8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 6, 2016

Imaging3, Inc.

(Exact name of registrant as specified in its charter)

California	000-50099	95-4451059
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

3022 North Hollywood Way. Burbank, CA 91505

(Address of Principal Executive Offices) (Zip Code)

818 260 0930

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.03 Creation of a Direct Financial Obligation.

On January 5, 2017 the Company entered into a financing arrangement set forth in that certain Convertible Note Amendment Agreement (the “Amendment Agreement”) with five accredited investors (the “Investors”), whereby the Company and the Investors (collectively, the “Parties”) agreed to the following:

(A) The Parties agreed to amend, in the form of that certain Amendment No. 1 to the 10% OID Secured Convertible Note (the “Note Amendment”), fourteen separate notes held by the Investors with a total face value of $662,000 comprised as follows: (i) $168,000 of face amount was dated April 27, 2015 and was due on October 27, 2015; (ii) $231,000 of face amount was dated August 27, 2015 and due on February 27, 2016; (iii) $165,000 of face amount was dated April 26, 2016 and was due on October 27, 2016; (iv) $65,000 of face amount was dated August 26, 2016 and is due on February 26, 2017; and (v) $33,000 of face amount was dated October 11, 2016 and is due on April 11, 2017 (the “Original Notes”). The balance as of January 1, 2017 of these Original Notes, including all interest, was $769,664.12. Of these Original Notes, which are secured by all the assets of the Company including all of its intellectual property and perfected by a UCC filing with the California Secretary of State, $564,000 of face amount was in default. As part of the Amendment Agreement, the Investors agreed to extend the maturity date of all the Original Notes to August 31, 2017, and the Original Notes remain secured under the same terms as the Original Notes. Furthermore, as part of the Amendment Agreement, the conversion provisions of the Original Notes were amended from an optional conversion (to common shares at a price of $0.01 per share) to the following:

(1) Optional Conversion: Upon the closing by the Company of any common or preferred stock equity financing (an “Offering”) whereby the cumulative gross proceeds of all such Offerings is less than $2,500.000 (a “Non-Qualified Financing”), then some or all of the principal amount and accrued interest of the notes as amended may, at the option of an Investor, be converted into shares of stock of the Company that are sold at the close of such Non- Qualified Financing. When an Investor elects to so convert, the Investor shall receive the same consideration that is issued in the Non-Qualified Financing on the same terms and conditions as the other investors participating in the Non-Qualified financing except the Investor shall convert the principal and interest then due under the terms of the Note Amendment at the lower of (a) the price per share of the then current Non-Qualified Financing or (b) the average weighted price per share of all Non-Qualified Financings to date;

(2) Mandatory Conversion: Upon the closing by the Company of any Offering whereby the cumulative gross proceeds raised from all such Offerings is equal to or greater than $2,500,000 (a “Qualified Financing”), then, provided the notes are not in default, all of the principal and accrued interest then due shall be automatically converted into shares of stock of the Company that are sold at the closing of the Qualified Financing on the same terms and conditions as the other investors participating in the Qualified Financing, except that the Investors shall convert their principal and accrued interest at the lower of the (a) the price per share of the Qualified Financing or (b) the average weighted price per share of all Offerings to date.

Should there an event of default under these amended notes, the Investors will have, in addition to all the other rights described in that certain Securities Purchaser Agreement, the right, at each Investor’s option, to convert the notes into common shares at $0.01 per share.

(B) The Parties agreed to amend, in the form of Amendment No. 1 to the Common Stock Purchase Warrants (the “Warrant Amendment”), the fifteen Common Stock Purchase Warrants (the “Original Warrants”) held by the Investors and issued to the Investors in connection with the issuance of the Original Notes. In aggregate, these fifteen Original Warrants gave to the Investors the right to purchase 66,500,000 common shares at a price of $0.01 per share. The Warrant Amendment reduces the number of shares of the Company’s common stock into which the Original Warrants to 16,625,000, a reduction of 75%. The exercise price remains at $0.01 per share. In consideration of this reduction of the number of common shares exercisable pursuant to the Original Warrants, the Company shall issue to the investors new convertible promissory notes in total principal amount of $124,687.50 in the same form as the Original Notes as amended by the Note Amendment (the “Additional Convertible Notes”). The Additional Convertible Notes accrue interest beginning on January 9, 2017 and are due August 31, 2017. They are secured by the UCC filing covering the Original Notes.

(C) The Investors agreed to lend the Company up to $200,000, in increments of $50,000, at the Company’s discretion (the “Additional Loans”), as long as the Original Notes are not in default. These loans will: (i) be evidenced by notes (the “Additional Notes”) in the form of the Original Notes as amended, (ii) be effective on the date of receipt of the Additional Loans by the Company, (iii) be due on August 31, 2017, and (iv) bear interest at 10% per annum. The Additional Notes shall have a face value of 118.75% of the funds actually advanced. The Additional Loans will be secured by a UCC filing on the Company’s assets. In addition, the Company shall issue a warrant in the form of the Original Warrants (as amended) granting the Investor the right to purchase, at $0.01 per share, that number of common shares of the Company equal to 25 times the number of dollars loaned.

The agreement to amend the notes and warrants and to loan additional monies to the Company, as described above, was dependent on the two officers of the Company—Chief Executive Officer Dane Medley and Chief Financial Officer Xavier Aguilera—agreeing to restate their respective employment agreement, which they both have done.

As part of his restated employment agreement, Mr. Medley waived all possible claims against the Company, accepted the title of President (and thereby dropping the Chief Executive Officer title), sold all his shares of Preferred Voting Stock (entitling him to 750,000,000 common-share-equivalent votes) back to the Company for a price of $60,000, and agreed to accept 4,000,000 Restricted Stock Units as soon as practical after a stock incentive plan that allows such issuances is approved. Mr. Medley’s compensation and severance package are also defined in his restated agreements.

As part of his restated employment agreement, Mr. Aguilera waived all possible claims against the Company and agreed to accept 2,000,000 Restricted Stock Units as soon as practical after a stock incentive plan that allows such issuances is approved. Mr. Aguilera’s compensation and severance package are also defined in his restated agreement.

It should be noted that, on December 14, 2016 and prior to the effective date of the Amendment Agreement, one of the 10% OID Secured Convertible Notes held by Investors, with in the face amount of $55,000 plus and interest due through the date of conversion, was converted into 7,074,700 common shares of the Company.

Item 9.01 Financial Statements and Exhibits

Exhibit 1. Convertible Note Amendment Agreement

Exhibit 2. Form of Note as amended for Notes relating to reduction of warrants by 75 percent

Exhibit 3. Agreement to Replace Medley Employment Agreement

Exhibit 4. Agreement to Replace Aguilera Employment Agreement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	Imaging3, Inc.
	By:	/s/ Dane Medley
	Name:	Dane Medley
	Title:	President
Date: January 12, 2017

EX-1

IMAGING3, INC.

CONVERTIBLE NOTE AMENDMENT AGREEMENT

This CONVERTIBLE NOTE AMENDMENT AGREEMENT is entered into as of January 5, 2017 between Imaging3, Inc., a California corporation (the “Company”), and each of the lenders (each being the “Lender” and collectively, the “Lenders”) who sign this Agreement (this “Agreement”).

The parties hereby agree as follows:

SECTION 1
AMENDMENT OF NOTES AND WARRANTS

1.1       Amendment of Notes and Warrants for Old Notes and Warrants

(a)       The Company has borrowed $662,000 from Lenders (face amount) for which the Company issued 10% OID Secured Convertible Notes and related warrants (“the “Original Notes” and the “Original Warrants,” respectively), as shown on Exhibit A.

(b)       Subject to the terms and conditions hereof, each Lender agrees to amend the terms and conditions of the Original Notes as described in the AMENDMENT NO. 1 TO 10% OID SECURED CONVERTIBLE NOTE, the form of which is shown in Exhibit B (the “Amendment”). This Amendment extends the Maturity Date to August 31, 2017, changes the interest rate to 10.0% per annum from January 1, 2017 through to the Maturity Date, and changes the terms and conditions upon which the notes convert into shares of Company stock. It is hereby agreed that the Company will make a payment to Gemini Master Fund, Ltd. of up to $100,000 (at Gemini’s discretion), from the proceeds of any Qualified Offering (as described in the Amendment), prior to the conversion that such a Qualified Offering would mandate.

(c)       Subject to the terms and conditions hereof, each Lender agrees to amend the terms and conditions of the Original Warrants as described in AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT, the form of which is shown in Exhibit C1. (the “Warrant Amendment”). This Warrant Amendment reduces the number of common shares exercisable by three-quarters (75.0%). In exchange for such a reduction, the Company shall issue to each Lender a convertible promissory note, in the same form as the Original Notes as amended pursuant to this Agreement, whereby the principal amount of each such note is equal to the total number of shares underlying all Original Warrants held by such Lender multiplied by 75% and then multiplied by $0.0025 (the “Additional Convertible Note”). Each such Additional Convertible Note will begin accruing interest on January 1, 2017. See Exhibit C2 for the calculations of the revised number of shares underlying the Original Warrants and the principal balances of the Additional Convertible Notes.

(d)       The Additional Convertible Notes will be secured by that same UCC-1 financing statement that was related to the Original Notes and that was filed by the Company, on behalf of the Lenders, with the Secretary of State of California. In addition, all parties hereby re-affirm all the terms, conditions, rights, responsibilities, duties, and obligations contained in that Security Agreement, dated March 31, 2016, that was executed by all the parties of this Agreement; and, by doing so, it is expressly understood that the Lenders shall maintain their security interest in all the assets of the Company, including any prototypes and all intellectual property (to include, among other things, the patents and trademarks) of the Company until the following are fully satisfied: (i) the Original Notes, as amended; (ii) the Additional Convertible Notes; and (iii) any secured convertible notes associated with the Additional Loans described later herein (Section 2).

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 1

(e)       It is hereby understood and agreed that any indemnification of the Lender--pursuant to Section 4.10 (titled “Indemnification of the Purchasers”) of the Security Purchase Agreements_ relating to the initial issuance of the Original Notes and Original Warrant--remains in full force and effect.

1.2       Delivery.

(a)       Within one week after the complete execution of this Convertible Note Amendment Agreement by the Lenders and by the Company (the “Closing”), and assuming that all the conditions described in Section 5 have been satisfied, the Company shall send to each Lender an Amendment in the form shown in Exhibit B for each of the Original Notes held by such Lender and a Warrant Amendment.in the form shown in Exhibit C1 for each of the Original Warrants held by such Lender.

(b)       Within one week after receipt of the Amendments and the Warrant Amendments, each Lender shall execute all the Amendments and Warrant Amendments and return them to the Company at its offices located at 3022 North Hollywood Way, Burbank CA 91505.

(c)       Within one week after receipt of the duly executed Amendments and the Warrant Amendments, the Company shall send to each Lender an executed Additional Convertible Note.

SECTION 2

AGREEMENT TO PROVIDE ADDITIONAL LOANS

Lenders hereby agree to provide additional loans of up to a total of $200,000 to the Company, in increments of $50,000 (collectively, the “Additional Loans”), as follows:

2.1       The Company, at its discretion, can call down a $50,000 tranche through email notice to the Lenders collectively, with the provision that such call-down notices must not be within 30 days of each other.

2.2       Each Lender, upon receipt of such call-down notice, would have five business days to wire transfer its pro-rata share of the $50,000, as shown in Exhibit D, to the Company’s bank account.

2.3       The Company would then send to each Lender, within five business days of the receipt of the relevant wire transfer, a convertible promissory note, in the same form as the Original Note as amended pursuant to this Agreement, except that the date of the note would be the effective date of the relevant wire transfer and the 10.0% annual interest on the note would begin to accrue on the effective date; in addition, the face amount of each such note shall be 118.75% of the amount loaned.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 2

2.4       Within this same five-day period, the Company would also send to each Lender a warrant, in the form of the Original Warrants, whereby each warrant grants the Lender the right to purchase, for $0.01 per share, that number of common shares equal to the number of dollars loaned multiplied by 25.

2.5       If there is an Event of Default under the Original Notes (other than an Event of Default pursuant to Section 9.a.iv of the Original Notes), this requirement of the Lender to provide Additional Loans to the Company shall cease to exist.

SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Disclosure Schedule attached hereto as Exhibit E, the Company hereby represents and warrants to the Lender that the statements in the following paragraphs of this Section 3 are true and correct to the best of the knowledge of the Company’s officers as of the date of this Agreement:

3.1       Authorization. All corporate action on the part of the Company, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company for the amendment of the Original Notes and issuance of the Additional Convertible Notes and the New Warrants hereunder has been taken. This Agreement, when executed and delivered by the Company, will constitute a valid and binding obligation of the Company enforceable in accordance with its terms, subject to (i) laws of general application relating to specific performance, injunctive relief or other equitable remedies, and (ii) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally.

3.2       Litigation. There are no legal actions, suits, arbitrations or other legal administrative or governmental proceedings pending or, to the Company’s knowledge, threatened against the Company, or against the assets or business of the Company, and the Company is not aware of any facts that might result in or form the basis for any such action, suit, arbitration or other proceeding.

3.3       Full Disclosure. To the Company’s knowledge, no representation or warranty made by the Company in this Agreement, or in any document furnished by the Company to the Lender pursuant to this Agreement, when taken together with this Agreement in its entirety and all such documents, contains any untrue statement of material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in light of the circumstances under which they are made.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 3

SECTION 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE LENDER

The Lender hereby represents, warrants and agrees as follows:

4.1       Authorization. This Agreement constitutes the Lender’s valid and legally binding obligation, enforceable in accordance with its terms except as may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (b) the effect of rules of law governing the availability of equitable remedies. The Lender represents that it has full power and authority to enter into this Agreement and the Registration Rights Agreement.

4.2       Sophistication The Lender has the capacity to protect its own interests in connection with the Lender’s acquisition of the Securities.

4.3       Access to Data The Lender has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management and the opportunity to inspect Company facilities and such books and records and material contracts as the Lender deemed necessary to its determination to purchase the Securities.

SECTION 5
CONDITIONS TO LENDER’S OBLIGATIONS AT CLOSING

The obligations of the Lender under Sections 1 and 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions:

5.1       Representations and Warranties Each of the representations and warranties of the Company contained in Section 3 shall be true and correct when made and as of the Closing as if made on such date.

5.2       Related Agreements. The Company shall have fully executed the Agreement to Amend Medley Employment Agreement and the Agreement to Amend Aguilar Employment Agreement with Dane Medley and Xavier Aguilera, respectively, attached hereby as Exhibit F1 and Exhibit F2.

5.3       Performance. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

5.4       All in. The Company shall have received an executed Agreement from each of the Lenders.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 4

SECTION 6
CONDITIONS TO COMPANY’S OBLIGATIONS AT CLOSING

The Company’s obligation to amend the Original Notes and issue New Warrants and Additional Convertible Notes is subject to the fulfillment (or waiver by the Company) of the following conditions:

6.1       Representations and Warranties. The representations and warranties made by the Lenders in Section 3 hereof shall be true and correct when made and as of the Closing as if made on such date.

6.2       Delivery of Original Documents. The Lenders shall have delivered to the Company the Original Warrants in accordance with Section 1.3(a) of this Agreement, or, in the alternative, the Lender shall have executed an agreement, as prepared by the Company, that cancels the respective Lender’s Original Warrants.

SECTION 7
COVENANTS OF THE COMPANY AFTER CLOSING

7.1       Use of Proceeds. The Company covenants that it will use proceeds from the Additional Loan for the Company’s working capital purposes and to raise additional capital.

7.2       Payments on Notes. The Company shall offer to all of the Lenders the same rights for prepayments, on a pro-rata basis, pursuant to the terms of all the notes referenced herein (“All Convertible Notes”). Upon maturity, the Company shall treat All Convertible Notes in the same manner, on a pro-rata basis, without giving preferential or discriminatory treatment to any of the notes or any of the Lenders.

7.3       Obligations. The Company shall perform and honor all of its obligations under the Notes, the Security Agreement, the Warrants and this Agreement.

SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

8.1       Restrictions on Transferability All Convertible Notes and the New Warrants shall be transferable to any accredited investor upon the conditions specified in this Section 8. The Lender will cause any proposed transferee of any such notes or warrants to agree to take and hold such notes subject to the provisions and upon the conditions specified in this Section 8.

SECTION 9
MISCELLANEOUS

9.1       Holding Period for Notes and Warrants. Pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, the holding period of the Original Notes and Original Warrants as amended (and the underlying shares of Common Stock issuable upon conversion thereof or in payment of interest thereon) shall tack back to the original issue date of such respective notes and warrants. The Company agrees not to take a position contrary to this paragraph. The Company agrees to take all actions, including, without limitation, the issuance by its legal counsel of any necessary legal opinions, necessary to issue to the Note (and such underlying shares) without restriction and not containing any restrictive legend without the need for any action by the Holder. The Company is not subject to Rule 144(i). This Amendment Agreement is not satisfying the obligations under the Notes and shall not constitute a novation or satisfaction and accord of any of the Notes. Without limiting any of the terms, conditions or covenants contained in this Agreement or other documents, if at any time it is determined that any underlying shares are not freely tradable without restriction or limitation pursuant to Rule 144, then the Company shall promptly register the resale of all underlying shares under the Securities Act by filing a registration statement with the SEC as soon as practicable (but in no event later than 60 days) and causing such registration statement to be declared effective as soon as practicable (but in no event later than 120 days)

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 5

9.2       Survival. The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Agreement and the Closing.

9.3       Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

9.4       Entire Agreement; Amendment This Agreement, together with the exhibits to this Agreement, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any term of this Agreement and the Security Agreement may be amended and the observance of any term of this Agreement and the Security Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders who have loaned more than half of the aggregate Principal Amounts loaned by all of the Lenders under this Agreement. Any amendment or waiver effected in accordance with this Section 8.4 shall be binding upon the Company, the Lender and each future holder of the Securities.

9.5       Expenses The Company and the Lenders shall each bear their own fees and legal expenses.

9.6       Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by U.S. mail, postage prepaid, or otherwise delivered by hand, messenger, telecopier or a nationally recognized overnight courier service, addressed to the Lender and the Company at the addresses set forth on the signature page.

All such notices, requests and other communications will (i) if delivered personally or by express courier to the address as provided in this Section 8.6, be deemed given upon delivery, or (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 8.6, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving ten (10) days’ prior written notice specifying such change to the other party hereto.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 6

9.7       Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Signatures may be delivered and transmitted by facsimile transmission.

9.8       Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.

9.9       Finder’s Fees. The Lender agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’ or broker’s fee (and any asserted liability) for which the Lender or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Lender from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

9.10       Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

9.11       Cooperation. With respect to performance of the terms of this Agreement, each party shall use its good faith efforts to cooperate and to take such actions as may be appropriate to carry out the terms and intentions of this Agreement. Whenever a party’s approval is required with respect to the terms of this Agreement, such approval will not be unreasonably withheld.

9.12       Individual Decision-Making. Each Lender is acting individually and is making its own decision based on its individual diligence and discussions with the Company.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 7

IN WITNESS WHEREOF, the parties hereto have executed this Convertible Note Amendment Agreement as of the date first set forth above.

COMPANY:

IMAGING3, INC.

3022 North Hollywood Way,

Burbank, California 91505

Attention: Dane Medley

Mobile: 714-944-5494

By:

Its:

Date:____________, 20__

LENDERS:

Name:	ALPHA CAPITAL ANSTALT
	Signature:
	Date:____________, 20__
Name:	BRIO CAPITAL MASTER FUND, LTD.
	Signature:
	Date:____________, 20__
Name:	GEMINI MASTER FUND, LTD.
	Signature:
	Date:____________, 20__
Name:	SAH TRUST
	Signature:
	Date:____________, 20__
Name:	DAN AND ELLEN TRONSON FAMILY TRUST
	Signature:
	Date:____________, 20__

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 8

Exhibit A

ORIGINAL NOTE HOLDERS

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 9

Exhibit B

AMENDMENT NO. 1 TO

10% OID SECURED CONVERTIBLE NOTE

This AMENDMENT NO. 1 (the “Amendment”) to that certain 10% OID SECURED CONVERTIBLE NOTE dated __________________ in favor of the Holder (the “Note”) is entered into as of January 1, 2017, between Imaging3, Inc., a California corporation (the “Company”), and the Holder listed on the signature page attached hereto (the “Holder”).

RECITALS

WHEREAS, the Holder is a stockholder in the Company;

WHEREAS, the Holder loaned the Company $__,000 (face amount) on __________, 20__ pursuant to the Note;

WHEREAS, Holder has entered into that certain Convertible Note Amendment Agreement by and among the Company, the Holder, and other Holders, whereby the Company and the Holder agreed to amend the Note; and the Company and the Holder now desire to amend the Note as set forth below.

NOW THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Holder agree as follows:

1. Amendment to the Note.

1.1 The second paragraph of the Note is hereby amended and restated in its entirety as follows:

FOR VALUE RECEIVED, the Company promises to pay to _______________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of USD $__________ on August 31, 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:

1.2 Section 2(a) of the Agreement is hereby amended and restated to read in its entirety as follows:

a) Payment of Interest in Cash. Interest on this Note shall accrue (i) at an annual rate equal to 10% for a period of six months following the effective date of the Note; (ii), at an annual rate of 18% for the period starting on the six-month anniversary of the effective date of the Note until December 31, 2016; and (iii) at an annual rate of 10.0% from January 1, 2017 until the Maturity Date. The Note shall be payable on the Maturity Date unless otherwise provided for herein.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 10

1.3 Section 4(a) of the Agreement is hereby amended and restated to read in its entirety as follows:

a)       Conversion of Note. Subject to the conversion limitations set forth in Section 4(d) hereof, until this Note is no longer outstanding, it shall be convertible, in whole or in part, as described in the sections below

i.	Optional Conversion. Upon the closing by the Company of any common or preferred stock equity financing with rights, preferences, and privileges equal to or better than the common stock outstanding (an “Offering”), whereby the aggregate gross proceeds raised from all such Offerings is less than $2,500,000 (a “Non-Qualified Financing”), then some or all of the principal amount and accrued interest due hereunder may, at the option of the Holder, be converted into shares of the stock of the Company that are sold at the closing of such Non-Qualified Financing. When the Holder elects to convert, the Holder shall receive the same consideration that is issued in the Non-Qualified Financing on the same terms and conditions as the other investors participating in the Non-Qualified Financing, except that the Holder shall convert the principal amount and accrued interest due hereunder at the lower of: (a) the price per share of the Non-Qualified Financing in question or (b) the average weighted price per share of all Non-Qualified Financings to date.
ii.	Mandatory Conversion. Upon the closing by the Company of any Offering whereby the aggregate gross proceeds raised from all such Offerings is equal to or greater than $2,500,000 (a “Qualified Financing”), then, provided there has not been an Event of Default (other than an Event Default pursuant to Section 9.a.iv of the Original Note), all of the principal amount and accrued interest due hereunder shall automatically be converted into shares of the stock of the Company that are sold at the closing of the Qualified Financing. The conversion process will be the same as described in Section 4 in that the Holder shall receive the same consideration that is issued in the Qualified Financing on the same terms and conditions as the other investors participating in the Qualified Financing, except the Holder shall convert the principal amount and accrued interest due hereunder at the lower of: (a) the price per share of the Qualified Financing or (b) the average weighted price per share of all Offerings to date, including the Qualified Financing. If there is an Event of Default (other than an Event Default pursuant to Section 9.a.iv of the Original Note) prior to mandatory conversion, the Holder shall no longer be subject to a mandatory conversion, and shall have the option, at its discretion, to convert any or all of the principal amount and accrued interest hereunder into common shares of stock of the Company at a conversion price of $0.01, subject to adjustment herein (the “Conversion Price”).
iii.	Notices of Offering. The Company must notice the Holder, via email and within five business days of the closing of any Offering, that an Offering has occurred (and the date thereof) and state in such notice: (a) the price per share of the most-recent Offering, together with all the terms and conditions thereof; (b) the average weighted price per share of all Offerings to date; (c) the aggregate gross proceeds from all Offerings to date; and (d) whether such Offering qualifies as a Non-Qualified Financing or a Qualified Financing. All the pertinent financing documents must be included with such notice. It is understood that, with respect to any notes that convert into an Offering, any accrued interest or original discount thereof shall not be considered part of the gross proceeds.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 11

 iv. Mechanics of Conversion. Within five days of receipt of the Notice of Offering as described immediately above, 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. The date on which such conversion shall be effected shall be the date of the closing of the Offering referenced in the relevant Notice of Offering (such date, the “Conversion Date”). 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 amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within two (2) Business Days 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.

1.4 Section 4(b) of the Agreement, which defines “Conversion Price,” is hereby deleted in its entirety.

1.5 Section 6.a shall be replaced in its entirety with the following:

a) Optional Redemption. Subject to the provisions of this Section 6(a) and subject to Holder’s approval, at any time the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding principal amount of this Note for cash in an amount equal to the Optional Redemption Amount on the tenth Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date,” such ten (10) Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”).

2. Miscellaneous.

2.1 Full Force and Effect. Except as otherwise provided in Section 1 above, the terms and conditions of the Agreement shall remain in full force and effect.

2.2 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

2.3 Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 12

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first written above. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

COMPANY:

IMAGING3, INC.
By:
	Dane Medley, CEO

HOLDER:

Name of Holder:

By (name):

Signature:

Title:

Address:

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 13

Exhibit C1

AMENDMENT NO. 1 TO

COMMON STOCK PURCHASE WARRANT

This AMENDMENT NO. 1 (the “Amendment”) to that certain COMMON STOCK PURCHASE WARRANT numbered _____________ and dated __________________ in favor of the Holder (the “Warrant”) is entered into as of January 2, 2017, between Imaging3, Inc., a California corporation (the “Company”), and the Holder listed on the signature page attached hereto (the “Holder”).

RECITALS

WHEREAS, the Holder is a stockholder in the Company;

WHEREAS, the Holder loaned funds to the Company and was issued a 10% OID Convertible Secured Note and the Warrant as described above;

WHEREAS, Holder has entered into that certain Convertible Note Amendment Agreement by and among the Company, the Holder, and other Holders, whereby the Company and the Holder agreed to amend the Warrant such that Holder will have the right to purchase twenty-five percent (25.0%) of the shares previously purchaseable under the Warrant; and the Company and the Holder now desire to amend the Note as set forth below.

NOW THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Holder agree as follows:

1. Amendment to the Warrant.

1.1 The following paragraph shall be inserted second paragraph of the Note is hereby amended and restated in its entirety as follows:

IMAGING3, INC., a corporation organized under the laws of California (the “Company”), hereby certifies that, for value received, __________________________, or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time, up to __________ fully paid and nonassessable shares of Common Stock (as hereinafter defined), par value of $0.001 per share, at the applicable Exercise Price per share (as defined below). This number of shares represents twenty-five percent (25.0%) of the number of shares that the Holder had the right to purchase in the warrant as originally issued and as stated just below the legend above. The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

2. Miscellaneous.

2.1 Full Force and Effect. Except as otherwise provided in Section 1 above, the terms and conditions of the Agreement shall remain in full force and effect.

2.2 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

2.3 Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 14

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the date first written above. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

COMPANY:

IMAGING3, INC.
By:
	Dane Medley, CEO

HOLDER:

Name of Holder:

By (name):

Signature:

Title:

Address:

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 15

Exhibit C2

REVISED NO. OF SHARES UNDERLYING THE WARRANT AND ADDITIONAL CONVERTIBLE NOTES

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 16

Exhibit D

PRO RATA SHARE OF ADDITIONAL LOANS

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 17

Exhibit E

DISCLOSURE SCHEDULE

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 18

Exhibit F1

AGREEMENT TO AMEND MEDLEY EMPLOYMENT AGREEMENT

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 19

Exhibit F2

AGREEMENT TO AMEND AGUILERA EMPLOYMENT AGREEMENT

Convertible Note Amendment Agreement, Imaging3, Inc. 2017-01 20

EX-2

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

Principal Amount $_________

SECURED CONVERTIBLE NOTE Due AUGUST 31, 2017

THIS SECURED CONVERTIBLE NOTE is a duly authorized and validly issued Secured Convertible Note of Imaging3, Inc., a California corporation, (the “Company”), having its principal place of business at 3200 Valhalla Drive, Burbank, CA 91505 designated as its 10% Secured OID Convertible Note (the “Note”).

FOR VALUE RECEIVED, the Company promises to pay to ______________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of USD $________ on August 31, 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, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

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

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

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

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

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

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

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholder of the Company immediately prior to such transaction own less than 66% 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 stockholder of the Company immediately prior to such transaction own less than 66% 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.

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

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

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

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

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

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

“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).

“Event of Default” shall have the meaning set forth in Section 9(a).

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

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

“Mandatory Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Note, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 120% of the outstanding principal amount of this Note, plus 100% of accrued and unpaid interest hereon, and (b) 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 10(d).

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

“Optional Redemption” shall have the meaning set forth in Section 6(a).

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“Optional Redemption Amount” means the sum of (a) 105% of the outstanding principal amount of the Note, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Note.

“Optional Redemption Date” shall have the meaning set forth in Section 6(a).

“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).

“Optional Redemption Notice Date” shall have the meaning set forth in Section 6(a).

“Optional Redemption Period” shall have the meaning set forth in Section 6(a).

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

“Purchase Agreement” means the Securities Purchase Agreement, dated as of April 27, 2015 among the Company and the Holder, as amended, modified or supplemented from time to time in accordance with its terms.

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

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

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

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

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

“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 not 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 Pink OTC Markets, 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 Holder 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.

Page 4 of 23 

Section 2. Interest, Prepayment.

a) Payment of Interest in Cash. Interest on this Note shall accrue at an annual rate equal to 10% and shall be payable on the Maturity Date unless otherwise provided for herein.

b) Prepayment. Except as set forth in Section 6 of this Note, the Company may not prepay any portion of the principal amount of this Note without the prior written consent of the Holder.

Section 3. Registration of Transfers and Exchanges.

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

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

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

Section 4. Conversion.

a) Conversion of Note. Subject to the conversion limitations set forth in Section 4(d) hereof, until this Note is no longer outstanding, it shall be convertible, in whole or in part, as described in the sections below

i. Optional Conversion. Upon the closing by the Company of any common or preferred stock equity financing with rights, preferences, and privileges equal to or better than the common stock outstanding (an “Offering”), whereby the aggregate gross proceeds raised from all such Offerings is less than $2,500,000 (a “Non-Qualified Financing”), then some or all of the principal amount and accrued interest due hereunder may, at the option of the Holder, be converted into shares of the stock of the Company that are sold at the closing of such Non-Qualified Financing. When the Holder elects to convert, the Holder shall receive the same consideration that is issued in the Non-Qualified Financing on the same terms and conditions as the other investors participating in the Non-Qualified Financing, except that the Holder shall convert the principal amount and accrued interest due hereunder at the lower of: (a) the price per share of the Non-Qualified Financing in question or (b) the average weighted price per share of all Non-Qualified Financings to date.

Page 5 of 23 

ii.	Mandatory Conversion. Upon the closing by the Company of any Offering whereby the aggregate gross proceeds raised from all such Offerings is equal to or greater than $2,500,000 (a “Qualified Financing”), then, provided there has not been an Event of Default (other than an Event Default pursuant to Section 9.a.iv of the Original Note), all of the principal amount and accrued interest due hereunder shall automatically be converted into shares of the stock of the Company that are sold at the closing of the Qualified Financing. The conversion process will be the same as described in Section 4 in that the Holder shall receive the same consideration that is issued in the Qualified Financing on the same terms and conditions as the other investors participating in the Qualified Financing, except the Holder shall convert the principal amount and accrued interest due hereunder at the lower of: (a) the price per share of the Qualified Financing or (b) the average weighted price per share of all Offerings to date, including the Qualified Financing. If there is an Event of Default (other than an Event Default pursuant to Section 9.a.iv of the Original Note) prior to mandatory conversion, the Holder shall no longer be subject to a mandatory conversion, and shall have the option, at its discretion, to convert any or all of the principal amount and accrued interest hereunder into common shares of stock of the Company at a conversion price of $0.01, subject to adjustment herein (the “Conversion Price”).
iii.	Notices of Offering. The Company must notice the Holder, via email and within five business days of the closing of any Offering, that an Offering has occurred (and the date thereof) and state in such notice: (a) the price per share of the most-recent Offering, together with all the terms and conditions thereof; (b) the average weighted price per share of all Offerings to date; (c) the aggregate gross proceeds from all Offerings to date; and (d) whether such Offering qualifies as a Non-Qualified Financing or a Qualified Financing. All the pertinent financing documents must be included with such notice. It is understood that, with respect to any notes that convert into an Offering, any accrued interest or original discount thereof shall not be considered part of the gross proceeds.
iv.	Mechanics of Conversion. Within five days of receipt of the Notice of Offering as described immediately above, 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. The date on which such conversion shall be effected shall be the date of the closing of the Offering referenced in the relevant Notice of Offering (such date, the “Conversion Date”). 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 amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within two (2) Business Days 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.

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b) Mechanics of Conversion.

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

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

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.

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iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5^th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 9 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.

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

vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock 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 (and the other Holder of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note 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.

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

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

c) Holder’s Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% 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). Any such increase or decrease will not be effective until the 61^st 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.

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Section 5. Certain Adjustments.

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

b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to such lower Dilutive Issuance price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. 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.

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c) Subsequent Rights Offerings. If the Company, at any time while the Note is outstanding, shall issue rights, options or warrants to all Holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion Price shall be multiplied by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming delivery to the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

d) Pro Rata Distributions. If the Company, at any time while this Note is outstanding, shall distribute to all Holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

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

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

g) Notice to the Holder.

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

ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all Holder 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 stockholder 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 Holder 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 holder 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.

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Section 6. Redemption.

a) Optional Redemption at Election of Company. Subject to the provisions of this Section 6(a) and subject to Holder’s approval, at any time the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding principal amount of this Note for cash in an amount equal to the Optional Redemption Amount on the 10^th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date,” such ten (10) Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”).

b) Redemption Procedure. The payment of cash pursuant to an Optional Redemption shall be payable on the Optional Redemption Date. If any portion of the payment pursuant to an Optional Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such Optional Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no further right to exercise such Optional Redemption. The Holder may elect to convert the outstanding principal amount of the Note pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

Section 7. Participation in Subsequent Financings.

(a) Subsequent Financings Prior to Repayment. In the event the Company consummates, prior to the repayment in full of this Note, an equity or debt financing with the principal purpose of raising capital (a “Qualified Financing”), then the Holder shall have the right to participate upon the same terms and conditions (except with respect to purchase price), in such Qualified Financing at a purchase price determined by multiplying the purchase price for participation in the Qualified Financing by 0.90 (the “Discounted Purchase Price”) and in lieu of receiving cash for repayment of this Note, may elect to apply an amount towards the payment of the Discounted Purchase Price up to or equal to the sum of (a) the then outstanding principal amount of the Note, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Note (such sum, the “Qualified Financing Participation Right Amount”). The Company shall notify the Holder of the terms of the Qualified Financing at least ten (10) business days prior to the anticipated closing date of the Qualified Financing. If the Holder shall elect to participate in the Qualified Financing pursuant to this Section 7, 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 used a payment for participation in the Qualified Financing. Elections pursuant to this Section 7 shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable amount applied towards participation in the Qualified Financing. The Holder and the Company shall maintain records showing the principal amount(s) applied and the date of such payment(s). 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 cancellation of a portion of this Note in connection with participation in a Qualified Financing, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

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Section 8. Negative Covenants. As long as any portion of this Note remains outstanding, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

a) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

b) (i) enter into any financing transactions that contain a conversion price that changes daily or varies based on the current market price of the common stock (a “Variable Rate Transaction”); (ii) incur any secured indebtedness (a “Secured Debt Transaction”); (iii) enter into any debt settlement agreements pursuant to Section 3(a)(10) of the Securities Act of 1933; (iv) enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing 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 board approval).

Section 9. Events of Default.

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

i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to the 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 three (3) Trading Days;

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ii. the Company shall fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) 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 or should have 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 (A) any of the Transaction Documents or (B) any other 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 other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

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

vi. the Company or any Subsidiary shall default on any of its obligations under any 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 $200,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in the relevant lender taking action to cause such indebtedness to become or be declared due and payable prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;

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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 33% (other than in the ordinary course of business) 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 does not meet the current public information requirements under Rule 144;

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

xi. 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 $75,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

b) Remedies Upon Event of Default. If any Event of Default occurs, the Note, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing upon the occurrence of any Event of Default, the interest rate on this Note shall accrue at an interest rate equal to the lesser of 18% 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 9(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 10. 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 10(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 facsimile number or address appears on the books of the Company, at the principal place of business of the Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

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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. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

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

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

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e) Amendments; Waiver. No provision of this Note may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by each of the Company, Gemini Master Fund, Ltd. or its assigns (“Gemini”) and the Holders (including if applicable, Gemini) holding a majority in outstanding principal of the then outstanding Notes or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. 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. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

g) 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.

h) 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)

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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.

IMAGING3, INC.

By:

Name:

Title:

Signature Page to Note

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 0% OID Convertible Note of Imaging3, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

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

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

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Note to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address for Delivery of Common Stock Certificates:

Or

DWAC Instructions:

Broker No:____________

Account No:__________

SCHEDULE 1

CONVERSION SCHEDULE

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

EX-3

IMAGING3, INC.

AGREEMENT TO REPLACE MEDLEY EMPLOYMENT AGREEMENT

This AGREEMENT TO REPLACE MEDLEY EMPLOYMENT AGREEMENT is entered into as of __________, 20 between Imaging3, Inc., a California corporation (the “Company”), and Dane Medley (“Medley”), a resident of Toluca Lake, California, and current Chief Executive Officer and President of the Company (this “Agreement”).

The parties hereby agree as follows:

SECTION 1

INTENT OF THE PARTIES

The Company hired Medley, effective ___________, 20__, as its Chief Executive Officer and President, and the two parties made effective an Employment Agreement dated May 15, 2014 (the “Current Employment Agreement”). Employee and Company now desire, contingent on various lenders to the Company amending their current notes and warrants for new notes and warrants (see SECTION 2), to: (i) make void the Current Employment Agreement, shown as Exhibit A, and (ii) replace it with a Restated Employment Agreement, shown as Exhibit B.

SECTION 2

AMENDMENT OF NOTES AND WARRANTS

(a) The Company has borrowed $662,000 (face amount) from five lenders for which the Company issued Convertible Secured Notes and related Warrants (“the “Original Notes” and the “Original Warrants,” respectively).

(b) The Company and the lenders intend to effect an amendment of these Original Notes and Original Warrants as part of that certain CONVERTIBLE NOTE AMENDMENT AGREEMENT, substantially in the form attached as Exhibit C (the “Amendment Agreement”).

SECTION 3
REPLACEMENT OF CURRENT EMPLOYMENT

AGREEMENT WITH RESTATED EMPLOYMENT AGREEMENT

(a) Medley hereby agrees that, within three business days following the date that the Amendment Agreement is effective (duly signed by all parties), Medley shall execute the Restated Employment Agreement and thereby forfeit all his rights, privileges, and obligations associated with the Current Employment Agreement

(b) The Company agrees that, within three business days following the date that the Amendment Agreement is effective (duly signed by all parties), it shall execute the Restated Employment Agreement and accept all the terms and conditions therein.

(c) The Company warrants that all corporate action on the part of the Company, its directors, and shareholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company for the execution of the Restated Employment Agreement hereunder has been taken. This Agreement, when executed and delivered by the Company, will constitute a valid and binding obligation of the Company enforceable in accordance with its terms, subject to (i) laws of general application relating to specific performance, injunctive relief or other equitable remedies, and (ii) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally.

SECTION 4
MISCELLANEOUS

4.1 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of California, without reference to principles of conflict of laws or choice of law.

4.2 Survival. The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Agreement and the Closing.

4.3 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

4.4 Entire Agreement; Amendment. This Agreement, together with the exhibits to this Agreement, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any term of this Agreement and the Security Agreement may be amended and the observance of any term of this Agreement and the Security Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders who have loaned more than half of the aggregate Principal Amounts loaned by all of the Lenders under this Agreement. Any amendment or waiver effected in accordance with this Section 8.4 shall be binding upon the Company, the Lender and each future holder of the Securities.

4.5 Expenses. The Company and Medley shall each bear its own fees and expenses relating to this Agreement, including any and all legal fees.

4.6 Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by U.S. mail, postage prepaid, or otherwise delivered by hand, messenger, telecopier or a nationally recognized overnight courier service, addressed to the Lender and the Company at the addresses set forth on the signature page.

All such notices, requests and other communications will (i) if delivered personally or by express courier to the address as provided in this Section 8.6, be deemed given upon delivery, or (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 8.6, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving ten (10) days’ prior written notice specifying such change to the other party hereto.

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4.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Signatures may be delivered and transmitted by facsimile transmission.

4.8 Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.

4.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

4.10 Cooperation. With respect to performance of the terms of this Agreement, each party shall use its good faith efforts to cooperate and to take such actions as may be appropriate to carry out the terms and intentions of this Agreement. Whenever a party’s approval is required with respect to the terms of this Agreement, such approval will not be unreasonably withheld.

4.11 Arbitration. If a dispute arises between or among the parties relating to the interpretation or performance of this Agreement, the Notes, the Warrants or the Security Agreement, and with the exception of any claim for a temporary restraining order or preliminary or permanent injunctive relief to enjoin any breach or threatened breach, such dispute shall be settled by a single neutral arbitrator, who is mutually agreeable to the parties, with such arbitration to be held in Los Angeles, California, in accordance with the then effective California rules of arbitration (CCP § 1282, et seq.). If the parties do not promptly select the neutral arbitrator, then the Los Angeles Superior Court shall select the neutral arbitrator. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall make his or her decision in accordance with the terms of this Agreement and applicable law. Each party shall initially bear its own costs and legal fees associated with such arbitration; and the parties shall initially split the cost of the arbitrator, but the prevailing party in any such arbitration shall be entitled to recover from the other party the reasonable attorneys’ fees, costs and expenses incurred by such prevailing party in connection with such arbitration. The decision of the arbitrator shall be final and may be sued on or enforced by the party in whose favor it runs in any court of competent jurisdiction at the option of the prevailing party. The rights and obligations of the parties to arbitrate any dispute relating to the interpretation or performance of this Agreement shall survive the Closing. The arbitrator shall be empowered to award specific performance, injunctive relief and other equitable remedies as well as damages, but shall not be empowered to award punitive or exemplary damages.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

COMPANY:
IMAGING3, INC.
3022 North Hollywood Way
Burbank, California 91505
Attention: Xavier Aguilera
By:
Date:	___________________________________, 20___
DANE MEDLEY:
___________________
___________________
Signature:
Date:	___________________________________, 20___

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Exhibit A

to the Agreement to Restate Medley Employment Agreement

[CURRENT EMPLOYMENT AGREEMENT]

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 15th day of May 2014, by and between Imaging 3, Inc., a California corporation (the “Company”), and Dane Medley, an individual (“Employee”), and is made with respect to the following facts:

R E C I T A L S

A. The Company and the Employee wish to ensure that the Company will receive the benefit of Employee’s loyalty and service.

B. In order to help ensure that the Company receives the benefit of Employee’s loyalty and service, the parties desire to enter into this formal Employment Agreement to provide Employee with appropriate compensation arrangements and to assure Employee of employment stability.

C. The parties have entered into this Agreement for the purpose of setting forth the terms of employment of the Employee by the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:

1. Employment of Employee and Duties. The Company hereby hires Employee and Employee hereby accepts employment upon the terms and conditions described in this Agreement. The Employee shall be the Chief Executive Officer of the Company with all of the duties, privileges and authorities usually attendant upon such office, including but not limited to overall supervision of the management of the Company’s operations. Subject to (a) the general supervision of the (Board of Directors) of the Company, and (b) the Employee’s duty to report to the Board of Directors periodically, as specified by it from time-to-time, Employee shall have all of the authority and discretion in the conduct of the Company’s operations that can lawfully be delegated by the Board of Directors.

2. Time and Effort. Employee agrees to devote his full working time and attention to the management of the Company’s business affairs, the implementation of its strategic plan, as determined by the Board of Directors, and the fulfillment of his duties and responsibilities as the Company’s Chief Executive Officer; provided that the expenditure of a reasonable amount of time by the Employee for personal matters and charitable activities shall not be deemed to be a breach of this Agreement.

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3. The Company’s Authority. Employee agrees to comply with the Company’s rules and regulations as adopted by the Company’s Board of Directors regarding performance of his duties, and to carry out and perform those orders, directions and policies established by the Company with respect to his engagement. Employee shall promptly notify the Board of Directors of any objection he has to the Board’s directives and the reasons for such objection.

4. Noncompetition by Employee. Employee agrees that during the term of his employment with the Company or during any time that the Employee serves as a director of the Company, or while he is receiving any severance payments from the Company, Employee will not directly or indirectly, whether (a) as employee, agent, consultant, employer, principal, partner, officer or director; (b) holder of ten percent or more of any class of equity securities or ten percent or more of the aggregate principal amount of any class of debt, notes or bonds of a company with publicly traded equity securities; or (c) in any other individual or representative capacity whatsoever, in each case for his own account or the account of any other person or entity, engage in any business or trade competing with the then business or trade of the Company anywhere in the world in which the Company is carrying on such trade or business as of the effective date of such termination.

5. Confidential Information: Nondisclosure Covenant.

5.1. Confidential Information. As used herein the term “Confidential Information” shall mean all customer and contract lists, supplier lists, records, financial data, trade secrets, proprietary technology and intellectual property, business and marketing plans and studies, manuals for employee and personnel policies, manufacturing and/or production manuals, computer programs and software, strategic plans, formulas, manufacturing and production processes and techniques (including without limitation types of machinery and equipment used together with improvements and modifications thereon), tools, applications for patents, designs, models, patterns, drawings, tracings, sketches, blueprints, and all other similar information developed and/or used by Company in the course of its business and which is not known by or readily available to the general public.

5.2 Nondisclosure Covenant. Employee acknowledges that, in the course of performing services for and on behalf of Company, Employee has had and will continue to have access to Confidential Information. Employee hereby covenants and agrees to maintain in strictest confidence all Confidential Information in trust for Company, its successors and assigns. During the period of Employee’s employment with Company and at all times following Employee’s termination of employment for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee agrees to not misappropriate, utilize for any purpose other than for the direct benefit of the Company, or disclose or make available to anyone outside Company’s organization, any Confidential Information or anything relating thereof without the prior written consent of Company, which consent may be withheld by Company for any reason or no reason at all.

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5.3 Return of Property. Upon Employee’s termination of his employment with Company for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee hereby agrees to promptly return to Company’s possession all copies of any writings, computer discs or equipment, drawings or any other information relating to Confidential Information which are in Employee’s possession or control, as well as all keys, passwords, credit cards and similar Company items. Employee further agrees that, upon the request of Company at any time during Employee’s period of employment with Company, Employee shall promptly return to Company all such copies of writings, computer discs or equipment, drawings or any other information relating to Confidential Information which are in Employee’s possession or control.

5.4 Rights to Inventions and Trade Secrets. Employee hereby assigns to Company all right, title and interest in and to any ideas, inventions, original works or authorship, developments, improvements or trade secrets which Employee solely or jointly has conceived or reduced to practice, or will conceive or reduce to practice, or cause to be conceived or reduced to practice during his employment with Company. All original works of authorship which are made by Employee (solely or jointly with others) within the scope of Employee’s services hereunder and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.

6. Noninterference and Nonsolicitation Covenants. In further reflection of the Company’s important interests in its proprietary information and its trade, customer, vendor and employee relationships, Employee agrees that, during the 24 month period following the termination of Employee’s employment with Company for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee will not directly or indirectly, for or on behalf of any person, firm, corporation or other entity, (a) interfere with any contractual or other business relationships that Company has with any of its customers, clients, service providers or materials suppliers as of the date of Employee’s termination of employment, or (b) solicit or induce any employee of Company to terminate his/her employment relationship with Company.

7. Term of Agreement. This Agreement shall commence to be effective on the date first above written (the “Commencement Date”), and shall continue until May 15, 2019, unless terminated sooner as provided in Section 15 hereof, or unless extended by a resolution duly adopted by the Company’s Board of Directors and agreed upon by the Employee.

8. Compensation. During the term of this Agreement, the Company shall pay the following compensation to Employee:

8.1 Annual Compensation. Employee shall be paid a base salary of $192,000 per year during the first year of the term of this Agreement. The base salary in subsequent years during the term of this Agreement will be no less than $192,000 per year, but may be adjusted to be higher by a resolution duly adopted by the Company’s Board of Directors. The Employee’s salary will be payable in two installments per month, each installment equaling one-twenty-fourth of the annual base salary, and each payable on the 1st and the 16^th day of each month covering, respectively, the first 15 days of the current month and the 16^th day through the last day of the previous month.

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8.2 Bonus Payments. In addition to the base salary provided for in Section 8.1 of this Agreement and the potential for discretionary additional bonuses in Section 8.4 of this Agreement, the Employee will be entitled to the following fixed performance-based annual bonuses, payable on or before January 30^th of each year for performance during the prior calendar year, equal to (a) 20% of the Employee’s base annual salary for the prior calendar year if the Company’s annual gross revenue for the prior calendar year, calculated in accordance with generally accepted accounting principles (“GAAP”), equals or exceeds $_500,000 in calendar year 2014, $3,000,000 in calendar year 2015, $7,000,000 in calendar year 2016, $15,000,000 in calendar year 2017 and $_30,000,000 in calendar year 2018, and (b) 40% of the Employee’s base annual salary for the prior calendar year if the Company’s annual gross revenue for the prior calendar year, calculated in accordance with GAAP, equals or exceeds $1,000,000 in calendar year 2014, $5,000,000 in calendar year 2015, $15,000,000 in calendar year 2016, $40,000,000 in calendar year 2017 and $70,000,000 in calendar year 2018. In the event of a change to the calculation of the Company’s annual gross revenue for a particular calendar year after January 30^th of the next year, then the bonus payment will be adjusted accordingly.

8.3 Stock Incentives. Upon commencement of this Agreement, Employee shall be issued 18,000,000 shares of the Company’s common stock (the “Incentive Shares”); provided, however, if Employee is terminated by the Company pursuant to Section 15.3(i) of this Agreement during the first year of its term, the Employee will tender back to the Company for cancellation 3,000,000 Incentive Shares. On May 15, 2014, the Company will grant to the Employee stock options to purchase up to 5,000,000 shares of the Company’s common stock pursuant to the Company’s Stock Incentive Plan for Directors, Officers, Employees and Key Consultants of Imaging 3, Inc. (the “Plan”), having an exercise price of $0.001 per share and an exercise period of ten years, with a vesting schedule as follows: (i) up to 1,000,000 stock options will vest and be exercisable on December 31, 2014 if the 2014 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2014 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (ii) up to 1,000,000 stock options will vest and be exercisable on December 31, 2015 if the 2015 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2015 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (iii) up to 1,000,000 stock options will vest and be exercisable on December 31, 2016 if the 2016 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2016 and Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (iv) up to 1,000,000 stock options will vest and be exercisable on December 31, 2017 if the 2017 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2017 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, and (v) up to 1,000,000 stock options will vest and be exercisable on December 31, 2018 if the 2018 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2018 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company. The stock options granted to Employee pursuant to this Agreement will be governed by the terms and conditions of the Plan and the stock option agreement executed by the Company and the Employee which applies to the options. Said stock options will be Incentive Stock Options (ISOs) under the Plan to the maximum extent permitted by the Plan and applicable law. Upon approval of the Company’s full Board of Directors, the Employee may be granted additional stock options to purchase additional stock of the Company during the second, third, fourth, and fifth years of the term of this Agreement, depending on the achievement of Company operating milestones such as annual gross revenue and EBIDTA, to be established by the Board of Directors of the Company. In the event Mr. Aguilera is asked to resigned (or leave, vacate, step-down or be removed from the Board of Directors) his position, he will further be compensated eighty percent (80%) of the outstanding Imaging3 Inc. common shares, along with any Imaging3 Inc. stock options he owns at the time of departure.

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8.4 Discretionary Additional Compensation. In addition to the compensation set forth in Sections 8.1, 8.2 and 8.3 of this Agreement, upon approval of the Company’s full Board of Directors, Employee may be paid an additional bonus or bonuses during each year, and may have his annual compensation raised, based on the CEO’s Board’s evaluation of the Employee’s definable efforts, accomplishments and similar contributions. In this regard, the Company expects that the Employee will earn an annual bonus equal to between 60% and 120% of his base fixed salary, including the fixed performance-based bonuses provided for in Section 8.2 of this Agreement, if the Company achieves certain additional operating milestones to be agreed upon by the Company and the Employee in a separate addendum to this Agreement; provided, that if the Company and the Employee do not agree on a separate written addendum to this Agreement setting forth said additional milestones, then discretionary bonuses will be determined in good faith in the discretion of the Company’s Board of Directors.

9. Fringe Benefits. The Company shall provide Employee with medical and dental group insurance coverage or equivalent coverage for Employee, including his dependents. The medical and dental insurance coverage shall begin on the Commencement Date and shall continue throughout the term of this Agreement. All compensation provided in Sections 8 and 9 of this Agreement shall be subject to customary withholding tax and other employment taxes, to the extent required by law.

10. Office and Staff. In order to enable Employee to discharge his obligations and duties pursuant to this Agreement, the Company agrees that it shall provide suitable office space for Employee, together with all necessary and appropriate supporting staff and secretarial assistance, equipment, stationery, books and supplies. Employee agrees that the supporting staff presently in place is suitable for the purposes of this Agreement. The Company agrees to provide at its expense parking for one vehicle by the Employee at the Company’s executive offices.

11. Reimbursement of Expenses. The Company shall reimburse Employee for all reasonable travel, mobile telephone, promotional and entertainment expenses incurred in connection with the performance of Employee’s duties hereunder, subject to Section 12 of this Agreement with respect to automobile expenses. Employee’s reimbursable expenses shall be paid promptly by the Company upon presentment by Employee of an itemized verifiable list of invoices describing such expenses. In the event Mr. Aguilera is asked to resigned (or leave, vacate, step-down or be removed from the Board of Directors) his position, he will further be compensated eighty percent (80%) of the outstanding Imaging3 Inc. common shares, along with any Imaging3 Inc. stock options he owns at the time of departure.

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12. Automobile Expenses. Notwithstanding anything else herein to the contrary, the Company shall pay to the Employee a fixed amount equal to $1,000 per month on the last day of each month during the term of this Agreement as reimbursement to the Employee for all expenses incurred by the Employee for the use of his automobile for Company business purposes, including but not limited to depreciation, repairs, insurance, reasonable maintenance, and gasoline expenses. Employee shall not be entitled to any other reimbursement for the use of his automobile for business purposes.

13. Vacation. Employee shall be entitled to four weeks of paid vacation per year or pro rata portion of each year of service by Employee under this Agreement. The Employee shall be entitled to the holidays provided in the Company’s established corporate policy for employees with comparable duties and responsibilities. If asked to resigned or leave, employee will be entitled to liquidate all existing vacations days owed for cash.

14. Definition of “Cause.” For the purposes of this Agreement, “termination for cause” means termination of Employee’s employment by Employer due to (a) Employee’s conviction of, or the entry of a pleading of guilty or nolo contender by Employee to, a felony or crime involving moral turpitude, or (b) Employee’s failure to comply with any material provision of this Agreement that results in material damage to the Company, or (c) an act of fraud committed by Employee against the Company, or (d) a willful act by Employee as a result of which he receives a material improper personal benefit at the expense of the Company, or (e) Employee’s demonstration of gross negligence or willful misconduct in the execution of his material assigned duties, or (f) Employee’s intentionally imparting confidential information relating to the Company to a third party, other than in the course of carrying out the Employee’s duties, which has resulted in material damage to the Company, in each case other than as a result of Employee’s death, disability or retirement, and the Employee has been given the written notice specified in this Section and has failed to cure any defect in performance as specified in such notice. The Company shall give Employee written notice specifying the conduct alleged to have constituted such cause and provide Employee the opportunity to cure such conduct, if curable, within 15 days following receipt of such notice.

15. Termination. This Agreement may be terminated in the following manner and not otherwise:

15.1 Mutual Agreement. This Agreement may be terminated by the mutual written agreement of the Company and Employee to terminate.

15.2 Termination by Employee. Employee may at his option and in his sole discretion terminate this Agreement for (i) the material breach by the Company of the terms of this Agreement (other than where Employee has first materially breached this Agreement causing material damage to the Company), or (ii) any “Change of Control” (as defined in Section 15.6) in which the Employee is unable to come to an agreement with the surviving company regarding an employment agreement as specified further in Section 15.6 of this Agreement.

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15.3 Termination by the Company. The Company may at its option terminate this Agreement upon fifteen (15) days prior written notice (“Termination Notice”) to the Employee of the Company’s election to terminate this Agreement (i) for cause as defined in and in accordance with Section 14 of this Agreement, or (ii) in the event of any “Change of Control”, as defined in Section 15.6 of this Agreement. In the event of termination by the Company pursuant to Section 15.3(i) herein, the Company shall pay the Employee any remaining base salary, at the rate then in effect under Section 8.1, 8.2, 8.3, 11, 13 through the effective date of such termination, plus any benefits under other plans or programs in which the Employee is vested at the time of his termination. In the event of termination by the Company pursuant to Section 15.3(ii) (and inability of the Employee, negotiating in good faith, to come to an agreement with the surviving Company or new controlling parties of the Company regarding an employment agreement), then the Employee will be entitled to the following severance payments and benefits, in addition to accrued salary and bonuses, if any, for past service, provided that the Employee enters into a severance agreement with the Company waiving and releasing the Company from all claims Employee may have against the Company and agreeing not to disparage the Company or its employees: (a) the Employee’s then salary and accrued but unpaid bonus (if any, with respect to bonus) payable for the twelve month period immediately following the Termination Notice, payable in semi-monthly installments in accordance with Section 8.1 of this Agreement, if the Termination Notice is issued during the first year of the term of this Agreement, with the severance payment period being nine months if the Termination Notice is issued during the second year of the term of this Agreement and six months if the Termination Notice is issued during the third, fourth, or fifth year of the term of this Agreement, and (b) Employee shall also be entitled to all the benefits during the severance payment period under Sections 9 and 12 of this Agreement, and (c) Employee shall be entitled to exercise all vested stock options which he owns for the entire remaining exercise period of the stock options as set forth in Section 8.3 of this Agreement, no such stock options shall terminate prior to said expiration dates, and no “severance” shall be deemed to have occurred under the Company’s Plan or under existing stock option agreements covering said stock options.

15.4 Termination Upon Death. This Agreement shall terminate upon the death of the Employee.

15.5 Termination Upon the Disability of the Employee. This Agreement shall terminate upon the disability of the Employee. As used in the previous sentence, the term “disability” shall mean the complete physical and/or mental disability to discharge Employee’s duties and responsibilities for a continuous period of not less than six months during any consecutive twelve (12) month period. Any physical or mental disability which does not prevent Employee from discharging his duties and responsibilities in accordance with usual standards of conduct as determined by the Company in its reasonable opinion shall not constitute a disability under this Agreement.

15.6 Termination As A Result of A Change in Control of the Company. “Change of Control” is defined as a sale of all or substantially all of the Company’s assets or more than fifty percent (50%) of the Company’s outstanding stock, to a purchaser which is unaffiliated with the Company, in a single transaction or a series of related transactions, or a merger, of which the Company is not the surviving corporation, with any entity which is unaffiliated with the Company. In the event of a Change in Control of the Company and termination of this Agreement as a result of said Change of Control, if the Employee, negotiating in good faith, is unable to come to an agreement with the surviving company or new controlling parties of the Company regarding an employment agreement, then the Employee may terminate this Agreement pursuant to Section 15.2 (ii) of this Agreement.

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15.7 Survival of Covenants. Notwithstanding anything contained in this Agreement to the contrary, the covenants of Employee contained in Section 4, Section 5 and Section 6 of this Agreement shall survive the term of this Agreement (as specified in Section 7 hereof) or Employee’s termination of his employment relationship with the Company, in each case as specified further in such covenants.

16. Indemnification of Employee. Pursuant to the provisions and subject to the limitations of the California Corporations Code, the Company shall indemnify and hold Employee harmless as provided in Sections 16.1, 16.2 and 16.3 of this Agreement. The Company shall, upon the request of Employee, assume the defense and directly bear reasonable expenses of any action or proceedings which may arise for which Employee is entitled to indemnification pursuant to this Section.

16.1 Indemnification of Employee for Actions by Third Parties. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, fines, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of Employee being made at any time a party to, or being threatened to be made a party to, any proceeding (other than an action by or in the right of the Company, which is addressed in Section 16.2 of this Agreement), relating to actions Employee takes within the scope of his employment as the President of the Company or in his role as a director of the Company, provided that Employee acted in good faith and in a manner he reasonably believed to be in the best interest of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful.

16.2 Indemnification of Employee for Actions in the Right of the Company. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of Employee being made a party to, or being threatened to be made a party to, any proceeding by or in the right of the Company to procure a judgment in its favor by reason of any action taken by Employee as an officer, director or agent of the Company, provided that Employee acted in good faith in a manner he reasonably believed to be in the best interests of the Company and its shareholders, and provided further, that no indemnification by the Company shall be required pursuant to this Section 16.2 (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that Employee believed to be contrary to the best interests of the Company or its shareholders or that involve the absence of good faith on the part of Employee, (iii) for any transaction from which Employee derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard by Employee of his duties to the Company or its shareholders in circumstances in which Employee was aware, or should have been aware, in the ordinary course of performing his duties, of a risk of serious injury to the Company or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of Employee’s duties to the Company or its shareholders, or (vi) for any other act by Employee for which Employee is not permitted to be indemnified under the California Corporations Code. Furthermore, the Company has no obligation to indemnify Employee pursuant to this Section 16.2 in any of the following circumstances:

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A. In respect of any claim, issue, or matter as to which Employee is adjudged to be liable to the Company in the performance of his duties to the Company and its shareholders, unless and only to the extent that the court in which such action was brought determines upon application that, in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for the expenses and then only in the amount that the court shall determine.

B. For amounts paid in settling or otherwise disposing of a threatened or pending action without court approval.

C. For expenses incurred in defending a threatened or pending action which is settled or otherwise disposed of without court approval.

16.3 Reimbursement. In the event that it is determined that Employee is not entitled to indemnification by the Company pursuant to Sections 16.1 or 16.2 of this Agreement, then Employee is obligated to reimburse the Company for all amounts paid by the Company on behalf of Employee pursuant to the indemnification provisions of this Agreement. In the event that Employee is successful on the merits in the defense of any proceeding referred to in Sections 16.1 or 16.2 of this Agreement, or any related claim, issue or matter, then the Company will indemnify and hold Employee harmless from all fees, costs and expenses actually incurred by him in connection with the defense of any such proceeding, claim, issue or matter.

17. Assignability of Benefits. Except to the extent that this provision may be contrary to law, no assignment, pledge, collateralization or attachment of any of the benefits under this Agreement shall be valid or recognized by the Company. Payment provided for by this Agreement shall not be subject to seizure for payment of any debts or judgments against the Employee, nor shall the Employee have any right to transfer, modify, anticipate or encumber any rights or benefits hereunder; provided that any stock issued by the Company to the Employee pursuant to this Agreement shall not be subject to Section 17 of this Agreement.

18. Directors’ and Officers’ Liability Insurance. The Company may purchase directors’ and officers’ liability insurance for the officers and directors of the Company, which would include the same coverage for Employee.

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19. Notice. All notices and other communications required or permitted hereunder shall be in writing or in the form of a email or facsimile (confirmed in writing) to be given only during the recipient’s normal business hours unless arrangements have otherwise been made to receive such notice by email or facsimile outside of normal business hours, and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or email or facsimile (as provided above) addressed (a) if to the Employee, at the address for such Employee set forth on the signature page hereto or at such other address as such Employee shall have furnished to the Company in writing or (b) if to the Company, to its principal executive offices and addressed to the attention of the Chairman of the Board, or at such other address as the Company shall have furnished in writing to the Employee.

In case of the Company:

Imaging 3, Inc.

3022 North Hollywood Way

Burbank, California 91505

Telephone No.: (818) 260-0930

Facsimile No.: (818) 260-0445

In case of the Employee:

Dane Medley

____________

____________

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if by telex or telecopy pursuant to the above, when received.

20. Attorneys’ Fees. In the event that any of the parties must resort to legal action in order to enforce the provisions of this Agreement or to defend such suit, the prevailing party shall be entitled to receive reimbursement from the non-prevailing party for all reasonable attorneys’ fees and all other costs incurred in commencing or defending such suit, including post judgment costs.

21. Entire Agreement. This Agreement embodies the entire understanding among the parties and merges all prior discussions or communications among them, and no party shall be bound by any definitions, conditions, warranties, or representations other than as expressly stated in this Agreement or as subsequently set forth in a writing signed by the duly authorized representatives of all of the parties hereto.

22. No Oral Change; Amendment. This Agreement may only be changed or modified and any provision hereof may only be waived by a writing signed by the party against whom enforcement of any waiver, change or modification is sought. This Agreement may be amended only in writing by mutual consent of the parties.

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23. Severability. In the event that any provision of this Agreement shall be void or unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and effect. The remaining provisions of this Agreement shall, however, continue in full force and effect, and to the extent required, shall be modified to preserve their validity.

24. Applicable Law. This Agreement shall be construed as a whole and in accordance with its fair meaning. This Agreement shall be interpreted in accordance with the laws of the State of Los Angeles, and venue for any action or proceedings brought with respect to this Agreement shall be in the County of Los Angeles in the State of California.

25. Successors and Assigns. Each covenant and condition of this Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, personal representatives, assigns and successors in interest. Without limiting the generality of the foregoing sentence, this Agreement shall be binding upon any successor to the Company whether by merger, reorganization or otherwise.

26. Injunctive Remedy. In the case of any breach or threatened breach by Employee of any of his covenants or obligations under Sections 4, 5 and/or 6 of this Agreement, the parties hereto agree that damages may not be an adequate remedy for the Company and that, in the event of any such breach or threatened breach, the Company may, either with or without pursuing any potential damage remedies, immediately obtain and enforce an injunction prohibiting Employee from committing or continuing to commit such breach or threatened breach.

27. Counterparts. This Agreement may be executed in two counterparts, each of which may be deemed an original, but both of which together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

COMPANY:	IMAGING 3, INC., a California corporation
	By:
		BOD (Board of Directors)
	By
		BOD (Board of Director)
	By
		BOD (Board of Director

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EMPLOYEE:
	Dane Medley
	Street Address
	City, State and Zip Code
	Telephone Number
	Facsimile Number

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EXHIBIT A

to the Current Employment Agreement

BENCHMARKS FOR VESTING OF UP TO 5,000,000 STOCK OPTIONS PURSUANT TO SECTION 8.3 OF THE EMPLOYMENT AGREEMENT

Year	Goal	Percentage Vested			Number of Options to Vest
2016 Goals	Submit the Dominion for FDA approval.		50	%		2,200,000
	Obtain a symbol from FINRA and begin trading.		50	%		2,250,000
2017 Goals	To be established by the BOD (Board of Directors)
2018 Goals	To be established by the BOD (Board of Directors)
2019 Goals	To be established by the BOD (Board of Directors)

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Exhibit B

to the Agreement to Restate Medley Employment Agreement

RESTATED EMPLOYMENT AGREEMENT

THIS RESTATED EMPLOYMENT AGREEMENT is made as of _________ __, 20__, at Los Angeles, California among Imaging3, Inc., a California corporation (the “Company”), and Dane Medley (the “Employee”) with reference to the following facts:

In consideration of their respective promises contained herein, the parties hereto agree as follows:

1. EMPLOYMENT

Company hired Employee, effective ___________, 20__, as its Chief Executive Officer and President, and the two parties made effective an Employment Agreement dated May 15, 2014 (the “Current Employment Agreement”). Employee and Company now desire: (i) to make void the Current Employment Agreement, together with all the obligations, duties, and restrictions therein (including any payments and share grants that have yet to be made), and (ii) to replace it with this Restated Employment Agreement, which shall serve to define all the terms and conditions associated with Employee’s employment with the Company going forward.

2. EMPLOYEE’S DUTIES

The Employee shall, while contributing his services hereunder:

(a) Serve the Company as President, with all of the duties, privileges and authorities usually attendant upon such office.

(b) Report initially to the Board of Directors; should (the “Board) or to whomever the Board designates, as long as the reporting relationship is consistent with the Employee’s position of President.

(c) Comply with and conform to any lawful instructions or directions given or made by his supervisor and/or the Board, and faithfully, industriously, diligently, and to the best of the Employee’s ability, experience, and talents, serve the Company and perform all of the duties that may be required by the terms and conditions of this Agreement to the reasonable satisfaction of his supervisor and the Board, so as to promote the Company’s business interests; and

(d) Devote approximately three-quarters of his working time and attention to the fulfillment of his duties and responsibilities as the Company’s President, provided that the expenditure of a reasonable amount of time by the Employee for personal matters and charitable activities shall not be deemed to be a breach of this Agreement.

3A. COMPENSATION

In consideration of the performance by the Employee of his duties hereunder, the remuneration of the Employee shall be (and the Company shall pay to the Employee):

(a) A base salary (“Salary”) of $48,000 per year until the closing of an equity offering of at least $2.5 million in gross proceeds (a “Qualified Financing”), at which point the base salary will increase to $96,000 per year. The base salary in subsequent years during the term of this Agreement will be no less than $96,000 per year, but may be adjusted to be higher by a resolution duly adopted by the Company’s Board of Directors. The Employee’s salary will be payable in two installments per month, each installment equaling one-twenty-fourth of the annual base salary, and each payable on the 1st and the 16^th day of each month covering, respectively, the first 15 days of the current month and the 16^th day through the last day of the previous month,

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(b)	Bonus compensation of up to 50% of the Consultant’s base compensation for the prior calendar year, to be based generally on the Board’s good-faith evaluation of (i) achievements by the Employee of the objectives provided him by the Board and/or (ii) the Employee’s definable efforts, accomplishments, and contributions. The bonus decision is at the Board’s sole discretion, but it is agreed hereby that reasonably strong performance by the Consultant would result in a 30%-35% bonus level, on average, over many years. It agreed that for the stub year of 2016, Employee will have earned, and will accrue, a bonus of $16,000, to be paid only if at least $2,500,000 of new equity is raised by the Company between January 1, 2017 and August 31, 2017.
(c)	Equity compensation of 4,000,000 Restricted Stock Units (“RSUs”) (the “Incentive Shares”), which shall be issued as soon as practical after the Company approves a stock option plan (or equivalent). The Company’s Board hereby agrees to approve such a plan no later than 30 days after the closing of a Qualified Financing, with underlying shares of at least 12%, but no greater than 15%, of the fully diluted number of shares outstanding at the time, and to then hold a shareholder vote for approval of the plan within 60 days after that. The Incentive Shares shall be issued to Employee regardless of his employment status and shall be immediately 100% vested.
(d)	Paid vacation, which shall accrue at the rate of four weeks per year,
(e)	Other benefits and perquisites normally available to executives of the Company, as may be changed from time to time, and
(f)	Such additional remuneration as Employee and the Company shall negotiate after January 1, 2018.

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3B. AGREEMENT TO SELL CLASS A PREFERRED VOTING SHARES

As part of this agreement, Employee shall agree to sell, and the Company shall agree to purchase, the 2,000 Class A Preferred Voting Shares (the “Voting Shares”) currently owned by Employee for a purchase price of $60,000, to be paid as follows: $5,000 per month for twelve successive months beginning the fourth month after Employee is terminated. Employee warrants that, other than the Voting Shares to be sold in this transaction, no other voting shares of any type exist, nor are than any plans to issue additional voting shares.

4. EXPENSES

The Company shall pay on behalf of the Employee or reimburse the Employee (against the Employee’s submission to the Company of proper receipts therefore) for all expenses properly incurred by him in the course of his employment hereunder or otherwise in connection with the business of the Company in accordance with Company policies, as such policies may be established and revised by the Board from time to time.

5. AT-WILL EMPLOYMENT

Employee and the Company understand and expressly agree that Employee’s employment with the Company is at-will, is not for a specified term, and may be terminated by the Company or by Employee at any time, with or without notice and with or without cause. While not required, as a courtesy, the parties shall attempt if possible to give thirty (30) days’ notice of termination. This clause shall not be interpreted to conflict with Employee’s at-will employment status. Employee and the Company further understand and agree that no representation contrary to this section is valid, and that this section may not be augmented, contradicted, or modified in any way, by any representative or agent of the Company or any other person, except by a writing signed by the Employee and by the Board.

6. TERMINATION

6.1 Upon termination for any reason, including voluntary resignation, Employee shall:

(a)	Be entitled to the compensation set forth in Section 3(a) hereof, prorated to the effective date of such termination;
(b)	Be entitled to the equity compensation set forth in Section 3 (c) hereof, if not already issued
(c)	Remain subject to the provisions of the Proprietary Information and Inventions Agreement, in the form attached hereto as Exhibit A, signed concurrently herewith;
(d)	Be entitled to receive a termination payment for any accrued, unused vacation.
(e)	Not be entitled to severance, unless as provided in Section 6.2.

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6.2 If Company terminates the employment of Employee without Cause (to be defined later in this section), the Company will, in addition to the provisions of Section 6.1, and in exchange for Employee’s execution of a full and complete release of all claims as described herein:

(i) Pay Employee three months’ base compensation. Such payments are to be made in accordance with Company’s normal payroll procedures with normal payroll deductions.

(ii) The term “Cause” is defined to mean conduct that in the good faith judgment of the Board constitutes a material breach of duty and is to include one or more of the following that results in a material adverse impact to the Company: falsification of company documents, fraud, moral turpitude, theft, embezzlement, criminal conduct, indictment on felony criminal charges, serious violations of Company policies, material breach of Employee’s employment agreement, extended or repeated absence from work that in the reasonable judgment of the Board is unjustified, inability to perform duties for a period of thirty (30) or more days without reasonable excuse and notice, or insubordination (e.g., refusal to carry out the reasonable instructions of the Board). If the material breach of duty is reasonably curable, Company shall provide notice to Employee of such breach of duty and shall give Employee a 30-day cure period. Refusal to relocate to a facility more than 50 miles from the current facility is NOT considered Cause.

(vi) Employee will be eligible for no other severance compensation, benefits, or vesting other than that which is provided for in this Section 6.2 when he is terminated. A condition precedent to the Company’s obligation to fulfill the severance terms in this Section 6.2 shall be Employee’s execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. Nothing in this severance provision supersedes or in any way alters the at-will provisions of Section 5 above.

(vii) Employee agrees that he will surrender to the Company, at its request, or at the conclusion of his employment, all accounts, notes, data, sketches, drawings and reproductions, and copies thereof, any of which (a) relate in any way to the business, products, practices, or techniques of the Company, (b) contain Confidential Information, whether or not created by him, or (c) come into his possession by reason of his employment with the Company; and Employee agrees further that all of the foregoing are the property of the Company.

7. LOYAL PERFORMANCE

7.1 Employee shall not, during the period of his employment by the Company, engage in any employment or activity in any business competitive with the Company. Employee agrees to notify the Company in writing of any outside employment or business activity, including the name of the business and the general nature of employee’s involvement, during the period of Employee’s employment with the Company.

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7.2 If, at any time during the period ending two years after Employee has ceased to be an employee of the Company (or of any subsidiary or affiliate of the Company), whether or not pursuant to this agreement, Employee:

(a) directly or indirectly engages with...

(b) assists or has an active interest in, whether as owner, partner, shareholder, joint venturer, corporate officer, director, employee, consultant, principal, agent, trustee or licensor, or in any other similar capacity whatsoever (provided that ownership of not more than two percent of the outstanding stock of a corporation traded on a National securities exchange or quoted on NASDAQ OTC shall not of itself be viewed as assisting or having an active interest)...

or

(c) enters the employment of or acts as an agent for or advisor or consultant to...

... any person, firm, partnership, association, corporation, business organization, entity, or enterprise (the Business”) that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Employee’s ceasing to provide services to the Company (or any subsidiary or affiliate of the Company) [such business or program shall include, but not be limited to, those that involve: (a) any composition of matter or method that is protected by (i) any Company trade secret or (ii) any Company intellectual property that is either issued, pending, or filed at the time of termination or (b) the use, research or development, for any therapeutic or diagnostic purpose, of (i) any sphingolipid, (ii) any lysophosphatidic acid, or (iii) any component of their respective pathways], then Employee shall immediately notify Company in writing of such involvement, including the name of the Business and the nature of Employee’s involvement, and Employee agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by Company that Employee is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A.

7.3 Employee will not, at any time, without prior written consent of the Company:

(a) Directly or indirectly take any action or make or cause to be made any statements which would disparage the reputation of the Company or any subsidiary or affiliate of the Company, or

(b) Induce or attempt to influence any employee or consultant of the Company or any of its or their subsidiaries or affiliates to terminate his or her employment.

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7.4 Nothing contained in this Section 7 is intended to supersede or alter in any way the provisions of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A.

8. CONFIDENTIALITY MATTERS

8.1 It is an express condition to the employment of Employee by Company that Employee sign and deliver a Proprietary Information and Inventions Agreement in the form attached hereto as Exhibit A concurrently with the execution of this Agreement.

4.12 8.2 The covenants contained in the Proprietary Information and Inventions Agreement constitute separate covenants. If in any judicial proceeding, a court shall hold that any of the covenants set forth in the Proprietary Information and Inventions Agreement is not permitted by applicable laws, Employee and Company agree that such provision shall and is hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Employee and Company further agree that the covenants in the Proprietary Information and Inventions Agreement shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Employee against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in the Proprietary Information and Inventions Agreement.

9. ACKNOWLEDGMENT

Employee acknowledges that he has been advised by Company to consult with independent counsel of his own choice, at his expense, as to the entering into this Agreement, that he has had the opportunity to do so, and that he has taken advantage of the opportunity to the extent that he desires. The Employee further acknowledges that he has read and that he understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment and such professional advice as he has seen fit to obtain.

10. ARBITRATION

Employee and the Company agree that in the event of any dispute concerning, arising out of, or related in any way to this Agreement, such dispute shall be submitted to arbitration. Except as otherwise provided for herein, the disputes subject to this agreement to arbitrate include, to the fullest extent allowable by law, all potential claims between Employee and Company including, but not limited to, breach of contract, tort, discrimination, harassment, wrongful termination, compensation and benefits claims, constitutional claims and claims for the violation of any local, state or federal statute, ordinance or regulation. Arbitration proceedings may be commenced by either party by giving the other party written notice thereof and proceeding thereafter in accordance with the rules and procedures of the American Arbitration Association and California law. Any such arbitration shall take place before a single arbitrator only in Los Angeles, California. Any such arbitration shall be governed by and be subject to the applicable laws of the State of California and the then-prevailing rules of the American Arbitration Association (the “AAA”). If the parties are unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator’s award in any such arbitration shall be final and binding, and a judgment upon such award may be entered and enforced by any court of competent jurisdiction. Each party to this Agreement understands that by agreeing to arbitrate their disputes, they are giving up their right to have their disputes heard in a court of law and, if applicable, by a jury. Company shall bear the costs of the arbitrator, the forum, and filing fees. Each party shall bear its own respective attorney’s fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator.

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11. VIOLATION OF THE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

The Employee agrees and acknowledges that the violation of any of the provisions contained in the Proprietary Information and Inventions Agreement attached hereto as Exhibit A would cause irreparable injury to the Company, the remedy at law for any violation or threatened violation thereof would be inadequate, and that the Company shall be entitled to temporary and permanent injunctive or other equitable relief without the necessity of proving actual damages. The Employee agrees that such relief shall be available in a court of law in Los Angeles, California, regardless of the arbitration provisions contained in Section 10 of this Agreement.

12. MISCELLANEOUS

12.1 Amendment. This Agreement may not be modified or amended without the express prior written consent of the Company and the Employee.

12.2 Notices. All notices required or permitted under this Agreement shall be in writing, shall be sent either certified mail, return receipt requested, or by facsimile transmission and mailed or sent to the relevant party at its address or facsimile number set out below (or such other address or facsimile number as the addressee has given to the other parties in accordance with the terms of this Section):

To the Company:

Imaging3 Therapeutics, Inc.

3022 North Hollywood Way

Burbank, California 91505

(818) 260-0930

To the Employee:

Dane Medley

_______________

_______________

_______________

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Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered (a) if given or made by certified letter, return receipt requested, when actually delivered to the relevant party; and (b) if given or made by facsimile, upon receipt of a transmission report confirming receipt.

12.3 Entire Agreement. This Agreement and the Exhibits attached hereto contain the entire agreement of the parties regarding the employment of the Employee, and there are no other promises or conditions regarding the Employee’s employment in any other agreement, whether oral or written. This Agreement shall terminate and supersede any previous employment agreements or arrangements between Employee and Company.

12.4 Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the respective corporation. Employee shall not be entitled to assign any of his rights or obligations under this Agreement.

12.5 Sections. References herein to Sections are to the sections in this Agreement, unless the context requires otherwise.

12.6 Headings. The section headings are inserted for convenience only and shall not affect the construction of this Agreement.

12.7 Rules of Construction. Unless the context requires otherwise, words importing the singular include the plural and vice versa, and words importing a gender include every gender.

4.13 12.8 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained therein.

12.9 Survival. Any variation in salary or conditions mutually agreed upon after the effective date of this Agreement shall not constitute a new agreement; instead, the terms and conditions of this Agreement, except as to such variation, shall continue in force.

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12.10 Waiver. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.

12.11 Interpretation. This Agreement shall not be construed against any party on the grounds that such party drafted the Agreement or caused it to be drafted.

12.12 Governing Law. This Agreement shall be governed by the laws of the State of California. Any controversy or claim arising out of or relating to this Agreement or the breach thereof, whether involving remedies at law or equity, shall be adjudicated in Los Angeles, California.

12.13 No Conflicting Agreements. Employee represents and warrants to the Company that he is not a party to or bound by any confidentiality, noncompetition, nonsolicitation or other agreement or restriction which could conflict with or be violated by the performance of Employee’s duties to the Company under this Agreement or otherwise. Employee agrees that he will not disclose to the Company, use, or induce the Company to use, any invention or confidential information belonging to any third party.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above.

IMAGING3, INC.	EMPLOYEE
By:
	Signature
Its:
	Print Name

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EXHIBIT A

TO THE RESTATED EMPLOYMENT AGREEMENT

IMAGING3, INC.

PROPRIETARY INFORMATION & INVENTIONS AGREEMENT

4.1 This Agreement is entered into this 25th day of July 2006, by and between Imaging3, Inc., a California corporation having an office at 3022 North Hollywood Way, Burbank CA 91505 (the “Company”), and _________________________________ (hereinafter referred to as “Employee”), having a principal residence at ______________________________________________________________.

In consideration of the compensation paid to Employee by the Company for Employee’s service as a member of the Company’s Board of Employees during such time as may be mutually agreeable to the Company and Employee, the Company and Employee hereby agree as follows:

1. Confidentiality, Non-disclosure.

(a) During the period of service, Employee will learn of and acquire Company and/or customer confidential, proprietary or other privileged information whether or not developed by Employee, relating to the products, processes, genes, promoters, plasmids, biological materials, microorganisms, computer programs, know-how, trade secrets, customers, suppliers, developments, patent rights and applications, equipment, and business information made, used, developed or practiced by the Company in its business. Employee recognizes that the success of the Company depends, in part, upon maintaining confidentiality of such information, which includes, without limitation, all non-public results of research or experiments, unannounced projects or plans, and all materials and information labeled as proprietary or confidential.

(b) Employee agrees to hold in strict confidence and not to disclose, during the term of service to the Company or thereafter, to anyone outside the Company or make use of such confidential, proprietary or privileged information except in the course of the performance of Employee’s duties to the Company or otherwise upon the prior written consent of the company in each instance. Disclosure of proprietary information through publications, seminars, posters and other media shall require the express written consent of the Company. The Company recognizes that Employee may from time to time desire to communicate with members of the professional community on matters of general interest. This paragraph is not intended to prohibit Employee’s interaction and communication with members of the professional community regarding issues of a general nature and not involving the disclosure of any Company confidences.

2. Disclosure and Assignment of Inventions.

(a) Employee will disclose promptly in writing to the Company every invention, discovery, improvement, process, technique, microorganism, gene, promoter, plasmid, vector, biological material, copyrightable material or know-how (herein “Invention”), whether patentable or not, made, conceived or developed, in whole or in part solely by Employee or jointly with others during the entire period of service to the Company which relate to the Company’s existing or contemplated business or which result from or are suggested by any work Employee has performed or may perform for the Company.

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(b) Employee hereby agrees to assign to the Company the entire right, title, and interest, domestic and foreign, to such Inventions. Employee further agrees, during and after the period of service to the Company, to sign all papers, execute all oaths and do everything necessary and proper to assign to the Company the domestic and foreign rights to said Inventions and to enable the Company to apply for, obtain, maintain and enforce United States and foreign patents and copyrights therein. This obligation is limited by the terms of Section 3 hereof.

(c) The Company agrees to bear all expense which it causes to be incurred by Employee in assigning, obtaining, maintaining and enforcing said patents and copyrights and further to pay Employee at a fair and reasonable rate for the time which it may require subsequent to the termination of Employee’s service and to reimburse Employee for any reasonable expenses incurred in connection therewith.

(d) With respect to such Inventions, whether patentable or not, conceived or made by Employee during the period of service, the obligations of this Section I shall continue beyond the term of such employment and shall be binding upon the heirs, legatees, assigns, executors, administrators and other legal representatives of Employee.

3. Unrelated Inventions. In signing this Agreement, I understand that California Labor Code Section 2870, of which notification is given below, applies to me regarding inventions, and that I am still required to disclose all my inventions to the Company.

NOTICE: This Agreement does not apply to an invention that qualifies fully under the provisions of Labor Code Section 2870 of the State of California, which states that:

(a) Any employment-agreement provision stating that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information, except for those inventions that either:

(1) relate at the time of conception or reduction to practice of the invention to the employer’s business or actual demonstrably anticipated research or development of the employer, or

(2) result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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4. Employee Inventions. As a matter of record, attached hereto is a list and detailed description of all improvements and inventions made by Employee prior to the beginning of his or her term of service to the company (acknowledged by an authorized officer of the Company) that Employee desires to exclude from this Agreement.

5. Proprietary Materials. Employee acknowledges that the Company is the sole owner of all notes, notebooks, reports, drawings, data, other records, and biological materials related to his or her service to the Company. Employee agrees to return all such records and materials to the Company upon termination of service, provided that Employee shall be allowed to keep copies of personal notebooks and related documents.

6. Other Agreements of Employee. Employee represents that the performance of the terms of this Agreement and the performance of Employee’s duties for the Company do not and will not breach any agreement by which Employee is bound, including without limitation any employment agreement, confidentiality agreement or other obligation to protect proprietary information. Employee agrees to indemnify and hold the Company harmless from and against any and all liabilities or claims, including costs, expenses and reasonable attorney’s fees, arising out of any acts by Employee that, the foregoing representation to the contrary notwithstanding, shall be in violation of or shall constitute a breach of any such agreement or obligation.

7. Covenant Not to Solicit. For a period beginning with Employee’s election to the Company’s Board of Employees and ending one year following the date of termination of such service for any reason, Employee hereby agrees that he will not call on or otherwise solicit business from any of the customers or potential customers of the Company which, at the time of termination of his service, were listed (or ought to have been listed) in the Company’s records, as to any product that competes with any product provided or marketed by or actually under development by the Company at the time of Employee’s termination. Employee further agrees that he will not solicit the employment of or hire any employee of the Company throughout the term of this covenant. Employee agrees that he will, while serving the Company, promptly and fully disclose to the Company any business opportunity coming to Employee’s attention, or conceived or developed in whole or in part by Employee, which relates to the Company’s business or demonstrably anticipated business. Employee will not at any time exploit such business opportunities for his own gain or that of any person or entity other than the Company.

8. Remedies. Employee agrees that damages for breach of his covenants herein will be difficult to determine and inadequate to remedy the harm that may be caused thereby, and therefore consents that these covenants may be enforced by temporary or permanent injunction without the necessity of bond. Such injunctive relief shall be in addition to and not in place of any other remedies available at law or equity. However, should any court or tribunal decline to enforce any provision of paragraph 8 of this Agreement as written, the parties hereby agree that this Agreement shall, to the extent applicable to that circumstance before such court, be deemed to be modified to restrict Employee’s competition with the Company to the maximum extent of time, scope and geography which the court shall find reasonable and enforceable, and such provisions shall be so enforced. The prevailing party in any enforcement proceedings hereunder shall be awarded its costs and reasonable attorneys’ fees at all levels of such proceedings.

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11. Effectiveness/Entire Agreement. This Agreement is effective as of the date of Employee’s first election to the Company’s Board of Employees and, with respect to the subject matter hereof, both constitutes the entire agreement of the parties and supersedes all previous agreements of the same. This Agreement is ancillary to any other contract between the Company and Employee and is not intended to set forth any terms of Employee’s service. No term of any agreement between the Company and Employee shall be construed to conflict with or lessen Employee’s obligations under this Agreement.

12. Successors and Assigns. This Agreement shall be binding upon (i) Employee, Employee’s heirs, legatees, executors, assigns and administrators and shall inure to the benefit of the Company and its successors and assigns, and (ii) upon the Company and its successors and assigns.

Dated as of the date below the top written signature.

EMPLOYEE:

Signature:_______________________________________

Home Address:___________________________________

Date:___________________________________________

IMAGING3:

Name/Title: ______________________________________

Date: _______________________________________________

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LIST AND DETAILED DESCRIPTION OF ALL IMPROVEMENTS AND INVENTIONS MADE BY EMPLOYEE PRIOR TO EMPLOYMENT BY THE COMPANY THAT EMPLOYEE DESIRES TO EXCLUDE FROM THIS AGREEMENT

EMPLOYEE:

Signature:_______________________________________

Date:___________________________________________

IMAGING3:

Name/Title: _____________________________________

Date: _______________________________________________

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TABLE OF CONTENTS

Page

Exhibit A3

CONVERTIBLE NOTE AMENDMENT AGREEMENT

 i

EX-4

IMAGING3, INC.

AGREEMENT TO REPLACE AGUILERA EMPLOYMENT AGREEMENT

This AGREEMENT TO REPLACE AGUILERA EMPLOYMENT AGREEMENT is entered into as of __________, 20 between Imaging3, Inc., a California corporation (the “Company”), and Xavier Aguilera (“Aguilera”), a resident of ___________, California, and current Chief Financial Officer of the Company (this “Agreement”).

The parties hereby agree as follows:

SECTION 1

INTENT OF THE PARTIES

The Company hired Aguilera, effective March 16, 1996 as its Chief Financial Officer, and the two parties made effective an Employment Agreement dated May 15, 2014 (the “Current Employment Agreement”), shown in Exhibit A. Employee and Company now desire, contingent on various lenders to the Company amending their current notes and warrants (see SECTION 2), to: (i) make void the Current Employment Agreement, and (ii) replace it with a Restated Employment Agreement, shown as Exhibit B.

SECTION 2

AMENDMENT OF NOTES AND WARRANTS

(a)       The Company has borrowed $662,000 (face amount) from five lenders for which the Company issued Convertible Secured Notes and related Warrants (“the “Original Notes” and the “Original Warrants,” respectively).

(b)       The Company and the lenders intend to effect an amendment of these Original Notes and Original Warrants as part of that certain CONVERTIBLE NOTE AMENDMENT AGREEMENT, substantially in the form attached as Exhibit C (the “Amendment Agreement”).

SECTION 3

REPLACEMENT OF CURRENT EMPLOYMENT AGREEMENT WITH RESTATED EMPLOYMENT AGREEMENT

(a)       Aguilera hereby agrees that, within three business days following the date that the Amendment Agreement is effective (duly signed by all parties), Aguilera shall execute the Restated Employment Agreement and thereby forfeit all his rights, privileges, and obligations associated with the Current Employment Agreement.

(b)       The Company agrees that, within three business days following the date that the Amendment Agreement is effective (duly signed by all parties), it shall execute the Restated Employment Agreement and accept all the terms and conditions therein.

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(c)       The Company warrants that all corporate action on the part of the Company, its directors, and shareholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company for the execution of the Restated Employment Agreement hereunder has been taken. This Agreement, when executed and delivered by the Company, will constitute a valid and binding obligation of the Company enforceable in accordance with its terms, subject to (i) laws of general application relating to specific performance, injunctive relief or other equitable remedies, and (ii) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally.

SECTION 4

MISCELLANEOUS

4.1       Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of California, without reference to principles of conflict of laws or choice of law.

4.2       Survival. The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Agreement and the Closing.

4.3       Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

4.4       Entire Agreement; Amendment. This Agreement, together with the exhibits to this Agreement, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any term of this Agreement and the Security Agreement may be amended and the observance of any term of this Agreement and the Security Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders who have loaned more than half of the aggregate Principal Amounts loaned by all of the Lenders under this Agreement. Any amendment or waiver effected in accordance with this Section 8.4 shall be binding upon the Company, the Lender and each future holder of the Securities.

4.5       Expenses. The Company and Aguilera shall each bear its own fees and expenses relating to this Agreement, including any and all legal fees.

4.6       Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by U.S. mail, postage prepaid, or otherwise delivered by hand, messenger, telecopier or a nationally recognized overnight courier service, addressed to the Lender and the Company at the addresses set forth on the signature page.

All such notices, requests and other communications will (i) if delivered personally or by express courier to the address as provided in this Section 8.6, be deemed given upon delivery, or (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 8.6, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving ten (10) days’ prior written notice specifying such change to the other party hereto.

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4.7       Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Signatures may be delivered and transmitted by facsimile transmission.

4.8       Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.

4.9       Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

4.10       Cooperation. With respect to performance of the terms of this Agreement, each party shall use its good faith efforts to cooperate and to take such actions as may be appropriate to carry out the terms and intentions of this Agreement. Whenever a party’s approval is required with respect to the terms of this Agreement, such approval will not be unreasonably withheld.

4.11       Arbitration. If a dispute arises between or among the parties relating to the interpretation or performance of this Agreement, the Notes, the Warrants or the Security Agreement, and with the exception of any claim for a temporary restraining order or preliminary or permanent injunctive relief to enjoin any breach or threatened breach, such dispute shall be settled by a single neutral arbitrator, who is mutually agreeable to the parties, with such arbitration to be held in Los Angeles, California, in accordance with the then effective California rules of arbitration (CCP § 1282, et seq.). If the parties do not promptly select the neutral arbitrator, then the Los Angeles Superior Court shall select the neutral arbitrator. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall make his or her decision in accordance with the terms of this Agreement and applicable law. Each party shall initially bear its own costs and legal fees associated with such arbitration; and the parties shall initially split the cost of the arbitrator, but the prevailing party in any such arbitration shall be entitled to recover from the other party the reasonable attorneys’ fees, costs and expenses incurred by such prevailing party in connection with such arbitration. The decision of the arbitrator shall be final and may be sued on or enforced by the party in whose favor it runs in any court of competent jurisdiction at the option of the prevailing party. The rights and obligations of the parties to arbitrate any dispute relating to the interpretation or performance of this Agreement shall survive the Closing. The arbitrator shall be empowered to award specific performance, injunctive relief and other equitable remedies as well as damages, but shall not be empowered to award punitive or exemplary damages.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

COMPANY:

IMAGING3, INC.

3022 North Hollywood Way

Burbank, California 91505

Attention: Dane Medley

By:
Date:	, 20__

XAVIER AGUILERA:
(818) 260-0930
Signature:
Date:	, 20___

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Exhibit A1

To the Agreement to Restate Aguilera Employment Agreement

CURRENT EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 15th day of May 2014, by and between Imaging 3, Inc., a California corporation (the “Company”), and Xavier Aguilera, an individual (“Employee”), and is made with respect to the following facts:

R E C I T A L S

A.       The Company and the Employee wish to ensure that the Company will receive the benefit of Employee’s loyalty and service.

B.       In order to help ensure that the Company receives the benefit of Employee’s loyalty and service, the parties desire to enter into this formal Employment Agreement to provide Employee with appropriate compensation arrangements and to assure Employee of employment stability.

C.       The parties have entered into this Agreement for the purpose of setting forth the terms of employment of the Employee by the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:

1.       Employment of Employee and Duties. The Company hereby hires Employee and Employee hereby accepts employment upon the terms and conditions described in this Agreement. The Employee shall be the Chief Financial Officer of the Company with all of the duties, privileges and authorities usually attendant upon such office, including but not limited to overall supervision of the management of the Company’s operations. Subject to (a) the general supervision of the Chief Executive Officer and (Board of Directors) of the Company, and (b) the Employee’s duty to report to the Board of Directors periodically, as specified by it from time-to-time, Employee shall have all of the authority and discretion in the conduct of the Company’s operations that can lawfully be delegated by the Board of Directors.

2.       Time and Effort. Employee agrees to devote his full working time and attention to the management of the Company’s business affairs, the implementation of its strategic plan, as determined by the Chief Executive Officer and the Board of Directors, and the fulfillment of his duties and responsibilities as the Company’s Chief Financial Officer; provided that the expenditure of a reasonable amount of time by the Employee for personal matters and charitable activities shall not be deemed to be a breach of this Agreement.

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3.       The Company’s Authority. Employee agrees to comply with the Company’s rules and regulations as adopted by the Company’s Board of Directors regarding performance of his duties, and to carry out and perform those orders, directions and policies established by the Company with respect to his engagement. Employee shall promptly notify the Company’s Chief Executive Officer and Board of Directors of any objection he has to the Board’s directives and the reasons for such objection.

4.       Noncompetition by Employee. Employee agrees that during the term of his employment with the Company or during any time that the Employee serves as a director of the Company, or while he is receiving any severance payments from the Company, Employee will not directly or indirectly, whether (a) as employee, agent, consultant, employer, principal, partner, officer or director; (b) holder of five percent or more of any class of equity securities or five percent or more of the aggregate principal amount of any class of debt, notes or bonds of a company with publicly traded equity securities; or (c) in any other individual or representative capacity whatsoever, in each case for his own account or the account of any other person or entity, engage in any business or trade competing with the then business or trade of the Company anywhere in the world in which the Company is carrying on such trade or business as of the effective date of such termination.

5.       Confidential Information: Nondisclosure Covenant.

5.1.       Confidential Information. As used herein the term “Confidential Information” shall mean all customer and contract lists, supplier lists, records, financial data, trade secrets, proprietary technology and intellectual property, business and marketing plans and studies, manuals for employee and personnel policies, manufacturing and/or production manuals, computer programs and software, strategic plans, formulas, manufacturing and production processes and techniques (including without limitation types of machinery and equipment used together with improvements and modifications thereon), tools, applications for patents, designs, models, patterns, drawings, tracings, sketches, blueprints, and all other similar information developed and/or used by Company in the course of its business and which is not known by or readily available to the general public.

5.2       Nondisclosure Covenant. Employee acknowledges that, in the course of performing services for and on behalf of Company, Employee has had and will continue to have access to Confidential Information. Employee hereby covenants and agrees to maintain in strictest confidence all Confidential Information in trust for Company, its successors and assigns. During the period of Employee’s employment with Company and at all times following Employee’s termination of employment for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee agrees to not misappropriate, utilize for any purpose other than for the direct benefit of the Company, or disclose or make available to anyone outside Company’s organization, any Confidential Information or anything relating thereof without the prior written consent of Company, which consent may be withheld by Company for any reason or no reason at all.

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5.3       Return of Property. Upon Employee’s termination of his employment with Company for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee hereby agrees to promptly return to Company’s possession all copies of any writings, computer discs or equipment, drawings or any other information relating to Confidential Information which are in Employee’s possession or control, as well as all keys, passwords, credit cards and similar Company items. Employee further agrees that, upon the request of Company at any time during Employee’s period of employment with Company, Employee shall promptly return to Company all such copies of writings, computer discs or equipment, drawings or any other information relating to Confidential Information which are in Employee’s possession or control.

5.4       Rights to Inventions and Trade Secrets. Employee hereby assigns to Company all right, title and interest in and to any ideas, inventions, original works or authorship, developments, improvements or trade secrets which Employee solely or jointly has conceived or reduced to practice, or will conceive or reduce to practice, or cause to be conceived or reduced to practice during his employment with Company. All original works of authorship which are made by Employee (solely or jointly with others) within the scope of Employee’s services hereunder and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.

6.       Noninterference and Nonsolicitation Covenants. In further reflection of the Company’s important interests in its proprietary information and its trade, customer, vendor and employee relationships, Employee agrees that, during the 24 month period following the termination of Employee’s employment with Company for any reason, including without limitation Employee’s voluntary resignation or involuntary termination with or without cause, Employee will not directly or indirectly, for or on behalf of any person, firm, corporation or other entity, (a) interfere with any contractual or other business relationships that Company has with any of its customers, clients, service providers or materials suppliers as of the date of Employee’s termination of employment, or (b) solicit or induce any employee of Company to terminate his/her employment relationship with Company.

7.       Term of Agreement. This Agreement shall commence to be effective on the date first above written (the “Commencement Date”), and shall continue until May 15, 2019, unless terminated sooner as provided in Section 15 hereof, or unless extended by a resolution duly adopted by the Company’s Board of Directors and agreed upon by the Employee.

8.       Compensation. During the term of this Agreement, the Company shall pay the following compensation to Employee:

8.1       Annual Compensation. Employee shall be paid a base salary of $165,000 per year during the first year of the term of this Agreement. The base salary in subsequent years during the term of this Agreement will be no less than $165,000 per year, but may be adjusted to be higher by a resolution duly adopted by the Company’s Board of Directors. The Employee’s salary will be payable in two installments per month, each installment equaling one-twenty-fourth of the annual base salary, and each payable on the 1st and the 16^th day of each month covering, respectively, the first 15 days of the current month and the 16^th day through the last day of the previous month.

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8.2       Bonus Payments. In addition to the base salary provided for in Section 8.1 of this Agreement and the potential for discretionary additional bonuses in Section 8.4 of this Agreement, the Employee will be entitled to the following fixed performance-based annual bonuses, payable on or before January 30^th of each year for performance during the prior calendar year, equal to (a) 20% of the Employee’s base annual salary for the prior calendar year if the Company’s annual gross revenue for the prior calendar year, calculated in accordance with generally accepted accounting principles (“GAAP”), equals or exceeds $_500,000 in calendar year 2014, $3,000,000 in calendar year 2015, $7,000,000 in calendar year 2016, $15,000,000 in calendar year 2017 and $_30,000,000 in calendar year 2018, and (b) 40% of the Employee’s base annual salary for the prior calendar year if the Company’s annual gross revenue for the prior calendar year, calculated in accordance with GAAP, equals or exceeds $1,000,000 in calendar year 2014, $5,000,000 in calendar year 2015, $15,000,000 in calendar year 2016, $40,000,000 in calendar year 2017 and $70,000,000 in calendar year 2018. In the event of a change to the calculation of the Company’s annual gross revenue for a particular calendar year after January 30^th of the next year, then the bonus payment will be adjusted accordingly.

8.3       Stock Incentives. Upon commencement of this Agreement, Employee shall be issued 10,000,000 shares of the Company’s common stock (the “Incentive Shares”); provided, however, if Employee is terminated by the Company pursuant to Section 15.3(i) of this Agreement during the first year of its term, the Employee will tender back to the Company for cancellation 3,000,000 Incentive Shares. On May 15, 2014, the Company will grant to the Employee stock options to purchase up to 5,000,000 shares of the Company’s common stock pursuant to the Company’s Stock Incentive Plan for Directors, Officers, Employees and Key Consultants of Imaging 3, Inc. (the “Plan”), having an exercise price of $0.001 per share and an exercise period of ten years, with a vesting schedule as follows: (i) up to 1,000,000 stock options will vest and be exercisable on December 31, 2014 if the 2014 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2014 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (ii) up to 1,000,000 stock options will vest and be exercisable on December 31, 2015 if the 2015 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2015 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (iii) up to 1,000,000 stock options will vest and be exercisable on December 31, 2016 if the 2016 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2016 and Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, (iv) up to 1,000,000 stock options will vest and be exercisable on December 31, 2017 if the 2017 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2017 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company, and (v) up to 1,000,000 stock options will vest and be exercisable on December 31, 2018 if the 2018 Goals set forth in Exhibit A to this Agreement are satisfied by December 31, 2018 and the Employee is still engaged on the scheduled vesting date as either an officer, director, employee or key consultant of the Company. The stock options granted to Employee pursuant to this Agreement will be governed by the terms and conditions of the Plan and the stock option agreement executed by the Company and the Employee which applies to the options. Said stock options will be Incentive Stock Options (ISOs) under the Plan to the maximum extent permitted by the Plan and applicable law. Upon approval of the Company’s full Board of Directors, the Employee may be granted additional stock options to purchase additional stock of the Company during the second, third, fourth, and fifth years of the term of this Agreement, depending on the achievement of Company operating milestones such as annual gross revenue and EBIDTA, to be established by the Board of Directors of the Company. In the event Mr. Aguilera is asked to resigned (or leave, vacate, step-down or be removed from the Board of Directors) his position, he will further be compensated eighty percent (80%) of the outstanding Imaging3 Inc. common shares, along with any Imaging3 Inc. stock options he owns at the time of departure.

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8.4       Discretionary Additional Compensation. In addition to the compensation set forth in Sections 8.1, 8.2 and 8.3 of this Agreement, upon approval of the Company’s full Board of Directors, Employee may be paid an additional bonus or bonuses during each year, and may have his annual compensation raised, based on the CEO’s Board’s evaluation of the Employee’s definable efforts, accomplishments and similar contributions. In this regard, the Company expects that the Employee will earn an annual bonus equal to between 60% and 120% of his base fixed salary, including the fixed performance-based bonuses provided for in Section 8.2 of this Agreement, if the Company achieves certain additional operating milestones to be agreed upon by the Company and the Employee in a separate addendum to this Agreement; provided, that if the Company and the Employee do not agree on a separate written addendum to this Agreement setting forth said additional milestones, then discretionary bonuses will be determined in good faith in the discretion of the Company’s Board of Directors.

9.       Fringe Benefits. The Company shall provide Employee with medical and dental group insurance coverage or equivalent coverage for Employee, including his dependents. The medical and dental insurance coverage shall begin on the Commencement Date and shall continue throughout the term of this Agreement. All compensation provided in Sections 8 and 9 of this Agreement shall be subject to customary withholding tax and other employment taxes, to the extent required by law.

10.       Office and Staff. In order to enable Employee to discharge his obligations and duties pursuant to this Agreement, the Company agrees that it shall provide suitable office space for Employee, together with all necessary and appropriate supporting staff and secretarial assistance, equipment, stationery, books and supplies. Employee agrees that the supporting staff presently in place is suitable for the purposes of this Agreement. The Company agrees to provide at its expense parking for one vehicle by the Employee at the Company’s executive offices.

11.       Reimbursement of Expenses. The Company shall reimburse Employee for all reasonable travel, mobile telephone, promotional and entertainment expenses incurred in connection with the performance of Employee’s duties hereunder, subject to Section 12 of this Agreement with respect to automobile expenses. Employee’s reimbursable expenses shall be paid promptly by the Company upon presentment by Employee of an itemized verifiable list of invoices describing such expenses. In the event Mr. Aguilera is asked to resigned (or leave, vacate, step-down or be removed from the Board of Directors) his position, he will further be compensated eighty percent (80%) of the outstanding Imaging3 Inc. common shares, along with any Imaging3 Inc. stock options he owns at the time of departure.

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12.       Automobile Expenses. Notwithstanding anything else herein to the contrary, the Company shall pay to the Employee a fixed amount equal to $1,000 per month on the last day of each month during the term of this Agreement as reimbursement to the Employee for all expenses incurred by the Employee for the use of his automobile for Company business purposes, including but not limited to depreciation, repairs, insurance, reasonable maintenance, and gasoline expenses. Employee shall not be entitled to any other reimbursement for the use of his automobile for business purposes.

13.       Vacation. Employee shall be entitled to four weeks of paid vacation per year or pro rata portion of each year of service by Employee under this Agreement. The Employee shall be entitled to the holidays provided in the Company’s established corporate policy for employees with comparable duties and responsibilities. If asked to resigned or leave, employee will be entitled to liquidate all existing vacations days owed for cash.

14.       Definition of “Cause.” For the purposes of this Agreement, “termination for cause” means termination of Employee’s employment by Employer due to (a) Employee’s conviction of, or the entry of a pleading of guilty or nolo contender by Employee to, a felony or crime involving moral turpitude, or (b) Employee’s failure to comply with any material provision of this Agreement that results in material damage to the Company, or (c) an act of fraud committed by Employee against the Company, or (d) a willful act by Employee as a result of which he receives a material improper personal benefit at the expense of the Company, or (e) Employee’s demonstration of gross negligence or willful misconduct in the execution of his material assigned duties, or (f) Employee’s intentionally imparting confidential information relating to the Company to a third party, other than in the course of carrying out the Employee’s duties, which has resulted in material damage to the Company, in each case other than as a result of Employee’s death, disability or retirement, and the Employee has been given the written notice specified in this Section and has failed to cure any defect in performance as specified in such notice. The Company shall give Employee written notice specifying the conduct alleged to have constituted such cause and provide Employee the opportunity to cure such conduct, if curable, within 15 days following receipt of such notice.

15.       Termination. This Agreement may be terminated in the following manner and not otherwise:

15.1       Mutual Agreement. This Agreement may be terminated by the mutual written agreement of the Company and Employee to terminate.

15.2       Termination by Employee. Employee may at his option and in his sole discretion terminate this Agreement for (i) the material breach by the Company of the terms of this Agreement (other than where Employee has first materially breached this Agreement causing material damage to the Company), or (ii) any “Change of Control” (as defined in Section 15.6) in which the Employee is unable to come to an agreement with the surviving company regarding an employment agreement as specified further in Section 15.6 of this Agreement.

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15.3       Termination by the Company. The Company may at its option terminate this Agreement upon fifteen (15) days prior written notice (“Termination Notice”) to the Employee of the Company’s election to terminate this Agreement (i) for cause as defined in and in accordance with Section 14 of this Agreement, or (ii) in the event of any “Change of Control”, as defined in Section 15.6 of this Agreement. In the event of termination by the Company pursuant to Section 15.3(i) herein, the Company shall pay the Employee any remaining base salary, at the rate then in effect under Section 8.1, 8.2, 8.3, 11, 13 through the effective date of such termination, plus any benefits under other plans or programs in which the Employee is vested at the time of his termination. In the event of termination by the Company pursuant to Section 15.3(ii) (and inability of the Employee, negotiating in good faith, to come to an agreement with the surviving Company or new controlling parties of the Company regarding an employment agreement), then the Employee will be entitled to the following severance payments and benefits, in addition to accrued salary and bonuses, if any, for past service, provided that the Employee enters into a severance agreement with the Company waiving and releasing the Company from all claims Employee may have against the Company and agreeing not to disparage the Company or its employees: (a) the Employee’s then salary and accrued but unpaid bonus (if any, with respect to bonus) payable for the twelve month period immediately following the Termination Notice, payable in semi-monthly installments in accordance with Section 8.1 of this Agreement, if the Termination Notice is issued during the first year of the term of this Agreement, with the severance payment period being nine months if the Termination Notice is issued during the second year of the term of this Agreement and six months if the Termination Notice is issued during the third, fourth, or fifth year of the term of this Agreement, and (b) Employee shall also be entitled to all the benefits during the severance payment period under Sections 9 and 12 of this Agreement, and (c) Employee shall be entitled to exercise all vested stock options which he owns for the entire remaining exercise period of the stock options as set forth in Section 8.3 of this Agreement, no such stock options shall terminate prior to said expiration dates, and no “severance” shall be deemed to have occurred under the Company’s Plan or under existing stock option agreements covering said stock options.

15.4       Termination Upon Death. This Agreement shall terminate upon the death of the Employee.

15.5       Termination Upon the Disability of the Employee. This Agreement shall terminate upon the disability of the Employee. As used in the previous sentence, the term “disability” shall mean the complete physical and/or mental disability to discharge Employee’s duties and responsibilities for a continuous period of not less than six months during any consecutive twelve (12) month period. Any physical or mental disability which does not prevent Employee from discharging his duties and responsibilities in accordance with usual standards of conduct as determined by the Company in its reasonable opinion shall not constitute a disability under this Agreement.

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15.6       Termination As A Result of A Change in Control of the Company. “Change of Control” is defined as a sale of all or substantially all of the Company’s assets or more than fifty percent (50%) of the Company’s outstanding stock, to a purchaser which is unaffiliated with the Company, in a single transaction or a series of related transactions, or a merger, of which the Company is not the surviving corporation, with any entity which is unaffiliated with the Company. In the event of a Change in Control of the Company and termination of this Agreement as a result of said Change of Control, if the Employee, negotiating in good faith, is unable to come to an agreement with the surviving company or new controlling parties of the Company regarding an employment agreement, then the Employee may terminate this Agreement pursuant to Section 15.2 (ii) of this Agreement.

15.7       Survival of Covenants. Notwithstanding anything contained in this Agreement to the contrary, the covenants of Employee contained in Section 4, Section 5 and Section 6 of this Agreement shall survive the term of this Agreement (as specified in Section 7 hereof) or Employee’s termination of his employment relationship with the Company, in each case as specified further in such covenants.

16.       Indemnification of Employee. Pursuant to the provisions and subject to the limitations of the California Corporations Code, the Company shall indemnify and hold Employee harmless as provided in Sections 16.1, 16.2 and 16.3 of this Agreement. The Company shall, upon the request of Employee, assume the defense and directly bear reasonable expenses of any action or proceedings which may arise for which Employee is entitled to indemnification pursuant to this Section.

16.1       Indemnification of Employee for Actions by Third Parties. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, fines, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of Employee being made at any time a party to, or being threatened to be made a party to, any proceeding (other than an action by or in the right of the Company, which is addressed in Section 16.2 of this Agreement), relating to actions Employee takes within the scope of his employment as the President of the Company or in his role as a director of the Company, provided that Employee acted in good faith and in a manner he reasonably believed to be in the best interest of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful.

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16.2       Indemnification of Employee for Actions in the Right of the Company. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of Employee being made a party to, or being threatened to be made a party to, any proceeding by or in the right of the Company to procure a judgment in its favor by reason of any action taken by Employee as an officer, director or agent of the Company, provided that Employee acted in good faith in a manner he reasonably believed to be in the best interests of the Company and its shareholders, and provided further, that no indemnification by the Company shall be required pursuant to this Section 16.2 (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that Employee believed to be contrary to the best interests of the Company or its shareholders or that involve the absence of good faith on the part of Employee, (iii) for any transaction from which Employee derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard by Employee of his duties to the Company or its shareholders in circumstances in which Employee was aware, or should have been aware, in the ordinary course of performing his duties, of a risk of serious injury to the Company or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of Employee’s duties to the Company or its shareholders, or (vi) for any other act by Employee for which Employee is not permitted to be indemnified under the California Corporations Code. Furthermore, the Company has no obligation to indemnify Employee pursuant to this Section 16.2 in any of the following circumstances:

A.       In respect of any claim, issue, or matter as to which Employee is adjudged to be liable to the Company in the performance of his duties to the Company and its shareholders, unless and only to the extent that the court in which such action was brought determines upon application that, in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for the expenses and then only in the amount that the court shall determine.

B.       For amounts paid in settling or otherwise disposing of a threatened or pending action without court approval.

C.       For expenses incurred in defending a threatened or pending action which is settled or otherwise disposed of without court approval.

16.3       Reimbursement. In the event that it is determined that Employee is not entitled to indemnification by the Company pursuant to Sections 16.1 or 16.2 of this Agreement, then Employee is obligated to reimburse the Company for all amounts paid by the Company on behalf of Employee pursuant to the indemnification provisions of this Agreement. In the event that Employee is successful on the merits in the defense of any proceeding referred to in Sections 16.1 or 16.2 of this Agreement, or any related claim, issue or matter, then the Company will indemnify and hold Employee harmless from all fees, costs and expenses actually incurred by him in connection with the defense of any such proceeding, claim, issue or matter.

17.       Assignability of Benefits. Except to the extent that this provision may be contrary to law, no assignment, pledge, collateralization or attachment of any of the benefits under this Agreement shall be valid or recognized by the Company. Payment provided for by this Agreement shall not be subject to seizure for payment of any debts or judgments against the Employee, nor shall the Employee have any right to transfer, modify, anticipate or encumber any rights or benefits hereunder; provided that any stock issued by the Company to the Employee pursuant to this Agreement shall not be subject to Section 17 of this Agreement.

18.       Directors’ and Officers’ Liability Insurance. The Company may purchase directors’ and officers’ liability insurance for the officers and directors of the Company, which would include the same coverage for Employee.

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19.       Notice. All notices and other communications required or permitted hereunder shall be in writing or in the form of a email or facsimile (confirmed in writing) to be given only during the recipient’s normal business hours unless arrangements have otherwise been made to receive such notice by email or facsimile outside of normal business hours, and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or email or facsimile (as provided above) addressed (a) if to the Employee, at the address for such Employee set forth on the signature page hereto or at such other address as such Employee shall have furnished to the Company in writing or (b) if to the Company, to its principal executive offices and addressed to the attention of the Chairman of the Board, or at such other address as the Company shall have furnished in writing to the Employee.

In case of the Company:

Imaging 3, Inc

3022 North Hollywood Way

Burbank, California 91505

Telephone No.: (818) 260-0930

Facsimile No.: (818) 260-0445

In case of the Employee:

Xavier Aguilera

_____________________

_____________________

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if by telex or telecopy pursuant to the above, when received.

20.       Attorneys’ Fees. In the event that any of the parties must resort to legal action in order to enforce the provisions of this Agreement or to defend such suit, the prevailing party shall be entitled to receive reimbursement from the non-prevailing party for all reasonable attorneys’ fees and all other costs incurred in commencing or defending such suit, including post judgment costs.

21.       Entire Agreement. This Agreement embodies the entire understanding among the parties and merges all prior discussions or communications among them, and no party shall be bound by any definitions, conditions, warranties, or representations other than as expressly stated in this Agreement or as subsequently set forth in a writing signed by the duly authorized representatives of all of the parties hereto.

22.       No Oral Change; Amendment. This Agreement may only be changed or modified and any provision hereof may only be waived by a writing signed by the party against whom enforcement of any waiver, change or modification is sought. This Agreement may be amended only in writing by mutual consent of the parties.

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23.       Severability. In the event that any provision of this Agreement shall be void or unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and effect. The remaining provisions of this Agreement shall, however, continue in full force and effect, and to the extent required, shall be modified to preserve their validity.

24.       Applicable Law. This Agreement shall be construed as a whole and in accordance with its fair meaning. This Agreement shall be interpreted in accordance with the laws of the State of Los Angeles, and venue for any action or proceedings brought with respect to this Agreement shall be in the County of Los Angeles in the State of California.

25.       Successors and Assigns. Each covenant and condition of this Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, personal representatives, assigns and successors in interest. Without limiting the generality of the foregoing sentence, this Agreement shall be binding upon any successor to the Company whether by merger, reorganization or otherwise.

26.       Injunctive Remedy. In the case of any breach or threatened breach by Employee of any of his covenants or obligations under Sections 4, 5 and/or 6 of this Agreement, the parties hereto agree that damages may not be an adequate remedy for the Company and that, in the event of any such breach or threatened breach, the Company may, either with or without pursuing any potential damage remedies, immediately obtain and enforce an injunction prohibiting Employee from committing or continuing to commit such breach or threatened breach.

27.       Counterparts. This Agreement may be executed in two counterparts, each of which may be deemed an original, but both of which together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

COMPANY: IMAGING 3, INC., a California corporation

By:
	Dane Medley Chairman / CEO

EMPLOYEE:
		Xavier Aguilera
	16827 Halsey Street
		Street Address
	Granada Hills, California 91344
		City, State and Zip Code
		Telephone Number
		Facsimile Number

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EXHIBIT A

To the Current Employment Agreement

BENCHMARKS FOR VESTING OF UP TO 5,000,000 STOCK OPTIONS PURSUANT TO SECTION 8.3 OF THE EMPLOYMENT AGREEMENT

Year	Goal	Percentage Vested			Number of Options to Vest
2014 Goals	Submit the Dominion for FDA approval.		25	%		200,000
	Grow revenues to greater than $4M per annum.		25	%		200,000
	Obtain at least one company through a merger or acquisition.		25	%		550,000
	Obtain a symbol from FINRA and begin trading.		25	%		50,000
2015 Goals	Grow revenues to greater than $10M per annum.		33.33	%		333,333
	Merge or acquire a minimum of three companies.		33.33	%		333,333
	Obtain FDA approval for the Dominion.		33.34	%		333,334
2016 Goals	Grow revenues to greater than $20M per annum.		50	%		500,000
	Merge or acquire a minimum of three companies.		50	%		500,000
2017 Goals	Grow revenues to greater than $30M per annum.		100	%		1,000,000
2018 Goals	Grow revenues to greater than $40M per annum.		100	%		1,000,000

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Exhibit A2

To the Agreement to Restate Aguilera Employment Agreement

RESTATED EMPLOYMENT AGREEMENT

RESTATED EMPLOYMENT AGREEMENT

THIS RESTATED EMPLOYMENT AGREEMENT is made as of _________ __, 20__, at Los Angeles, California among Imaging3, Inc., a California corporation (the “Company”), and Xavier Aguilera (the “Employee”) with reference to the following facts:

In consideration of their respective promises contained herein, the parties hereto agree as follows:

1. EMPLOYMENT

Company hired Employee, effective March 16, 1996, as its Chief Financial Officer, and the two parties made effective an Employment Agreement dated May 15, 2014 (the “Former Employment Agreement”). Employee and Company now desire: (i) to make void the Former Employment Agreement, together with all the obligations, duties, and restrictions therein (including any payments and share grants that have yet to be made), and (ii) to replace it with this Restated Employment Agreement, which shall serve to define all the terms and conditions associated with Employee’s employment with the Company going forward.

2. EMPLOYEE’S DUTIES

The Employee shall, while contributing his services hereunder:

(a) Serve the Company as Chief Financial Officer with all of the duties, privileges and authorities usually attendant upon such office.

(b) Report to the Chief Executive Officer or to whomever is designated by the Company’s Board of Directors (the “Board), as long as the person so designated is consistent with Employee’s role of Chief Financial Officer;

(c) Comply with and conform to any lawful instructions or directions given or made by his supervisor and/or the Board, and faithfully, industriously, diligently, and to the best of the Employee’s ability, experience, and talents, serve the Company and perform all of the duties that may be required by the terms and conditions of this Agreement to the reasonable satisfaction of his supervisor and the Board, so as to promote the Company’s business interests; and

(d) Devote approximately two-thirds of his working time and attention to the fulfillment of his duties and responsibilities as the Company’s Chief Financial Officer, provided that the expenditure of a reasonable amount of time by the Employee for personal matters and charitable activities shall not be deemed to be a breach of this Agreement.

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3. COMPENSATION

In consideration of the performance by the Employee of his duties hereunder, the remuneration of the Employee shall be (and the Company shall pay to the Employee):

(a)	A base salary (“Salary”) of $48,000 per year until the closing of an equity offering of at least $2.5 million in gross proceeds (a “Qualified Financing”), at which point the base salary will increase to $96,000 per year. The base salary in subsequent years during the term of this Agreement will be no less than $96,000 per year, but may be adjusted to be higher by a resolution duly adopted by the Company’s Board of Directors. The Employee’s salary will be payable in two installments per month, each installment equaling one-twenty-fourth of the annual base salary, and each payable on the 1st and the 16th day of each month covering, respectively, the first 15 days of the current month and the 16th day through the last day of the previous month,
(b)	Bonus compensation of up to 20% of the Employee’s base compensation for the prior calendar year, to be based generally on the Board’s good-faith evaluation of (i) achievements by the Employee of the objectives provided him by the Board and/or (ii) the Employee’s definable efforts, accomplishments, and contributions. The bonus decision is at the Board’s sole discretion, but it is agreed hereby that reasonably strong performance by the Employee would result in a 10-15% bonus level, on average, over many years. It agreed that for the stub year of 2016, Employee will have earned, and will accrue, a bonus of $6,000, to be paid only if a Qualified Financing occurs prior to August 31, 2017.
(c)	Equity compensation of 2,000,000 Restricted Stock Units (“RSUs”) (the “Incentive Shares”), which shall be issued as soon as practical after the Company approves a stock option plan (or equivalent). The Company’s Board hereby agrees to approve such a plan no later than 30 days after the closing of a Qualified Financing, with underlying shares of at least 12%, but no greater than 15%, of the fully diluted number of shares outstanding at the time, and to then hold a shareholder vote for approval of the plan within 60 days after that. The Incentive Shares shall be issued to Employee regardless of his employment status and shall be immediately 100% vested.
(d)	Paid vacation, which shall accrue at the rate of four weeks per year,
(e)	Other benefits and perquisites normally available to executives of the Company, as may be changed from time to time, and
(f)	Such additional remuneration as Employee and the Company shall negotiate after January 1, 2018.

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4. EXPENSES

The Company shall pay on behalf of the Employee or reimburse the Employee (against the Employee’s submission to the Company of proper receipts therefore) for all expenses properly incurred by him in the course of his employment hereunder or otherwise in connection with the business of the Company in accordance with Company policies, as such policies may be established and revised by the Board from time to time.

5. AT-WILL EMPLOYMENT

Employee and the Company understand and expressly agree that Employee’s employment with the Company is at-will, is not for a specified term, and may be terminated by the Company or by Employee at any time, with or without notice and with or without cause. This clause shall not be interpreted to conflict with Employee’s at-will employment status. Employee and the Company further understand and agree that no representation contrary to this section is valid, and that this section may not be augmented, contradicted, or modified in any way, by any representative or agent of the Company or any other person, except by a writing signed by the Employee and by the Board.

6. TERMINATION

6.1 Upon termination for any reason, including voluntary resignation, Employee shall:

(a)	Be entitled to the compensation set forth in Section 3(a) hereof, prorated to the effective date of such termination;
(b)	Be entitled to the equity compensation set forth in Section 3 (c) hereof, if not already issued
(c)	Remain subject to the provisions of the Proprietary Information and Inventions Agreement, in the form attached hereto as Exhibit A, signed concurrently herewith;
(d)	Be entitled to receive a termination payment for any accrued, unused vacation;
(e)	Not be entitled to severance, unless as provided in Section 6.2.

6.2 If Company terminates the employment of Employee without Cause (to be defined later in this section), the Company will, in addition to the provisions of Section 6.1, and in exchange for Employee’s execution of a full and complete release of all claims as described herein:

(i) Pay Employee four months’ base compensation. Such payments are to be made in accordance with Company’s normal payroll procedures with normal payroll deductions.

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(ii) The term “Cause” is defined to mean conduct that in the good faith judgment of the Board constitutes a material breach of duty and is to include one or more of the following that results in a material adverse impact to the Company: falsification of company documents, fraud, moral turpitude, theft, embezzlement, criminal conduct, indictment on felony criminal charges, serious violations of Company policies, material breach of Employee’s employment agreement, extended or repeated absence from work that in the reasonable judgment of the Board is unjustified, inability to perform duties for a period of thirty (30) or more days without reasonable excuse and notice, or insubordination (e.g., refusal to carry out the reasonable instructions of the Board). If the material breach of duty is reasonably curable, Company shall provide notice to Employee of such breach of duty and shall give Employee a 30-day cure period. Refusal to relocate to a facility more than 50 miles from the current facility is NOT considered Cause.

(iii) Employee will be eligible for no other severance compensation, benefits, or vesting other than that which is provided for in this Section 6.2 when he is terminated. A condition precedent to the Company’s obligation to fulfill the severance terms in this Section 6.2 shall be Employee’s execution of a full and complete release of all claims against the Company, its Board, officers, agents, and affiliates in reasonable form as provided by the Company. Nothing in this severance provision supersedes or in any way alters the at-will provisions of Section 5 above.

(iv) Employee agrees that he will surrender to the Company, at its request, or at the conclusion of his employment, all accounts, notes, data, sketches, drawings and reproductions, and copies thereof, any of which (a) relate in any way to the business, products, practices, or techniques of the Company, (b) contain Confidential Information, whether or not created by him, or (c) come into his possession by reason of his employment with the Company; and Employee agrees further that all of the foregoing are the property of the Company.

7. LOYAL PERFORMANCE

7.1 Employee shall not, during the period of his employment by the Company, engage in any employment or activity in any business competitive with the Company. Employee agrees to notify the Company in writing of any outside employment or business activity, including the name of the business and the general nature of employee’s involvement, during the period of Employee’s employment with the Company.

7.2 If, at any time during the period ending two years after Employee has ceased to be an employee of the Company (or of any subsidiary or affiliate of the Company), whether or not pursuant to this agreement, Employee:

(a) directly or indirectly engages with...

(b) assists or has an active interest in, whether as owner, partner, shareholder, joint venturer, corporate officer, director, employee, Employee, principal, agent, trustee or licensor, or in any other similar capacity whatsoever (provided that ownership of not more than two percent of the outstanding stock of a corporation traded on a National securities exchange or quoted on NASDAQ OTC shall not of itself be viewed as assisting or having an active interest)...

or

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(c) enters the employment of or acts as an agent for or advisor or consultant to. any person, firm, partnership, association, corporation, business organization, entity, or enterprise (the Business”) that is, or is about to become, directly or indirectly, engaged in any business or program that competes directly with or is substantially similar to any business or program that the Company (or any subsidiary or affiliate of the Company) was involved in (or was in the planning or development stage) during the 120-day period immediately prior to Employee’s ceasing to provide services to the Company (or any subsidiary or affiliate of the Company) [such business or program shall include, but not be limited to, those that involve: (a) any composition of matter or method that is protected by (i) any Company trade secret or (ii) any Company intellectual property that is either issued, pending, or filed at the time of termination or (b) the use, research or development, for any therapeutic or diagnostic purpose, of (i) any sphingolipid, (ii) any lysophosphatidic acid, or (iii) any component of their respective pathways], then Employee shall immediately notify Company in writing of such involvement, including the name of the Business and the nature of Employee’s involvement, and Employee agrees to fully respond to reasonable questions by the Company regarding such involvement and to provide such further assurances reasonably requested by Company that Employee is not and will not be in breach of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A.

7.3 Employee will not, at any time, without prior written consent of the Company:

(a) Directly or indirectly take any action or make or cause to be made any statements which would disparage the reputation of the Company or any subsidiary or affiliate of the Company, or

(b) Induce or attempt to influence any employee or consultant of the Company or any of its or their subsidiaries or affiliates to terminate his or her employment.

7.4 Nothing contained in this Section 7 is intended to supersede or alter in any way the provisions of the Proprietary Information and Inventions Agreement attached hereto as Exhibit A.

8. CONFIDENTIALITY MATTERS

8.1 It is an express condition to the employment of Employee by Company that Employee sign and deliver a Proprietary Information and Inventions Agreement in the form attached hereto as Exhibit A concurrently with the execution of this Agreement.

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4.12       8.2 The covenants contained in the Proprietary Information and Inventions Agreement constitute separate covenants. If in any judicial proceeding, a court shall hold that any of the covenants set forth in the Proprietary Information and Inventions Agreement is not permitted by applicable laws, Employee and Company agree that such provision shall and is hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Employee and Company further agree that the covenants in the Proprietary Information and Inventions Agreement shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Employee against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants set forth in the Proprietary Information and Inventions Agreement.

9. ACKNOWLEDGMENT

Employee acknowledges that he has been advised by Company to consult with independent counsel of his own choice, at his expense, as to the entering into this Agreement, that he has had the opportunity to do so, and that he has taken advantage of the opportunity to the extent that he desires. The Employee further acknowledges that he has read and that he understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment and such professional advice as he has seen fit to obtain.

10. ARBITRATION

Employee and the Company agree that in the event of any dispute concerning, arising out of, or related in any way to this Agreement, such dispute shall be submitted to arbitration. Except as otherwise provided for herein, the disputes subject to this agreement to arbitrate include, to the fullest extent allowable by law, all potential claims between Employee and Company including, but not limited to, breach of contract, tort, discrimination, harassment, wrongful termination, compensation and benefits claims, constitutional claims and claims for the violation of any local, state or federal statute, ordinance or regulation. Arbitration proceedings may be commenced by either party by giving the other party written notice thereof and proceeding thereafter in accordance with the rules and procedures of the American Arbitration Association and California law. Any such arbitration shall take place before a single arbitrator only in Los Angeles, California. Any such arbitration shall be governed by and be subject to the applicable laws of the State of California and the then-prevailing rules of the American Arbitration Association (the “AAA”). If the parties are unable to agree on a single neutral arbitrator, the arbitrator shall be selected pursuant to the AAA rules. The arbitrator’s award in any such arbitration shall be final and binding, and a judgment upon such award may be entered and enforced by any court of competent jurisdiction. Each party to this Agreement understands that by agreeing to arbitrate their disputes, they are giving up their right to have their disputes heard in a court of law and, if applicable, by a jury. Company shall bear the costs of the arbitrator, the forum, and filing fees. Each party shall bear its own respective attorney’s fees and all other costs, unless otherwise required or allowed by law and awarded by the arbitrator.

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11. VIOLATION OF THE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

The Employee agrees and acknowledges that the violation of any of the provisions contained in the Proprietary Information and Inventions Agreement attached hereto as Exhibit A would cause irreparable injury to the Company, the remedy at law for any violation or threatened violation thereof would be inadequate, and that the Company shall be entitled to temporary and permanent injunctive or other equitable relief without the necessity of proving actual damages. The Employee agrees that such relief shall be available in a court of law in Los Angeles, California, regardless of the arbitration provisions contained in Section 10 of this Agreement.

12. MISCELLANEOUS

12.1 Amendment. This Agreement may not be modified or amended without the express prior written consent of the Company and the Employee.

12.2 Notices. All notices required or permitted under this Agreement shall be in writing, shall be sent either certified mail, return receipt requested, or by facsimile transmission and mailed or sent to the relevant party at its address or facsimile number set out below (or such other address or facsimile number as the addressee has given to the other parties in accordance with the terms of this Section):

To the Company:

Imaging3 Therapeutics, Inc.

3022 North Hollywood Way

Burbank, California 91505

(818) 260-0930

To the Employee:

Xavier Aguilera

_____________________

_____________________

Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered (a) if given or made by certified letter, return receipt requested, when actually delivered to the relevant party; and (b) if given or made by facsimile, upon receipt of a transmission report confirming receipt.

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12.3 Entire Agreement. This Agreement and the Exhibits attached hereto contain the entire agreement of the parties regarding the employment of the Employee, and there are no other promises or conditions regarding the Employee’s employment in any other agreement, whether oral or written. This Agreement shall terminate and supersede any previous employment agreements or arrangements between Employee and Company.

12.4 Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the respective corporation. Employee shall not be entitled to assign any of his rights or obligations under this Agreement.

12.5 Sections. References herein to Sections are to the sections in this Agreement, unless the context requires otherwise.

12.6 Headings. The section headings are inserted for convenience only and shall not affect the construction of this Agreement.

12.7 Rules of Construction. Unless the context requires otherwise, words importing the singular include the plural and vice versa, and words importing a gender include every gender.

4.13 12.8 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained therein.

12.9 Survival. Any variation in salary or conditions mutually agreed upon after the effective date of this Agreement shall not constitute a new agreement; instead, the terms and conditions of this Agreement, except as to such variation, shall continue in force.

12.10 Waiver. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.

12.11 Interpretation. This Agreement shall not be construed against any party on the grounds that such party drafted the Agreement or caused it to be drafted.

12.12 Governing Law. This Agreement shall be governed by the laws of the State of California. Any controversy or claim arising out of or relating to this Agreement or the breach thereof, whether involving remedies at law or equity, shall be adjudicated in Los Angeles, California.

12.13       No Conflicting Agreements. Employee represents and warrants to the Company that he is not a party to or bound by any confidentiality, noncompetition, nonsolicitation or other agreement or restriction which could conflict with or be violated by the performance of Employee’s duties to the Company under this Agreement or otherwise. Employee agrees that he will not disclose to the Company, use, or induce the Company to use, any invention or confidential information belonging to any third party.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above.

IMAGING3, INC.	EMPLOYEE
By:
	Signature
Its:
	Print Name

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EXHIBIT A

To the Restated Employment Agreement

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

IMAGING3, INC.

PROPRIETARY INFORMATION & INVENTIONS AGREEMENT

4.1       This Agreement is entered into this 25th day of July 2006, by and between Imaging3, Inc., a California corporation having an office at 3022 North Hollywood Way, Burbank CA 91505 (the “Company”), and _________________________________ (hereinafter referred to as “Employee”), having a principal residence at ______________________________________________________________.

In consideration of the compensation paid to Employee by the Company for Employee’s service as a member of the Company’s Board of Employees during such time as may be mutually agreeable to the Company and Employee, the Company and Employee hereby agree as follows:

1. Confidentiality, Non-disclosure.

(a) During the period of service, Employee will learn of and acquire Company and/or customer confidential, proprietary or other privileged information whether or not developed by Employee, relating to the products, processes, genes, promoters, plasmids, biological materials, microorganisms, computer programs, know-how, trade secrets, customers, suppliers, developments, patent rights and applications, equipment, and business information made, used, developed or practiced by the Company in its business. Employee recognizes that the success of the Company depends, in part, upon maintaining confidentiality of such information, which includes, without limitation, all non-public results of research or experiments, unannounced projects or plans, and all materials and information labeled as proprietary or confidential.

(b) Employee agrees to hold in strict confidence and not to disclose, during the term of service to the Company or thereafter, to anyone outside the Company or make use of such confidential, proprietary or privileged information except in the course of the performance of Employee’s duties to the Company or otherwise upon the prior written consent of the company in each instance. Disclosure of proprietary information through publications, seminars, posters and other media shall require the express written consent of the Company. The Company recognizes that Employee may from time to time desire to communicate with members of the professional community on matters of general interest. This paragraph is not intended to prohibit Employee’s interaction and communication with members of the professional community regarding issues of a general nature and not involving the disclosure of any Company confidences.

2. Disclosure and Assignment of Inventions.

(a) Employee will disclose promptly in writing to the Company every invention, discovery, improvement, process, technique, microorganism, gene, promoter, plasmid, vector, biological material, copyrightable material or know-how (herein “Invention”), whether patentable or not, made, conceived or developed, in whole or in part solely by Employee or jointly with others during the entire period of service to the Company which relate to the Company’s existing or contemplated business or which result from or are suggested by any work Employee has performed or may perform for the Company.

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(b) Employee hereby agrees to assign to the Company the entire right, title, and interest, domestic and foreign, to such Inventions. Employee further agrees, during and after the period of service to the Company, to sign all papers, execute all oaths and do everything necessary and proper to assign to the Company the domestic and foreign rights to said Inventions and to enable the Company to apply for, obtain, maintain and enforce United States and foreign patents and copyrights therein. This obligation is limited by the terms of Section 3 hereof.

(c) The Company agrees to bear all expense which it causes to be incurred by Employee in assigning, obtaining, maintaining and enforcing said patents and copyrights and further to pay Employee at a fair and reasonable rate for the time which it may require subsequent to the termination of Employee’s service and to reimburse Employee for any reasonable expenses incurred in connection therewith.

(d) With respect to such Inventions, whether patentable or not, conceived or made by Employee during the period of service, the obligations of this Section I shall continue beyond the term of such employment and shall be binding upon the heirs, legatees, assigns, executors, administrators and other legal representatives of Employee.

3. Unrelated Inventions. In signing this Agreement, I understand that California Labor Code Section 2870, of which notification is given below, applies to me regarding inventions, and that I am still required to disclose all my inventions to the Company.

NOTICE: This Agreement does not apply to an invention that qualifies fully under the provisions of Labor Code Section 2870 of the State of California, which states that:

(a) Any employment-agreement provision stating that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information, except for those inventions that either:

(1) relate at the time of conception or reduction to practice of the invention to the employer’s business or actual demonstrably anticipated research or development of the employer, or

(2) result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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4. Employee Inventions.

As a matter of record, attached hereto is a list and detailed description of all improvements and inventions made by Employee prior to the beginning of his or her term of service to the company (acknowledged by an authorized officer of the Company) that Employee desires to exclude from this Agreement.

5. Proprietary Materials. Employee acknowledges that the Company is the sole owner of all notes, notebooks, reports, drawings, data, other records, and biological materials related to his or her service to the Company. Employee agrees to return all such records and materials to the Company upon termination of service, provided that Employee shall be allowed to keep copies of personal notebooks and related documents.

6. Other Agreements of Employee. Employee represents that the performance of the terms of this Agreement and the performance of Employee’s duties for the Company do not and will not breach any agreement by which Employee is bound, including without limitation any employment agreement, confidentiality agreement or other obligation to protect proprietary information. Employee agrees to indemnify and hold the Company harmless from and against any and all liabilities or claims, including costs, expenses and reasonable attorney’s fees, arising out of any acts by Employee that, the foregoing representation to the contrary notwithstanding, shall be in violation of or shall constitute a breach of any such agreement or obligation.

7. Covenant Not to Solicit. For a period beginning with Employee’s election to the Company’s Board of Employees and ending one year following the date of termination of such service for any reason, Employee hereby agrees that he will not call on or otherwise solicit business from any of the customers or potential customers of the Company which, at the time of termination of his service, were listed (or ought to have been listed) in the Company’s records, as to any product that competes with any product provided or marketed by or actually under development by the Company at the time of Employee’s termination. Employee further agrees that he will not solicit the employment of or hire any employee of the Company throughout the term of this covenant. Employee agrees that he will, while serving the Company, promptly and fully disclose to the Company any business opportunity coming to Employee’s attention, or conceived or developed in whole or in part by Employee, which relates to the Company’s business or demonstrably anticipated business. Employee will not at any time exploit such business opportunities for his own gain or that of any person or entity other than the Company.

8. Remedies. Employee agrees that damages for breach of his covenants herein will be difficult to determine and inadequate to remedy the harm that may be caused thereby, and therefore consents that these covenants may be enforced by temporary or permanent injunction without the necessity of bond. Such injunctive relief shall be in addition to and not in place of any other remedies available at law or equity. However, should any court or tribunal decline to enforce any provision of paragraph 8 of this Agreement as written, the parties hereby agree that this Agreement shall, to the extent applicable to that circumstance before such court, be deemed to be modified to restrict Employee’s competition with the Company to the maximum extent of time, scope and geography which the court shall find reasonable and enforceable, and such provisions shall be so enforced. The prevailing party in any enforcement proceedings hereunder shall be awarded its costs and reasonable attorneys’ fees at all levels of such proceedings.

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11. Effectiveness/Entire Agreement. This Agreement is effective as of the date of Employee’s first election to the Company’s Board of Employees and, with respect to the subject matter hereof, both constitutes the entire agreement of the parties and supersedes all previous agreements of the same. This Agreement is ancillary to any other contract between the Company and Employee and is not intended to set forth any terms of Employee’s service. No term of any agreement between the Company and Employee shall be construed to conflict with or lessen Employee’s obligations under this Agreement.

12. Successors and Assigns. This Agreement shall be binding upon (i) Employee, Employee’s heirs, legatees, executors, assigns and administrators and shall inure to the benefit of the Company and its successors and assigns, and (ii) upon the Company and its successors and assigns.

Dated as of the date below the top written signature.

EMPLOYEE:

Signature:

Home Address:

Date:

IMAGING3:

Name/Title:

Date:

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LIST AND DETAILED DESCRIPTION OF ALL IMPROVEMENTS AND INVENTIONS MADE BY EMPLOYEE PRIOR TO EMPLOYMENT BY THE COMPANY THAT EMPLOYEE DESIRES TO EXCLUDE FROM THIS AGREEMENT

EMPLOYEE:

Signature:

Date:

IMAGING3:  

Name/Title:

Date:

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TABLE OF CONTENTS

Page

Exhibit A3

To the Agreement to Restate Aguilera Employment Agreement

CONVERTIBLE NOTE AMENDMENT AGREEMENT

i