Document:

Exhibit 10.3

 

THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)

 

US $66,000.00         

 

POSITIVEID CORP.

8% CONVERTIBLE REDEEMABLE NOTE

DUE AUGUST 13, 2015

BACK END NOTE

 

FOR
VALUE RECEIVED, PositiveID Corp. (the “Company”) promises to pay to the order of TOLEDO ADVISORS, LLC and its authorized
successors and permitted assigns ("Holder"), the aggregate principal face amount of Sixty Six Thousand Dollars
exactly (U.S. $66,000.00) on August 13, 2015 ("Maturity Date") and to pay interest on the principal amount outstanding
hereunder at the rate of 8% per annum commencing on August 13, 2014. The Company acknowledges this Note was issued with a $5,000.00
original issue discount (OID) and as such the issuance price was $61,000.00. The interest will be paid to the Holder in whose name
this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and
interest on, this Note are payable at 641 5th Street, Lakewood, NJ 08701, initially,
and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The
Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any
amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder
at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment
of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the
sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph
4(b) herein.

 

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Notwithstanding anything
set forth herein, the Company can opt out of a closing on this Note by providing the Holder written notice of its intent to opt
out at least thirty (30) days prior to the six (6) month anniversary of this Note. Upon the Company opting out of the Note both
parties will have no further obligations under this Note including the disbursement of the additional funds to the Company and
the repayment by Company to the Holder of this Note.

 

This Note is subject
to the following additional provisions:

 

1.          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 made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.

 

2.          The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3.          This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and
applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior
to due presentment for transfer 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 Company's records as the owner hereof for all other purposes, whether or not this Note be overdue,
and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing
to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a),
and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being
converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including
receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

 

4.          (a)          The
Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") without restrictive
legend of any nature, at a price ("Conversion Price") for each share of Common Stock equal to the lower
of (i)  60% of the average of the three lowest closing bid prices of the Common Stock as reported on the
National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock
may be traded in the future ("Exchange"), for the fifteen prior trading days including
the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or
other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes
to include the same day closing price) or (ii) $0.06 per share. If the shares have not been delivered within 3 business
days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common
Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received
such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder's
intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences
a DTC “Chill” on its shares, the conversion price shall be decreased to 50% instead of 60% while that “Chill”
is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares
of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the
Common Stock of the Company.

 

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(b)          Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock ("Interest Shares"). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

(c)          This
Note may not be prepaid, except that if the $66,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder Issued Note will each be automatically be deemed satisfied and this Note and the
Holder Issued Note will be automatically be deemed cancelled and of no further force or effect.

 

(d)          Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.

 

(e)          In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

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5.          No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6.          The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7.          The
Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder
in collecting any amount due under this Note.

 

8.          If
one or more of the following described "Events of Default" shall occur:

 

(a)          The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or

 

(b)          Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or

 

(c)          The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or

 

(d)          The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or

 

(e)          A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or

 

(f)          Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or

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(g)          Unless
previously disclosed in the Company’s filings with the Securities and Exchange Commission, one or more money judgments, writs
or warrants of attachment, or similar process, in excess of Fifty thousand dollars ($50,000) in the aggregate, shall be entered
or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed
for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(h)         The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or

 

(i)          The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

 

(j)          Intentionally
Deleted;

 

(k)         The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or

 

(l)          The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or

 

(m)       
The Company’s Common Stock has a closing bid price of less than $0.03 per share for at least 5 consecutive trading days;
or

 

(n)         The
aggregate dollar trading volume of the Company’s Common Stock is less than Fifty thousand dollars ($50,000.00) in any 5 consecutive
trading days; or

 

(o)         The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or

 

(p)         The Company shall
lose the “bid” price for its stock in a market (including the OTCBB marketplace or other exchange)

 

Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand,
protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything
herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights
or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or,
if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, if the
Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset any payment
obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued
beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500
per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p) shall be an increase of
the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the outstanding principal
due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note
shall increase by 10%.

 

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If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then, if the Holder
prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.

 

9.          In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

10.         Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.

 

11.         The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)
(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12.         Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a) herewith and in accordance with Section 12 of the other $66,000 Convertible Redeemable Note issued on even date herewith.
The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, the reserve
representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issuing and delivering
the shares.

 

13.         The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.

 

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14.         This
Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed
within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

	Dated:  	August 18, 2014	 

 

	 	POSITIVEID CORP.
	 	 
	 	By:	William Caragol
	 	 	 
	 	Title: 	CEO

 

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EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the
Registered Holder in order to Convert the Note)

 

The undersigned hereby
irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of PositiveID Corp. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be
issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable
with respect thereto.

 

	Date of Conversion:    	 

	Applicable Conversion Price:  	 

	Signature:  	 
	 	[Print Name of Holder and Title of Signer]

	 	 

	Address:  	 

	 	 

 

	SSN or EIN: __________________________
	Shares are to be registered in the following name:  	 

 

	Name:  	 

	Address:  	 

	Tel:  	 

	Fax:  	 

	SSN or EIN:  	 
	 	 
	Shares are to be sent or delivered to the following account:

 

	Account Name:  	 

	Address:  	 

 

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    	8Exhibit 10.4

 

FINANCING AGREEMENT

 

FOR VALUE RECEIVED, PositiveID Corp.,
(“PSID”), a Delaware corporation (the “Borrower”) with at least 82,000,000 common shares issued and outstanding,
promises to pay to Macallan Partners, LLC or its Assignees (the “Lender”) the Principal Sum along with the Interest
and any other fees according to the terms herein. This Agreement will become effective only upon execution by both parties and
delivery of the first payment of consideration by the Lender (the “Effective Date”).

 

The Principal Sum is $275,000 plus
accrued and unpaid interest and any other fees. The loan amount will be evidenced by a Convertible Debenture issued by the Borrower
to the Lender, including all material terms of this Agreement. The Convertible Debenture shall be issued at a 10% Original Issue
Discount, such that the total amount that the Lender shall provide to the Borrower under this Agreement shall be $247,500
(the “Discounted Amount”). The Discounted Amount shall be paid by Lender, as follows: (i) $100,000 in cash initially,
after the lender has received proof from the borrower and its transfer agent of common shares being irrevocably placed in a reserve
account for benefit of the lender (ii) such further amounts as shall be agreed by the Lender and the Borrower, up to the Discounted
Amount. All installments shall be payable under a full recourse Convertible Debenture(s) for $275,000 (the “Investor
Note”), subject to certain prepayment requirements, set forth below.

 

The prepayment of any amount of the Principal
Sum shall be subject to a prepayment penalty. Upon prepayment, the Company shall be required to pay the principal amount outstanding,
plus all expenses and fees. In addition, the Borrower shall be required to pay a penalty of 25% of the principal amount.

 

The Maturity Date is May 30, 2015
unless earlier converted pursuant to the Conversion section below.

 

At no time will the Lender convert
any amount of the Debenture into common stock that would result in the Lender owning more than 9.99% of the common stock outstanding.

 

Furthermore:

 

 

		1.	Prepayment Penalty. Prepayment of any amount of the Principal Sum shall
be subject to a prepayment penalty. Upon prepayment, the Borrower shall be required to pay the principal amount outstanding, plus
all expenses and fees. In addition, the Borrower shall be required to pay a penalty of 25% of the principal amount.

 

		2.	Conversion(s). The Lender has the right, at any time after the Effective
Date, at its election, to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees)
under any convertible balance due by the Borrower, into fully paid and non-assessable shares of common stock of the Borrower as
per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion
Price. The Conversion price is equal to 60% of the lowest VWAP during the 15 days prior to the election to convert. Notice of Lender’s
conversion may be delivered to Borrower by method of Lender’s choice (including but not limited to email, facsimile, mail,
overnight courier, or personal delivery), and all conversions shall be cashless and not require further payment from the Lender.
If no objection is delivered from Borrower to Lender regarding calculations in the conversion notice within 24 hours of delivery
of the conversion notice, the Borrower shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified
such conversion notice and waived any objection thereto. The Borrower shall deliver the shares from any conversion to Lender (in
any name directed by Lender) within two (2) business days of conversion notice delivery.

 

    	 

    	 

    

 

In the event that the outstanding shares of the common
stock subject to the conversion are changed into or exchanged for a different number or kind of shares of the Borrower or other
securities of the Borrower by reason of merger, consolidation, re-capitalization, re-classification, stock split, stock dividend
or combination of shares, the Borrower shall make an appropriate and equitable adjustment in the number and kind of shares as to
which the conversion shall be applicable, to the end that after such event the Lender’s proportionate interest is preserved
after the occurrence of such event.

 

		3.	Convertible Debenture.  The borrowings under this Agreement shall be
evidenced by a Convertible Debenture, in the form attached as Exhibit A, hereto.

 

		4.	Conversion Delays. If Borrower fails to deliver shares in accordance
with the timeframe stated in Section 2; the Lender, at any time prior to selling all of those shares, may rescind any portion,
in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned
to the Principal Sum with the rescinded conversion shares returned to the Borrower (under Lender’s and Borrower’s expectations
that any returned conversion amounts will tack back to the original date of the Debenture). In addition, for each conversion, in
the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $2,000 per
day will be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is
made; and such penalty will be added to the Principal Sum of the Debenture (under Lender’s and Borrower’s expectations
that any penalty amounts will tack back to the original date of the Debenture).

 

		5.	Notification about balance of Authorized Shares. During the course of
this Agreement, the Borrower will notify the Lender if the balance of the authorized shares falls below [25,000,000]. And
if so, the Lender has the right to suspend its impending installments until more shares are authorized to accommodate further conversions.

 

		6.	Terms of Future Financings. So long as the Debenture is outstanding,
upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such
security or with a term in favor of the holder of such security that was not similarly provided to the Lender in the Debenture,
then the Borrower shall notify the Lender of such additional or more favorable term and such term, at Lender’s option, shall
become a part of the transaction documents with the Lender. The types of terms contained in another security that may be more favorable
to the holder of such security include, but are not limited to, terms addressing conversion discounts.

 

			During the course of this agreement, the Borrower must notify the lender if
any of these conditions occur:

 

		(I)	If conversion shares are not deliverable by DWAC.

		(II)	If the shares are ineligible for deposit into the DTC system and only eligible
for Xclearing deposit.

 

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		7.	Default. The following are events of default under the Debenture and
this Agreement: (i) the Borrower shall fail to pay any principal under the Debenture when due and payable (or payable by conversion)
thereunder; or (ii) the Borrower shall fail to pay any interest or any other amount under the Debenture when due and payable (or
payable by conversion) thereunder; or (iii) a receiver, trustee or other similar official shall be appointed over the Borrower
or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or
discharged within sixty (60) days; or (iv) the Borrower shall become insolvent or generally fails to pay, or admits in writing
its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (v) the Borrower shall make
a general assignment for the benefit of creditors; or (vi) the Borrower shall file a petition for relief under any bankruptcy,
insolvency or similar law (domestic or foreign); or (vii) an involuntary insolvency proceeding shall be commenced or filed against
the Borrower; or (viii) the Borrower shall lose its status as “DTC Eligible” or the borrower’s shareholders shall
lose the ability to deposit (either electronically or by physical certificates, or otherwise) shares into the DTC System; or the
shares of the Borrower no longer allow for DWAC transfer for the shares; or (ix) the Borrower shall become delinquent in its filing
requirements as a fully-reporting issuer registered with the SEC; or (x) the borrower shall fail
to maintain sufficient common shares authorized and available to satisfy the lender’s conversions for as long as this debenture
remains unpaid in whole or in part.

 

		8.	Remedies. In the event of any default, the outstanding principal amount
of the Debenture, plus accrued but unpaid interest, liquidated damages, fees and other amounts owing in respect thereof shall be
accelerated and shall become, at the Lender’s election, immediately due and payable in cash at the Mandatory Default Amount.
The Mandatory Default Amount means the greater of (i) the outstanding principal amount of the Debenture, plus all accrued and unpaid
interest, liquidated damages, fees and other amounts hereon, divided by the Conversion Price on the date the Mandatory Default
Amount is either demanded or paid in full, whichever has a lower Conversion Price, multiplied by the VWAP (volume weighted average
price) on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a higher VWAP, or (ii) 150% of
the outstanding principal amount of the Debenture, plus 100% of the accrued and unpaid interest, liquidated damages, fees and other
amounts hereon. Commencing five (5) days after the occurrence of any event of default that results in the acceleration of the Debenture,
a default interest rate shall be applicable to all borrowings. The default interest rate shall accrue at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described
herein, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind,
and the Lender 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 Lender at any time
prior to payment hereunder and the Lender shall have all rights as a holder of the note until such time, if any, as the Lender
receives full payment pursuant to this Section 10. No such rescission or annulment shall affect any subsequent event of default
or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available
to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect
to the Borrower’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the Debenture
as required pursuant to the terms hereof.

 

		9.	No Short Selling. Lender must agree that as long as the Debenture from
Borrower to Lender remains outstanding, Lender will not short sell the Common Stock or hedge the transaction which establishes
a net short position with respect to the Common Stock of Borrower. Borrower agrees that upon delivery of a conversion notice by
Lender, Lender will own the shares of Common Stock described in the conversion notice and any sale of those shares issuable under
such conversion notice would not be considered a short sale.

 

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		10.	Assignability. The Borrower may not assign the Debenture. The Debenture
is binding upon the Borrower and its successors and will inure to the benefit of the Lender and its successors and assigns and
may be assigned by the Lender to anyone of its choosing without Borrower’s approval.

 

		11.	Governing Law. This Agreement will be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard to the conflict of laws principles thereof. Any
action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts for located in New York. Both parties and the individuals signing this
Agreement agree to submit to the jurisdiction of such courts.

 

		12.	Delivery of Process by Lender to Borrower. In the event of any action
or proceeding by Lender against Borrower, and only by Lender against Borrower, service of copies of summons and/or complaint and/or
any other process which may be served in any such action or proceeding may be made by Lender via U.S. Mail, overnight delivery
service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the
Borrower at its last known attorney as set forth in its most recent SEC filing.

 

		13.	Attorney Fees. In the event any attorney is employed by either party
to the Debenture with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement
of the Debenture or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions
of the Debenture, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys'
fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled. In connection
with the issuance of the Convertible Debenture, the Borrower shall pay attorney fees incurred by the Lender of $5,000. Borrower
shall also be responsible for payment of banking fees as agreed with the investment banker.

 

		14.	Permitted Borrowings.  Borrower shall have the right to enter into secured
or unsecured borrowings from commercial banks and comparable commercial credit institutions for the purpose of financing inventory
and fixed assets, upon approval of the Board of Directors of the Borrower (“Permitted Borrowings”). Permitted Borrowings
shall not require the prior approval of the Lender. All other borrowings by the Borrower shall be subject to the prior written
approval of the Lender.

 

		15.	Opinion of Counsel. In the event that an opinion of counsel is needed
for any matter related to the Debenture, Lender has the right to have any such opinion provided by its counsel. Lender also has
the right to have any such opinion provided by Borrower’s counsel.

 

		16.	Notices. Any notice required or permitted hereunder (including Conversion
Notices) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier.
Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier
the business day after such notice is deposited with the courier service for delivery.

 

    	4

    	 

    

 

 

	The Borrower	 	The Lender
	 	 	 
	 	 	 
	/s/
William Caragol	 	 

 

 

    	5

    	 

    

 

Attachment A

 

FULL-RECOURSE
CONVERTIBLE DEBENTURE

 

[see
attached]

 

 

    	6

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