than the Fixed Conversion Price (such lower price,
the “Base Conversion Price” and such issuances, collectively, a “Dilutive

    	 	14	 

     

    

Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price
per share that is lower than the Fixed Conversion Price, such issuance shall be deemed to have occurred for less than the Fixed
Conversion Price on such date of the Dilutive Issuance), then the Fixed Conversion Price shall be reduced to equal the Base Conversion
Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
if a Dilutive Issuance involves issuance of both Common Stock and Common Stock Equivalents as units, no value will be attributed
to Common Stock Equivalents and the Base Conversion Price will be deemed to be a price per each such unit. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder
in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this
Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder
is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive
Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

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

 

d)                
Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of

    	 	15	 

     

    

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

 

e)                 
Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one
or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section
4(d) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such

    	 	16	 

     

    

Fundamental
Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note). For purposes of any such conversion,
the determination of the Fixed Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Fixed Conversion Price among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company
shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under this Note in accordance with the provisions
of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note,
deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of
this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a
conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein.

 

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

 

g)                 
Notice to the Holder.

 

    	 	17	 

     

    

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

 

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

 

Section
6.Events of Default.

 

    	 	18	 

     

    

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

 

                                                                   
i.                       
any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing
to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above,
is not cured within five (5) Trading Days;

 

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

 

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

 

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

 

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

 

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

 

    	 	19	 

     

    

                                                             
vii.                       
the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within five (5) Trading Days or the transfer of shares of Common Stock through the DTC
is no longer available or “chilled”;

 

                                                           
viii.                       
the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose
of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);

 

                                                               
ix.                       
the Company shall fail for any reason to deliver certificates to a Holder prior to the third (3rd) Trading Day after a Conversion
Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of the Note in accordance with the terms hereof;

 

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

 

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

 

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

 

                                                           
xiii.                       
the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company
or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in
the aggregate, and any such levy, seizure or

    	 	20	 

     

    

attachment
shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;

 

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

 

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

 

                                                           
xvi.                       
the Company shall replace the Transfer Agent.

 

 

b)                 
Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event
of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2%
per month (24% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind,
and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.

 

Section
7.Miscellaneous.

 

a)                 
Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address
as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all
notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or sent by a nationally recognized overnight courier service addressed to the Holder at the facsimile number or
address of the Holder appearing on the books of the Company, or if no such

    	 	21	 

     

    

facsimile
number or address appears on the books of the Company, at the principal place of business of such Holder set forth above. Any
notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto
prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by
the party to whom such notice is required to be given.

 

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

 

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

 

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

    	 	22	 

     

    

any
right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees
and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)                 
Amendments; Waiver. Unless otherwise provided for hereunder, no provision of this Note may be amended, modified, supplemented
or waived without the written consent of the Company and the Holder. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Note on any other occasion.

 

f)                  
Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain
in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. 

 

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

 

h)                 
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual
and consequential damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to
the Holder that there shall be no characterization concerning this instrument other than as expressly

    	 	23	 

     

    

provided
herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions
of this Note.

 

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

 

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

 

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

 

(Signature
Pages Follow)

    	 	24	 

     

    

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

 

 

	epic
                                         stores corp.

         

         

	By:
                                         /s/ Brian Davidson

        Name: Brian Davidson

        Title: CEo

         

        Facsimile
        No. for delivery of Notices: _______________

	
	

 

    	 	25	 

     

    

ANNEX
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 8% Senior Convertible Promissory Note due January 27, 2017 of Epic Stores
Corp., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”)
of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and
is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will
be charged to the holder for any conversion, except for such transfer taxes, if any.

 

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

 

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

 

Conversion
calculations:

Date
to Effect Conversion:

 

Principal
Amount of Note to be Converted:

 

Payment
of Interest in Common Stock __ yes __ no

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

Number
of Shares of Common Stock to be Issued:

Signature:

Name:

 

Delivery
Instructions: 

 

    	 	26	 

     

    

 

Schedule
1

 

CONVERSION
SCHEDULE

 

This
8% Senior Convertible Promissory Note due on January 27, 2017 in the original principal amount of $500,000 is issued by Epic Stores
Corp., a Nevada corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

 

Dated: 

 

	 

        Date
        of Conversion

        (or
        for first entry, Original Issue Date)
	 

        Amount
        of Conversion
	 

        Aggregate
        Principal Amount Remaining Subsequent to Conversion

        (or
        original Principal Amount)
	 

        Company
        Attest

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

	 

         

         
	 

         
	 

         
	 

         

 

    	 	27	 

     

    

Schedule
2

 

AMORTIZATION
SCHEDULE

	Transaction	Amount	Timing
	Principal
    Amount:	$500,000	January
    27, 2016
	Amortization
    Payments	 	 
	First
    Payment		
	Second
    Payment		
	Third
    Payment		
	Fourth
    payment		
	Fifth
    Payment		
	Sixth
    Payment		

 

 

    	 	28

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