Exhibit 10.2
CONVERTIBLE
PROMISSORY NOTE
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION
OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
CANNABIS
GLOBAL, INC.
Convertible
Promissory Note
due
April 28, 2023
| USD $400,000.00 |
Dated: April 28, 2022 |
For
value received, Cannabis Global, Inc., a Nevada corporation (the “Company”), with an address of 520 South Grand
Avenue, Ste. 320, Los Angeles, CA 90071, hereby promises to pay to the order of Sugarmade, Inc., a Delaware corporation, for the benefit
of Lemon Glow Company, Inc., a California corporation, with an address of 750 Royal Oaks Drive 108, Monrovia CA 91016 (together
with its successors, representatives, and permitted assigns, the “Holder”), in accordance with the terms hereinafter
provided, $400,000.00 (four hundred thousand dollars) (the “Principal Amount”), in connection with that certain Cultivation
and Supply Agreement executed April 28, 2022, and 8% interest. The Principal Amount outstanding shall be due and payable on the date
that is 12 months from the issuance date, i.e., April 28, 2023.
The
due dates of any outstanding Principal Amount and interest are referred to herein as the “Maturity Date”, respectively.
All
payments under or pursuant to this Note refer to and shall be made in United States Dollars in immediately available funds to the Holder
at the address of the Holder first set forth above or at such other place as the Holder may designate from time to time in writing to
the Company or by wire transfer of funds to the Holder’s account.
ARTICLE
I
Section
1.1 Cultivation Agreement. This Note has been executed and delivered pursuant to a Cultivation and Supply Agreement executed
April 28, 2022. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Cultivation
and Supply Agreement.
Section
1.2 Interest. Beginning on the issuance date of this Note (the “Issuance Date”), the outstanding principal
balance of this Note shall bear interest in arrears at a rate per annum equal to 8 percent accruing on a 12 month basis commencing
on the Issuance Date, which shall consist of the prepaid interest referred to above, which, at the option of the Holder, may be
converted to shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) on the same
terms as the Note.
Section
1.3 Payment on Non-Business Days. Whenever any payment to be made shall be due on a Saturday, Sunday, or a public holiday
under the laws of the State of Nevada, such payment may be due on the next succeeding business day and such next succeeding day
shall be included in the calculation of the amount of accrued interest payable on such date.
Section
1.4 Transfer. This Note may be transferred or sold, subject to the provisions of Section 4.8 of this Note, or pledged,
hypothecated, or otherwise granted as security by the Holder.
Section
1.5 Replacement. Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect to
the loss, theft, or destruction of this Note (or any replacement hereof), and without requiring an indemnity bond or other security,
or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Company shall issue a new Note, of like
tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.
ARTICLE
II
EVENTS
OF DEFAULT; REMEDIES
Section
2.1 Events of Default. The occurrence of any of the following events shall be an “Event of Default” under this
Note:
(a)
the Company shall fail to make the payment of any amount of principal outstanding on the date such payment is due
hereunder;
(b)
the Company shall fail to make any payment of interest in shares of Common Stock for a period of three (3) days after the date such
interest is due;
(c)
the suspension from listing, without subsequent listing, or the failure of the Common Stock to be listed on at least one of the OTC
Markets, Nasdaq SmallCap Market, Nasdaq National Market, American Stock Exchange or The New York Stock Exchange, Inc. for a period
of five (5) consecutive Trading Days;
(d)
the Company’s notice to the Holder, including by way of public announcement, at any time, of its inability to comply or its
intention not to comply with proper requests for conversion of this Note into shares of Common Stock;
(e)
the Company shall fail to (i) timely deliver the shares of Common Stock upon conversion of the Note or any accrued and unpaid
interest, or (ii) make the payment of any fees and/or liquidated damages under this Note or the Purchase Agreement, which failure in
the case of items (i) and (ii) of this Section 2.1(e) is not remedied within three (3) business days after the incurrence
thereof;
(f)
default shall be made in the performance or observance of (i) any material covenant, condition or agreement contained in this Note
(other than as set forth in clause (e) of this Section 2.1) and such default is not fully cured within five (5) business days after
the occurrence thereof or (ii) any material covenant, condition or agreement contained in the Purchase Agreement or any other
Transaction Document which is not covered by any other provisions of this Section 2.1 and such default is not fully cured within
five (5) business days after the occurrence thereof;
(g)
any material representation or warranty made by the Company herein or any other Transaction Document shall prove to have been false
or incorrect or breached in a material respect on the date as of which made;
(h)
the Company shall (A) default in any payment of any amount or amounts of principal of or interest on any Indebtedness (other than
the Indebtedness hereunder) the aggregate principal amount of which Indebtedness is in excess of $100,000 or (B) default in the
observance or performance of any other agreement or condition relating to any Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness to
cause with the giving of notice if required, such Indebtedness to become due prior to its stated maturity;
(i)
the Company shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of
its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v)
acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or
winding down of its operations or issue a press release regarding same, or (vii) take any action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing;
(j)
a proceeding or case shall be commenced in respect of the Company, without its application or consent, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of
its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of
its assets in connection with the liquidation or dissolution of the Company or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed,
or unstayed and in effect, for a period of sixty (60) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Company or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be
taken with respect to the Company and shall continue undismissed, or unstayed and in effect for a period of sixty (60) days;
or
(k)
the failure of the Company to instruct its transfer agent to remove any legends from shares of Common Stock eligible to be sold
under Rule 144 of the Securities Act and issue such unlegended certificates to the Holder within five (5) business days of the
Holder’s request so long as the Holder has provided reasonable assurances and opinions of counsel to the Company that such
shares of Common Stock can be resold pursuant to Rule 144; or
(l)
the failure of the Company to pay any amounts due to the Holder herein within three (3) business days of receipt of notice to the
Company.
Section
2.2 Remedies Upon An Event of Default. If an Event of Default shall have occurred and shall be continuing, the Holder of this
Note may at any time at its option, (a) declare the entire unpaid principal balance of this Note, together with all interest accrued
hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest,
or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Company; provided, however, that upon the
occurrence of an Event of Default described in (i) Sections 2.1 (k) or (l), the outstanding principal balance and interest hereunder
shall be automatically due and payable and (ii) Sections 2.1 (a)-(j) and 2.1(m)-(n), demand the prepayment of this Note pursuant to
Section 3.6 hereof, (b) subject to Section 3.4 hereof, demand that the principal amount of this Note then outstanding shall be
converted into shares of Common Stock at a Conversion Price (as defined in Section 3.2(a) hereof) per share calculated pursuant to
Section 3.1 hereof assuming that the date that the Event of Default occurs is the Conversion Date and demand that all accrued and
unpaid interest under this Note shall be converted into shares of Common Stock in accordance with Section 1.2 hereof, or (c)
exercise or otherwise enforce any one or more of the Holder’s rights, powers, privileges, remedies and interests under this
Note, the Purchase Agreement, other Transaction Document or applicable law. No course of delay on the part of the Holder shall
operate as a waiver thereof or otherwise prejudice the right of the Holder. No remedy conferred hereby shall be exclusive of any
other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE
III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section
3.1 Conversion Option.
(a)
At any time after the Issuance Date, this Note shall be convertible (in whole or in part), at the option of the Holder (the
“Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock (the
“Conversion Rate”) as is determined by dividing that portion of the outstanding principal balance under this Note
as of such date that the Holder elects to convert by the Conversion Price (as defined in Section 3.2(a) hereof) then in effect on
the date on which the Holder faxes a notice of conversion (the “Conversion Notice”), duly executed, to the
Company (the “Voluntary Conversion Date”), provided, however, that the Conversion Price shall be subject to
adjustment as described in Section 3.5 below. The Holder shall deliver this Note to the Company at the address designated in the
Purchase Agreement at such time that this Note is fully converted. With respect to partial conversions of this Note, the Company
shall keep written records of the amount of this Note converted as of each Conversion Date.
(b)
On any Voluntary Conversion Date, the Holder may cause the outstanding Principal Amount of this Note plus all accrued and unpaid
interest to convert into a number of fully paid and nonassessable shares of Common Stock equal to the quotient of the elected
outstanding principal amount of this Note plus all accrued interest on the elected outstanding on the Voluntary Conversion Date (as
described in this Section below) divided by the Conversion Price as described in Section 3.2(a) below.
Furthermore,
upon the occurrence of an Event of Default (as defined in Section 2.1 hereof), then to the extent permitted by law, the Company will
pay interest to the Holder, payable on demand, on the outstanding principal balance of the Note from the date of the Event of Default
until such Event of Default is cured at the rate of the lesser of fifteen percent (15%) and the maximum applicable legal rate per annum.
(c) Conversion
Limitations; Holder’s Restriction on Conversion. The Company shall not affect any conversion of this Note, and the
Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to such conversion, the
Holder (together with the Holder’s affiliates), as set forth on the applicable Conversion Notice, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion. 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 the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the
remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any
other Notes or the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this
Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination of whether this Note is convertible (in relation to other securities
owned by the Holder) and of which a portion of this Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Conversion Notice
that such Conversion Notice 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. For purposes of this Section, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K (or such related form), as the case may be, (y) a more recent public announcement
by the Company or (z) any other 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 the 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
provisions of this Section may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior
notice to the Company, and the provisions of this Section shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver).
Section
3.2 Conversion Price.
The
term “Conversion Price” shall mean 75% of the average closing price of Cannabis Global common shares during the ten
(10) trading days prior to conversion.
Section
3.3 Mechanics of Conversion.
(a)
Not later than three (3) Trading Days after any Conversion Date, the Company, or its designated transfer agent, as applicable, shall
issue and deliver to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Notice, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. In the alternative, not
later than three (3) Trading Days after any Conversion Date, the Company shall deliver to the applicable Holder by express courier a
certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by
Section 5.1 of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this
Note (the “Delivery Date”). Notwithstanding the foregoing to the contrary, the Company or its transfer agent
shall only be obligated to issue and deliver the shares to the DTC on the Holder’s behalf via DWAC (or certificates free of
restrictive legends) if such conversion is in connection with a sale and the Holder has complied with the applicable prospectus
delivery requirements. If in the case of any Conversion Notice such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Delivery Date, the Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall
immediately return this Note if tendered for conversion, whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the delivery of such notice of revocation, except that any amounts described in Sections
3.3(b) and (c) shall be payable through the date notice of rescission is given to the Company.
(b)
The Company understands that a delay in the delivery of the shares of Common Stock upon conversion of this Note beyond the Delivery
Date could result in economic loss to the Holder. If the Company fails to deliver to the Holder such shares via DWAC or a
certificate or certificates pursuant to this Section hereunder by the Delivery Date, the Company shall pay to such Holder, in cash,
an amount per Trading Day for each Trading Day until such shares are delivered via DWAC or certificates are delivered, together with
interest on such amount at a rate of 10% per annum, accruing until such amount and any accrued interest thereon is paid in full,
equal to the greater of (A) (i) 1% of the aggregate principal amount of the Note requested to be converted for the first five (5)
Trading Days after the Delivery Date and (ii) 2% of the aggregate principal amount of the Note requested to be converted for each
Trading Day thereafter and (B) $2,000 per day (which amount shall be paid as liquidated damages and not as a penalty). Nothing
herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or
injunctive relief). Notwithstanding anything to the contrary contained herein, the Holder shall be entitled to withdraw a Conversion
Notice, and upon such withdrawal the Company shall only be obligated to pay the liquidated damages accrued in accordance with this
Section 3.3(b) through the date the Conversion Notice is withdrawn.
Section
3.4 Ownership Cap and Certain Conversion Restrictions.
Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the Holder convert all or a portion of this Note if the
number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common
Stock owned by the Holder at such time, the number of shares of Common Stock which would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) more than 9.9% of all of the Common Stock outstanding
at such time; provided, however, that upon the Holder providing the Company with sixty-one (61) days notice (pursuant to Section 4.1
hereof) (the “Waiver Notice”) that the Holder would like to waive this Section 3.4 with regard to any or all shares of Common
Stock issuable upon conversion of this Note, this Section 3.4 will be of no force or effect with regard to all or a portion of the Note
referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the Maturity Date.
Section
3.5 Adjustment of Conversion Price.
(a)
The Conversion Price shall be subject to adjustment from time to time as follows:
(i) Adjustments
for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issuance Date, effect a stock
split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be
proportionately decreased. If the Company shall at any time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.5(a)(i) shall be effective at the close of business on the date the stock split or
combination occurs.
(ii) Adjustments
for Certain Dividends and Distributions. If the Company shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the applicable Conversion Price in effect immediately prior to such
event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of
business on such record date, by multiplying, the applicable Conversion Price then in effect by a fraction:
(1)
the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and
(2)
the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such
dividend or distribution.
(iii) Adjustment
for Other Dividends and Distributions. If the Company shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion Price
shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the holders of this Note
shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of
securities of the Company which they would have received had this Note been converted into Common Stock on the date of such event
and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities
(together with any distributions payable thereon during such period), giving application to all adjustments called for during such
period under this Section 3.5(a)(iii) with respect to the rights of the holders of this Note; provided, however, that
if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends
or distributions.
(iv) Adjustments
for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon conversion of this Note at any time or from
time to time after the Issuance Date shall be changed to the same or different number of shares of any class or classes of stock,
whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or
stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 3.5(a)(v)), then, and in each event, an appropriate revision to the Conversion Price shall be made and
provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the Holder shall have the right thereafter to
convert this Note into the kind and amount of shares of stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock into which such Note might have been converted
immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided
herein.
(v) Adjustments
for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the Issuance Date there
shall be a capital reorganization of the Company (other than by way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 3.5(a)(i), (ii) and (iii), or a reclassification, exchange or substitution of shares provided
for in Section 3.5(a)(iv)), or a merger or consolidation of the Company with or into another corporation where the holders of
outstanding voting securities prior to such merger or consolidation do not own over fifty percent (50%) of the outstanding voting
securities of the merged or consolidated entity, immediately after such merger or consolidation, or the sale of all or substantially
all of the Company’s properties or assets to any other person (an “Organic Change”), then as a part of such
Organic Change an appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the
Conversion Price or otherwise) so that the Holder shall have the right thereafter to convert such Note into the kind and amount of
shares of stock and other securities or property of the Company or any successor corporation resulting from Organic Change. In any
such case, appropriate adjustment shall be made in the application of the provisions of this Section 3.5(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of this Section 3.5(a)(v) (including any adjustment in
the applicable Conversion Price then in effect and the number of shares of stock or other securities deliverable upon conversion of
this Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.
(vi) Consideration
for Stock. In case any shares of Common Stock or any Common Stock Equivalents shall be issued or sold:
(1)
in connection with any merger or consolidation in which the Company is the surviving corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of the Company shall be changed to or exchanged for the stock or
other securities of another corporation), the amount of consideration therefor shall be, deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board may determine to be attributable to such shares of Common Stock, Convertible Securities,
rights or warrants or options, as the case may be; or
(2)
in the event of any consolidation or merger of the Company in which the Company is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Company shall be changed into or exchanged for the stock or other securities of
another corporation, or in the event of any sale of all or substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a number of shares of its Common Stock for stock or
securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction
was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or
securities or other property of the other corporation. If any such calculation results in adjustment of the applicable Conversion
Price, or the number of shares of Common Stock issuable upon conversion of the Note, the determination of the applicable Conversion
Price or the number of shares of Common Stock issuable upon conversion of the Note immediately prior to such merger, consolidation,
or sale, shall be made after giving effect to such adjustment of the number of shares of Common Stock issuable upon conversion of
the Note. In the event Common Stock is issued with other shares or securities or other assets of the Company for consideration which
covers both, the consideration computed as provided in this Section 3.5(viii) shall be allocated among such securities and assets as
determined in good faith by the Board of Directors of the Company.
(b) Record
Date. In case the Company shall take record of the holders of its Common Stock for the purpose of entitling them to subscribe
for or purchase Common Stock or Convertible Securities, then the date of the issue or sale of the shares of Common Stock shall be
deemed to be such record date.
(c) Certain
Issues Excepted. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment to
the Conversion Price in connection with (i) securities issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to a bona fide firm underwritten public offering of the Company’s securities,
(iii) securities issued pursuant to the conversion or exercise of convertible or excercisable securities issued or outstanding on or
prior to the date hereof or issued pursuant to the Purchase Agreement, (iv) the shares of Common Stock issuable upon the exercise of
Warrants, (v) securities issued in connection with strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (vi) Common Stock issued or options to purchase Common Stock granted or issued
pursuant to the Company’s stock option plans and employee stock purchase plans as they now exist and (vii) the payment of any
accrued interest in shares of Common Stock pursuant to this Note.
(d) No
Impairment. The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good
faith, assist in the carrying out of all the provisions of this Section 3.5 and in the taking of all such action as may be necessary
or appropriate in order to protect the Conversion Rights of the Holder against impairment. In the event a Holder shall elect to
convert any Note as provided herein, the Company cannot refuse conversion based on any claim that such Holder or any one associated
or affiliated with such Holder has been engaged in any violation of law, violation of an agreement to which such Holder is a party
or for any reason whatsoever, unless, an injunction from a court, or notice, restraining and or adjoining conversion of all or of
said Note shall have issued and the Company posts a surety bond for the benefit of such Holder in an amount equal to one hundred
thirty percent (130%) of the amount of the Note the Holder has elected to convert, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the event it
obtains judgment.
(e) Certificates
as to Adjustments. Upon occurrence of each adjustment or readjustment of the Conversion Price or number of shares of Common
Stock issuable upon conversion of this Note pursuant to this Section 3.5, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment
and readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon written
request of the Holder, at any time, furnish or cause to be furnished to the Holder a like certificate setting forth such adjustments
and readjustments, the applicable Conversion Price in effect at the time, and the number of shares of Common Stock and the amount,
if any, of other securities or property which at the time would be received upon the conversion of this Note. Notwithstanding the
foregoing, the Company shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease
of at least one percent (1%) of such adjusted amount.
(f) Issue
Taxes. The Company shall pay any and all issue and other taxes, excluding federal, state, or local income taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on conversion of this Note pursuant thereto; provided, however,
that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection
with any such conversion.
(g) Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of this Note. In lieu of any fractional shares to
which the Holder would otherwise be entitled, the Company shall pay cash equal to the product of such fraction multiplied by the
average of the Closing Bid Prices of the Common Stock for the five (5) consecutive Trading Days immediately preceding the Conversion
Date.
(h) Reservation
of Common Stock. The Company shall at all times when this Note shall be outstanding, reserve and keep available out of its
authorized but unissued Common Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of this Note and all interest accrued thereon; provided that the number of shares of Common Stock so reserved
shall at no time be less than one hundred twenty percent (120%) of the number of shares of Common Stock for which this Note and all
interest accrued thereon are at any time convertible. The Company shall, from time to time in accordance with Nevada corporate law,
increase the authorized number of shares of Common Stock if at any time the unissued number of authorized shares shall not be
sufficient to satisfy the Company’s obligations under this Section 3.5(h).
(i) Regulatory
Compliance. If any shares of Common Stock to be reserved for the purpose of conversion of this Note or any interest accrued
thereon require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body
under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the
Company shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor to secure such registration,
listing or approval, as the case may be.
Section
3.6 Prepayment.
(a) Prepayment
Upon an Event of Default. Notwithstanding anything to the contrary contained herein, upon the occurrence of an Event of Default
described in Sections 2.1(a)-(j) and 2.1(m)-(o) hereof, the Holder shall have the right, at such Holder’s option, to require
the Company to prepay in cash all or a portion of this Note plus all accrued and unpaid interest applicable at the time of such
request (the “Event of Default Prepayment Price”). Nothing in this Section 3.6(a) shall limit the Holder’s
rights under Section 2.2 hereof.
(b) Prepayment
Option Upon Major Transaction. In addition to all other rights of the Holder contained herein, simultaneous with the occurrence
of a Major Transaction (as defined in Section 3.6(d) hereof), the Holder shall have the right, at the Holder’s option, to
require the Company to prepay all or a portion of the Holder’s Note at a price equal to one hundred thirty percent (130%) of
the aggregate principal amount of this Note plus all accrued and unpaid interest (the “Major Transaction Prepayment
Price”).
(c) Prepayment
Option Upon Triggering Event. In addition to all other rights of the Holder contained herein, after a Triggering Event (as
defined below), the Holder shall have the right, at the Holder’s option, to require the Company to prepay all or a portion of
this Note in cash at a price equal to the sum of (i) the greater of (A) one hundred thirty percent (130%) of the aggregate principal
amount of this Note plus all accrued and unpaid interest and (B) in the event at such time the Holder is unable to obtain the
benefit of its conversion rights through the conversion of this Note and resale of the shares of Common Stock issuable upon
conversion hereof in accordance with the terms of this Note and the other Transaction Documents, the aggregate principal amount of
this Note plus all accrued but unpaid interest hereon, divided by the Conversion Price on (x) the date the Prepayment Price (as
defined below) is demanded or otherwise due or (y) the date the Prepayment Price is paid in full, whichever is less, multiplied by
the VWAP on (x) the date the Prepayment Price is demanded or otherwise due, and (y) the date the Prepayment Price is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Note and the other
Transaction Documents (the “Triggering Event Prepayment Price,” and, collectively with the “Major Transaction
Prepayment Price,” the “Prepayment Price”).
(d) Major
Transaction. A “Major Transaction” shall be deemed to have occurred at such time as any of the following
events:
(i)
the consolidation, merger or other business combination of the Company with or into another Person (other than (A) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or (B) a
consolidation, merger or other business combination in which holders of the Company’s voting power immediately prior to the
transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such
entity or entities); or
(ii)
the sale or transfer of more than fifty percent (50%) of the Company’s assets (based on the fair market value as determined in
good faith by the Company’s Board of Directors) other than inventory in the ordinary course of business in one or a related
series of transactions; or
(iii)
closing of a purchase, tender or exchange offer made to the holders of more than fifty percent (50%) of the outstanding shares of
Common Stock in which more than fifty percent (50%) of the outstanding shares of Common Stock were tendered and accepted.
(e) Triggering
Event. A “Triggering Event” shall be deemed to have occurred at such time as any of the following events:
(i)
the suspension from listing, without subsequent listing on any one of, or the failure of the Common Stock to be listed on at least
one of the OTC Bulletin Board, Nasdaq SmallCap Market, Nasdaq National Market, American Stock Exchange or The New York Stock
Exchange, Inc. for a period of five (5) consecutive Trading Days;
(ii)
the Company’s notice to any holder of the Note, including by way of public announcement, at any time, of its inability to
comply (including for any of the reasons described in Section 3.8) or its intention not to comply with proper requests for
conversion of any Note into shares of Common Stock; or
(iii)
the Company’s failure to comply with a Conversion Notice tendered in accordance with the provisions of this Note within ten
(10) business days after the receipt by the Company of the Conversion Notice; or
(iv)
the Company deregisters its shares of Common Stock and as a result such shares of Common Stock are no longer publicly traded;
or
(v)
the Company consummates a “going private” transaction and as a result the Common Stock is no longer registered under
Sections 12(b) or 12(g) of the Exchange Act.
(f) Mechanics
of Prepayment at Option of Holder Upon Major Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior to
the consummation of a Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall
deliver written notice thereof via facsimile and overnight courier (“Notice of Major Transaction”) to the Holder of this
Note. At any time after receipt of a Notice of Major Transaction (or, in the event a Notice of Major Transaction is not delivered at
least ten (10) days prior to a Major Transaction, at any time within ten (10) days prior to a Major Transaction), any holder of the
Notes then outstanding may require the Company to prepay, effective immediately prior to the consummation of such Major Transaction,
all of the holder’s Notes then outstanding by delivering written notice thereof via facsimile and overnight courier
(“Notice of Prepayment at Option of Holder Upon Major Transaction”) to the Company, which Notice of Prepayment at Option
of Holder Upon Major Transaction shall indicate (i) the number of Notes that such holder is electing to prepay and (ii) the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section 3.6(b) above.
(g) Mechanics
of Prepayment at Option of Holder Upon Triggering Event. Within one (1) business day after the occurrence of a Triggering Event,
the Company shall deliver written notice thereof via facsimile and overnight courier (“Notice of Triggering Event”) to
each holder of the Notes. At any time after the earlier of a holder’s receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any holder of this Note may require the Company to prepay all of the Notes on a pro rata basis
by delivering written notice thereof via facsimile and overnight courier (“Notice of Prepayment at Option of Holder Upon
Triggering Event”) to the Company, which Notice of Prepayment at Option of Holder Upon Triggering Event shall indicate (i)
the amount of the Note that such holder is electing to have prepaid and (ii) the applicable Triggering Event Prepayment Price, as
calculated pursuant to Section 3.6(c) above. A holder shall only be permitted to require the Company to prepay the Note pursuant to
Section 3.6 hereof for the greater of a period of ten (10) days after receipt by such holder of a Notice of Triggering Event or for
so long as such Triggering Event is continuing.
(h) Payment
of Prepayment Price. Upon the Company’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Triggering Event or
a Notice(s) of Prepayment at Option of Holder Upon Major Transaction from any holder of the Notes, the Company shall immediately
notify each holder of the Notes by facsimile of the Company’s receipt of such Notice(s) of Prepayment at Option of Holder Upon
Triggering Event or Notice(s) of Prepayment at Option of Holder Upon Major Transaction and each holder which has sent such a notice
shall promptly submit to the Company such holder’s certificates representing the Notes which such holder has elected to have
prepaid. The Company shall deliver the applicable Triggering Event Prepayment Price, in the case of a prepayment pursuant to Section
3.6(i), to such holder within five (5) business days after the Company’s receipt of a Notice of Prepayment at Option of Holder
Upon Triggering Event and, in the case of a prepayment pursuant to Section 3.(f), the Company shall deliver the applicable Major
Transaction Prepayment Price immediately prior to the consummation of the Major Transaction; provided that a holder’s original
Note shall have been so delivered to the Company; provided further that if the Company is unable to prepay all of the Notes to be
prepaid, the Company shall prepay an amount from each holder of the Notes being prepaid equal to such holder’s pro-rata amount
(based on the number of Notes held by such holder relative to the number of Notes outstanding) of all Notes being prepaid. If the
Company shall fail to prepay all of the Notes submitted for prepayment (other than pursuant to a dispute as to the arithmetic
calculation of the Prepayment Price), in addition to any remedy such holder of the Notes may have under this Note and the Purchase
Agreement, the applicable Prepayment Price payable in respect of such Notes not prepaid shall bear interest at the rate of two
percent (2%) per month (prorated for partial months) until paid in full. Until the Company pays such unpaid applicable Prepayment
Price in full to a holder of the Notes submitted for prepayment, such holder shall have the option (the “Void Optional
Prepayment Option”) to, in lieu of prepayment, require the Company to promptly return to such holder(s) all of the Notes that
were submitted for prepayment by such holder(s) under this Section 3.6 and for which the applicable Prepayment Price has not been
paid, by sending written notice thereof to the Company via facsimile (the “Void Optional Prepayment Notice”).
Upon the Company’s receipt of such Void Optional Prepayment Notice(s) and prior to payment of the full applicable Prepayment
Price to such holder, (i) the Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the Notice(s) of Prepayment at
Option of Holder Upon Major Transaction, as the case may be, shall be null and void with respect to those Notes submitted for
prepayment and for which the applicable Prepayment Price has not been paid, (ii) the Company shall immediately return any Notes
submitted to the Company by each holder for prepayment under this Section 3.6(h) and for which the applicable Prepayment Price has
not been paid and (iii) the Conversion Price of such returned Notes shall be adjusted to the lesser of (A) the Conversion Price as
in effect on the date on which the Void Optional Prepayment Notice(s) is delivered to the Company and (B) the lowest Closing Bid
Price during the period beginning on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major Transaction or the
Notice(s) of Prepayment at Option of Holder Upon Triggering Event, as the case may be, is delivered to the Company and ending on the
date on which the Void Optional Prepayment Notice(s) is delivered to the Company; provided that no adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect. A holder’s delivery of a Void Optional
Prepayment Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any
payments which have accrued prior to the date of such notice. Payments provided for in this Section 3.6 shall have priority to
payments to other stockholders in connection with a Major Transaction.
(i) Company
Prepayment Option upon Major Transaction. Upon the consummation of a Major Transaction, the Company may prepay in cash all or
any portion of the outstanding principal amount of this Note together with all accrued and unpaid interest thereon upon at least
thirty (30) days prior written notice to the Holder (the “Company’s Prepayment Notice”) at a price equal to
one hundred thirty percent (120%) of the aggregate principal amount of this Note plus any accrued but unpaid interest (the
“Company’s Prepayment Price”); provided, however, that if a holder has delivered a Conversion Notice to the
Company or delivers a Conversion Notice within such thirty (30) day period following delivery of the Company’s Prepayment
Notice, the principal amount of the Notes plus any accrued but unpaid interest designated to be converted may not be prepaid by the
Company and shall be converted in accordance with Section 3.3 hereof; provided further that if during the period between delivery of
the Company’s Prepayment Notice and the Company’s Prepayment Date (as defined below), a holder shall become entitled and
elects to deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or Notice of Prepayment at Option of Holder upon
Triggering Event, then such rights of the holders shall take precedence over the previously delivered Company Prepayment Notice if
the holder so elects. The Company’s Prepayment Notice shall state the date of prepayment which date shall be the date of the
consummation of the Major Transaction (the “Company’s Prepayment Date”), the Company’s Prepayment
Price and the principal amount of Notes plus any accrued but unpaid interest to be prepaid by the Company. The Company shall deliver
the Company’s Prepayment Price on the Company’s Prepayment Date, provided, that if the holder(s) delivers a Conversion
Notice before the Company’s Prepayment Date, then the portion of the Company’s Prepayment Price which would be paid to
prepay the Notes covered by such Conversion Notice shall be returned to the Company upon delivery of the Common Stock issuable in
connection with such Conversion Notice to the holder(s). On the Company’s Prepayment Date, the Company shall pay the
Company’s Prepayment Price, subject to any adjustment pursuant to the immediately preceding sentence, to the holder(s) on a
pro rata basis. If the Company fails to pay the Company’s Prepayment Price by the third (3rd) business day after the
Company’s Prepayment Date, the prepayment will be declared null and void and the Company shall lose its right to serve a
Company’s Prepayment Notice pursuant to this Section 3.6(i) in the future. Notwithstanding the foregoing to the contrary, the
Company may affect a prepayment pursuant to this Section 3.6(i) only if trading in the Common Stock shall not have been suspended by
the Securities and Exchange Commission or the Nasdaq SmallCap Market (or other exchange or market on which the Common Stock is
trading), and the Company is in material compliance with the terms and conditions of this Note and the other Transaction
Documents.
(j) Prepayment
at the Election of the Company. Notwithstanding anything to the contrary contained in this Note, at any time during the period
beginning on the Issuance Date and ending on the date which is one hundred and eighty (180) days following the issue date, the
Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to
prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 3.6(j). Any notice of
prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its
registered addresses and shall state: (1) that the Company is exercising its right to prepay the Note, and (2) the date of
prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed
for prepayment (the “Optional Prepayment Date”), the Company shall make payment of the Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Company at least one (1) business
day prior to the Optional Prepayment Date. If the Company exercises its right to prepay the Note, the Company shall make payment to
the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the
Optional Prepayment Date.
Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is one hundred and eighty
one (181) days following the issue date and ending on the date which is thirty days thereafter, and for each subsequent thirty day period
thereafter, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder
of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 3.6(j). Any Optional
Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Company is exercising
its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the Company shall make payment of the Subsequent Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Company at least one (1) business
day prior to the Optional Prepayment Date. If the Company exercises its right to prepay the Note, the Company shall make payment to the
Holder of an amount in cash (the “Subsequent Optional Prepayment Amount”) equal to 135%, multiplied by the sum of: (w) the
then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the
Optional Prepayment. For each subsequent thirty-day period, the Subsequent Optional Prepayment amount shall increase by 5% of amount
payable.
Section
3.7 Inability to Fully Convert.
(a) Holder’s
Option if Company Cannot Fully Convert. If, upon the Company’s receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock for any reason, including, without limitation, because the Company (w) does not have a sufficient number of
shares of Common Stock authorized and available, or (x) is otherwise prohibited by applicable law or by the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of
its securities from issuing all of the Common Stock which is to be issued to the Holder pursuant to a Conversion Notice, then the
Company shall issue as many shares of Common Stock as it is able to issue in accordance with the Holder’s Conversion Notice
and, with respect to the unconverted portion of this Note, the Holder, solely at Holder’s option, can elect to:
(i)
require the Company to prepay that portion of this Note for which the Company is unable to issue Common Stock in accordance with the
Holder’s Conversion Notice (the “Mandatory Prepayment”) at a price per share equal to the Triggering Event
Prepayment Price as of such Conversion Date (the “Mandatory Prepayment Price”);
(ii)
void its Conversion Notice and retain or have returned, as the case may be, this Note that was to be converted pursuant to the
Conversion Notice (provided that the Holder’s voiding its Conversion Notice shall not affect the Company’s obligations
to make any payments which have accrued prior to the date of such notice).
In
the event a Holder shall elect to convert any portion of its Notes as provided herein, the Company cannot refuse conversion based on
any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, violation of
an agreement to which such Holder is a party or for any reason whatsoever, unless, an injunction from a court, on notice, restraining
and or adjoining conversion of all or of said Notes shall have been issued and the Company posts a surety bond for the benefit of such
Holder in an amount equal to 130% of the principal amount of the Notes the Holder has elected to convert, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the
event it obtains judgment.
(b) Mechanics
of Fulfilling Holder’s Election. The Company shall immediately send via facsimile to the Holder, upon receipt of a
facsimile copy of a Conversion Notice from the Holder which cannot be fully satisfied as described in Section 3.7(a) above, a notice
of the Company’s inability to fully satisfy the Conversion Notice (the “Inability to Fully Convert
Notice”). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Company is unable to fully satisfy
such holder’s Conversion Notice, (ii) the amount of this Note which cannot be converted and (iii) the applicable Mandatory
Prepayment Price. The Holder shall notify the Company of its election pursuant to Section 3.7(a) above by delivering written notice
via facsimile to the Company (“Notice in Response to Inability to Convert”).
(c) Payment
of Prepayment Price. If the Holder shall elect to have its Notes prepaid pursuant to Section 3.7(a)(i) above, the Company shall
pay the Mandatory Prepayment Price to the Holder within thirty (30) days of the Company’s receipt of the Holder’s Notice
in Response to Inability to Convert, provided that prior to the Company’s receipt of the Holder’s Notice in
Response to Inability to Convert the Company has not delivered a notice to the Holder stating, to the satisfaction of the Holder,
that the event or condition resulting in the Mandatory Prepayment has been cured and all Conversion Shares issuable to the Holder
can and will be delivered to the Holder in accordance with the terms of this Note. If the Company shall fail to pay the applicable
Mandatory Prepayment Price to the Holder on a timely basis as described in this Section 3.7(c) (other than pursuant to a dispute as
to the determination of the arithmetic calculation of the Prepayment Price), in addition to any remedy the Holder may have under
this Note and the Purchase Agreement, such unpaid amount shall bear interest at the rate of two percent (2%) per month (prorated for
partial months) until paid in full. Until the full Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i) void
the Mandatory Prepayment with respect to that portion of the Note for which the full Mandatory Prepayment Price has not been paid,
(ii) receive back such Note, and (iii) require that the Conversion Price of such returned Note be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Holder voided the Mandatory Prepayment and (B) the lowest Closing Bid Price
during the period beginning on the Conversion Date and ending on the date the Holder voided the Mandatory Prepayment.
(d) Pro-rata
Conversion and Prepayment. In the event the Company receives a Conversion Notice from more than one holder of the Notes on the
same day and the Company can convert and prepay some, but not all, of the Notes pursuant to this Section 3.7, the Company shall
convert and prepay from each holder of the Notes electing to have its Notes converted and prepaid at such time an amount equal to
such holder’s pro-rata amount (based on the principal amount of the Notes held by such holder relative to the principal amount
of the Notes outstanding) of all the Notes being converted and prepaid at such time.
Section
3.8 No Rights as Shareholder. Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the
conversion of this Note, the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of
any meeting of shareholders for the election of directors of the Company or of any other matter, or any other rights as a shareholder
of the Company.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be
in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy or facsimile at the address
or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The Company will give written
notice to the Holder at least ten (10) days prior to the date on which the Company takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to holders of Common Stock or (z) for determining
rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such notice be provided
to such holder prior to such information being made known to the public. The Company will also give written notice to the Holder at least
ten (10) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place and in no event shall
such notice be provided to the Holder prior to such information being made known to the public.
| Address for Holder: |
Lemon Glow Company, Inc. |
| |
750 Royal Oaks Drive 108 |
| |
Monrovia CA 91016 |
| |
Email: Attention Jimmy Chan: Jimmy@sugarmade.com |
| |
|
| Address for Company: |
Cannabis Global, Inc. |
| |
520 South Grand Avenue, Ste. 320 |
| |
Los Angeles, CA 90071 |
| |
Email: Attention Arman Tabatabaei:
arman@cannabisglobalinc.com |
Section
4.2 Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of Nevada,
without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another
jurisdiction. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.
Section
4.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and
shall not constitute a part of this Note for any other purpose.
Section
4.4 Remedies, Characterizations, Other Obligations, Breaches, and Injunctive Relief. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a
decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit a holder’s right to pursue actual damages for
any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments,
conversion, and the like (and the computation thereof) shall be the amounts to be received by the holder thereof and shall not,
except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the
remedy at law for any such breach may be inadequate. Therefore, the Company agrees that, in the event of any such breach or
threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to
seek and obtain such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach,
without the necessity of showing economic loss and without any bond or other security being required.
Section
4.5 Enforcement Expenses. The Company agrees to pay all costs and expenses of enforcement of this Note, including, without
limitation, reasonable attorneys’ fees, and expenses.
Section
4.6 Binding Effect. The obligations of the Company and the Holder set forth herein shall be binding upon the successors and
assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof.
Section
4.7 Amendments. This Note may not be modified or amended in any manner except in writing executed by the Company and the
Holder.
Section
4.8 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the
Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell,
or otherwise dispose of this Note. This Note and any Note issued in substitution or replacement therefor shall be stamped or
imprinted with a legend in substantially the following form:
“THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL IN THE FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”
Section
4.9 Consent to Jurisdiction. Each of the Company and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction
of the State of Nevada for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this Section 4.9 shall affect or limit any right to serve process
in any other manner permitted by law. Each of the Company and the Holder hereby agree that the prevailing party in any suit, action or
proceeding arising out of or relating to this Note shall be entitled to reimbursement for reasonable legal fees from the non-prevailing
party.
Section
4.10 Parties in Interest. This Note shall be binding upon, inure to the benefit of and be enforceable by the Company, the
Holder and their respective successors and permitted assigns.
Section
4.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or privilege.
Section
4.12 Company Waivers. Except as otherwise specifically provided herein, the Company and all others that may become liable for
all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all
other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do
hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions
may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of
any person liable hereon, all without affecting the liability of the other persons, firms or Company liable for the payment of this
Note, AND DO HEREBY WAIVE TRIAL BY JURY.
(a)
No delay or omission on the part of the Holder in exercising its rights under this Note, or course of conduct relating hereto, shall
operate as a waiver of such rights or any other right of the Holder, nor shall any waiver by the Holder of any such right or rights
on any one occasion be deemed a waiver of the same right or rights on any future occasion.
(b)
THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY
APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS
SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
SIGNATURE
PAGE FOLLOWS
SIGNATURE
PAGE TO CONVERTIBLE PROMISSORY NOTE
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CANNABIS GLOBAL INC. |
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By: |
/s/ Arman Tabatabaei |
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Name: |
Arman Tabatabaei |
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Title: |
Chief Executive Officer |
FORM
OF
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the principal amount of the above Note No. ___ into shares of
Common Stock of Plandaí Biotechnology Inc. (the “Company”) according to the conditions hereof, as of the date
written below.
Date
of Conversion: ___________________________________________
Applicable
Conversion Price: ____________________________________
Number
of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion: _________________________________________________
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