Exhibit 10.1
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
| Principal
Amount: US$39,111 |
Issue
Date: February 6, 2024 |
| Purchase
Price: US$35,200.08 |
|
PROMISSORY NOTE
FOR VALUE RECEIVED, AUTO PARTS
4LESS GROUP, INC., a Nevada corporation (hereinafter called the “Borrower”) (Trading Symbol: FLES), hereby promises to
pay to the order of CAVALRY FUND I, LP,, a Delaware limited partnership, or registered assigns (the “Holder”) the
sum of US$39,111 (the “Principal”) together with guaranteed interest (the “Interest”) on the Principal balance
hereof in the amount of twelve percent (12%) (the “Interest Rate”) per calendar year from the date hereof (the “Issue
Date”). All Principal and Interest owing hereunder, along with any and all other amounts, shall be due and owing on October 31st,
2024 (the “Maturity Date”). Interest shall accrue hereunder and shall be due and payable on the Maturity Date, upon the consummation
of the Borrower’s uplist or next capital raise, or upon acceleration or by prepayment or otherwise. Notwithstanding the foregoing,
the final payment of Principal and Interest shall be due on the Maturity Date. This Note may be prepaid in whole or in part as set forth
herein. Any amount of Principal or Interest on this Note which is not paid when due shall bear interest at the rate of the lesser of
(i) eighteen percent (18%) per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid
(the “Default Interest”). Default Interest shall commence accruing upon an Event of Default and shall be computed on the
basis of a 360-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock,
$0.0001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the
United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of
any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be
taken into account for purposes of
determining the amount of interest due on such date.
As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date
hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).
This Note carries an original
issue discount of $3,911.12 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale
of the Note, which is included in the principal balance of this Note. Thus, the purchase price of this Note shall be $35,200.08 computed
as follows: the Principal Amount minus the OID.
This Note is free from all taxes,
liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights
of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also
apply to this Note:
ARTICLE I. CONVERSION RIGHTS UPON EVENT
OF DEFAULT
1.1 Conversion Right. The
Holder shall have the right beginning on the date that is 180 days from the date hereof, from time to time following an Event of Default,
and ending on the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in
respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal,
interest, penalties, and all other amounts under this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock
exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter
be changed or reclassified at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note
upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the
unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to
the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note
with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (“Beneficial Ownership Limitation”). For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1)
of such proviso. The Holder, upon notice to the Borrower, may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 1.1, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions
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of this Section 1.1 shall continue to apply. Any such
increase or decrease will not be effective until the 61st day after such notice is delivered to the Borrower. The number of shares of
Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by
the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit
A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with
Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion
date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note,
the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued
and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however,
that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, Default Interest,
if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2 Conversion Price.
(a)
Calculation of Conversion Price. Subject to the adjustments described herein, the conversion price (the “Conversion
Price”) shall equal $0.01 per share. If the shares of the Borrower’s Common Stock have not been delivered within three (3)
business days to the Borrower or Borrower’s transfer agent, the Notice of Conversion may be rescinded. “Trading Day”
shall mean any day on which the Common Stock is tradable for any period on the OTC Pink, OTCQB or on the principal securities exchange
or other securities market on which the Common Stock is then being traded. The Borrower shall be responsible for the fees of its transfer
agent and all DTC fees associated with any such issuance. Holder shall be entitled to deduct $500.00 from the conversion amount in each
Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion.
While this Note is outstanding,
each time any 3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a
settlement or otherwise), including but not limited to under Section 3(a)(9) and Section 3(a)(10), at a discount to market greater than
the Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), but excluding any 3rd
party loans that are already outstanding on the Issue Date, then the Holder, in Holder’s sole discretion, may utilize such greater
discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. While this Note is outstanding,
each time any 3rd party has a look back period greater than the look back period in effect under the Note at that time, including
but not limited to under Section 3(a)(9) and Section 3(a)(10), excluding any 3rd party loans that are already outstanding on
the Issue Date, then the Holder, in Holder’s sole discretion, may utilize such greater number of look back days until this Note
is no longer outstanding. The Borrower shall give written notice to the Holder within one (1) business day of becoming aware of any event
that could permit the Holder to make any adjustment described in the two immediately preceding sentences.
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(b)
Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder
in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with Section 4.13.
(c)
If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock,
then the Conversion Price hereunder shall equal such par value for such conversion and the Conversion Amount for such conversion shall
be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number
of conversion shares as would have been issued had the Conversion Price not been subject to the minimum price set forth in this Section
1.2(c).
1.3 Authorized Shares. The
Borrower covenants that during the period while any outstanding balance is owing hereunder or any conversion of the Note is available,
the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to
provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower
is required at all times to have authorized and reserved at least five (5) times the number of shares that is actually issuable upon full
conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). The
Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 3(d) of the
Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.
In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares
of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to
issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute
full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no
event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.
If, at any time the Borrower does
not maintain or replenish the Reserved Amount as required hereunder within three (3) business days of the request of the Holder, the principal
amount of the Note shall increase by Five Thousand and No/100 United States Dollars ($5,000) (under Holder’s and Borrower’s
expectation that any principal amount increase will tack back to the Issue Date) per occurrence.
1.4 Method of Conversion.
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(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time
from time to time after an Event of Default, by (A) submitting to the Borrower or Borrower’s transfer agent a Notice of Conversion
(by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New
York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note
in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire
unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records
of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders
this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount
of this Note represented by this Note may be less than the amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property
unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established
to the satisfaction of the Borrower that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail
(or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely
in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and
the Purchase Agreement.
(e)
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall
be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount
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of accrued and unpaid interest on this Note shall
be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect
to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein,
the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation
of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by the Borrower before 11:59 p.m., New York, New York time, on such date.
(f)
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and
in this Section 1.4, the Borrower shall use its commercially reasonable best efforts to cause its transfer agent to electronically transmit
the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal At Custodian (“DWAC”) system.
(g)
DTC Eligibility & Market Loss. If the Borrower fails to maintain its status as “DTC Eligible” for any reason,
the principal amount of the Note shall increase by Five Thousand and No/100 United States Dollars ($5,000) (under Holder’s and Borrower’s
expectation that any principal amount increase will tack back to the Issue Date) and the Variable Conversion Price shall be redefined
to mean seventy percent (70%) multiplied by the Market Price, subject to adjustment as provided in this Note.
(h)
Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue
other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon
conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit
the Holder's balance account with OTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder's conversion
of any Conversion Amount (under Holder's and Borrower's expectation that any damages will tack back to the Issue Date). Such cash amount
shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by
written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of
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this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable
right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(h)
are justified.
(i)
Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the
Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s
Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion,
(iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted
and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the
Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any
time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets changes the Borrower's designation to ‘Limited
Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’,
‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after
the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion (“Rescindment”)
with a “Notice of Rescindment.”
1.5 Concerning the Shares.
The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant
to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion
of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect
that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares
are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or other applicable exemption
or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Holder who agrees to sell or otherwise
transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).
Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule
144 or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately
sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal
of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
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EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall
be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its
transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which
opinion shall be reasonably accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock
issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed
under the Act or otherwise may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of
securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel
provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation
S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially
all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with
or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event
of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of
and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to
Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association,
trust or other entity or organization.
(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion
of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially
all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this
Note shall thereafter have the right to receive upon conversion of this Note, upon
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the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which
the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable,
as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower
shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, fifteen (15) days
prior written notice (but in any event at least ten (10) days prior written notice) of the record date of the special meeting of shareholders
to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b)
the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b).
The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire
its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend
or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after
the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been
payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such
shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells,
or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued in an Exempt
Issuance (as defined in the Purchase Agreement) and any shares issued under conversion or exercise of 3rd party securities
that are already outstanding on the Issue Date, any shares of Common Stock for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the
date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the
Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such
Dilutive Issuance.
The Borrower shall be deemed to
have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including
employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock
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(“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable
upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common
Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment
to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion
or exchange of Convertible Securities issuable upon exercise of such Options.
Additionally, the Borrower shall
be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether
or not immediately convertible (other than in an Exempt Issuance), and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share.
For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange”
is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon
the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum
total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders
of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the
events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare
and
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furnish to the Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall,
upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the Note.
1.7 Status as Shareholder.
Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be
issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall
be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note
shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided
herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this
Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless
the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the
rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable,
return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of
this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation,
(i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default
and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Borrower’s failure to convert this Note.
1.8 Prepayment. The Borrower
may at any time pay or prepay all or any portion of the amounts outstanding hereunder by making a payment to the Holder of an amount in
cash equal to 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 plus (y) Default Interest, if any.
1.9 Mandatory Repayment of this
Note. In the event, the Borrower completes the uplist of its securities onto a national securities exchange and receives proceeds
in excess of $5,000,000 in connection therewith, it shall use a portion of such proceeds to immediately repay all amounts due and owing
hereunder.
ARTICLE II. CERTAIN COVENANTS
2.1 Distributions on Capital
Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written
consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b)
directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for
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distributions pursuant to any shareholders’
rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.2 Restriction on Stock Repurchases.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem,
repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction
or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire
any such shares.
2.3 Borrowings. So long as
the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur,
assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability
for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in
writing prior to the date hereof, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary
course of business, (c) borrowings, the proceeds of which shall be used to repay this Note, (d) borrowings which are expressly subordinated
to this Note, and (e) indebtedness incurred by the Borrower solely for the purposes of immediate material working capital needs. The Borrower
shall use the proceeds from any borrowings or financings following the date hereof to repay this Note and the Borrower’s failure
to comply with this covenant shall constitute an Event of Default hereunder.
2.4 Sale of Assets. So long
as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease
or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition
of any assets shall be conditioned on a specified use of the proceeds towards the repayment of this Note.
2.5 Advances and Loans. So
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend
money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors,
employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof
and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not
in excess of $100,000.
2.6 Section 3(a)(9) or 3(a)(10)
Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance
with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”)
or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes
any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages
charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars $15,000, will be assessed
and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this
Note.
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2.7 Preservation of Existence,
etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets)
to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased
by it or in which the transaction of its business makes such qualification necessary.
2.8 Non-circumvention. The
Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws,
or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Note, and will at all
times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of
default (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal
or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration
or otherwise.
3.2 Conversion and the Shares.
The Borrower (i) fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii)
fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares
of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) directs
its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically
or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant
to this Note as and when required by this Note, (iv) fails to remove (or directs its transfer agent not to remove or impairs, delays,
and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion, (v) fails
to remain current in its obligations to its transfer agent, (vi) causes a conversion of this Note to be delayed, hindered or frustrated
due to a balance owed by the Borrower to its transfer agent, (vii) fails to repay Holder, within forty eight (48) hours of a demand from
the Holder, any amount of funds advanced by Holder to Borrower’s transfer agent in order to process a conversion, (viii) fails to
reserve sufficient amount of shares of common stock to satisfy the Reserved Amount at all
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times, (ix) fails to provide a Rule 144 opinion letter
from the Borrower’s legal counsel to the Holder, covering the Holder’s resale into the public market of the respective conversion
shares under this Note, within two (2) business days of the Holder’s submission of a Notice of Conversion to the Borrower (provided
that the Holder must request the opinion from the Borrower at the time that Holder submits the respective Notice of Conversion and the
date of the respective Notice of Conversion must be on or after the date which is six (6) months after the date that the Holder funded
the Purchase Price under this Note), and/or (x) an exemption under Rule 144 is unavailable for the Holder’s deposit into Holder’s
brokerage account and resale into the public market of any of the conversion shares under this Note at any time after the date which is
six (6) months after the date that the Holder funded the Purchase Price under this Note (other than as a result of Holder’s status
as an affiliate of the Borrower).
3.3 Failure to Deliver Transaction
Expense Amount. The Borrower fails to deliver the Transaction Expense Amount (as defined in the Purchase Agreement) to the Holder
within three (3) business days of the date such amount is due.
3.4 Breach of Covenants.
The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including
but not limited to the Purchase Agreement and such breach continues for a period of seven (7) days after written notice thereof to the
Borrower from the Holder.
3.5 Breach of Representations
and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading
in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the
rights of the Holder with respect to this Note or the Purchase Agreement.
3.6 Receiver or Trustee.
The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors or commence proceedings for its dissolution,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed for the Borrower or for a substantial part of its property or business without its
consent and shall not be discharged within fifteen (15) days after such appointment.
3.7 Judgments. Any money
judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property
or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise
consented to by the Holder.
3.8 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower, or the Borrower
admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy
relief, all under federal or state laws as applicable or the Borrower admits in writing its inability to pay its debts generally as they
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mature, or have filed against it an involuntary petition
for bankruptcy relief, all under international, federal or state laws as applicable.
3.9 Delisting of Common Stock.
The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq
Small Cap Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange
3.10 Failure to Comply with the
Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to
becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.11 Liquidation. Any dissolution,
liquidation, or winding up of Borrower or any substantial portion of its business.
3.12 Cessation of Operations.
Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due,
provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission
that the Borrower cannot pay its debts as they become due.
3.13 Maintenance of Assets.
The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the future), or any disposition or conveyance of any material asset of the Borrower.
3.14 Financial Statement Restatement.
The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue
Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated
financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase
Agreement.
3.15 Reverse Splits. The
Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.16 Replacement of Transfer
Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective
date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase
Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by
the successor transfer agent to Borrower and the Borrower.
3.17 Cessation of Trading.
Any cessation of trading of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap Market,
New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange, and such cessation of trading shall continue for a period of
five consecutive (5) Trading Days.
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3.18 Cross-Default. Notwithstanding
anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any
covenant or other term or condition contained in any of the Other Agreements (as defined herein), after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms
of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means,
collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder (and any
affiliate of the Holder) or any other third party, including, without limitation, promissory notes; provided, however, the term “Other
Agreements” shall not include the agreements and instruments defined as the Documents. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.19 Bid Price. The Borrower
shall lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid”
per Level 2) and/or a market (including the OTC Pink, OTCQB or an equivalent replacement exchange).
3.20 OTC Markets Designation.
OTC Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and
Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
3.21 Inside Information.
Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance,
or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower,
to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation
FD on that same date.
3.22 Unavailability of Rule 144.
If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144
legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing
firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free
trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s
brokerage account (in each case, other than as a result of Holder’s status as an affiliate of the Borrower).
3.23 Delisting or Suspension
of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading,
(ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ
Stock Market, the New York Stock Exchange, or the NYSE American.
3.24 Failure to File Registration
Statement. If the Borrower shall fail to file a registration statement as required under Section 4(q) of the Purchase Agreement.
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED
IN SECTION 3 OF THIS NOTE, THE NOTE SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE
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AND PAYABLE WITHOUT DEMAND, PRESENTMENT, OR NOTICE
AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (A) IN THE EVENT OF AN
OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN OF SECTION 3.2, 3.9, 3.10, 3.16, 3.17, 3.19, 3.20, 3.22, 3.23 OR 3.24, THE THEN OUTSTANDING
PRINCIPAL AMOUNT OF THIS NOTE PLUS (X) ACCRUED AND UNPAID INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF THIS NOTE TO THE DATE OF PAYMENT
(THE “MANDATORY PREPAYMENT DATE”) PLUS (Y) DEFAULT INTEREST, IF ANY, ON THE AMOUNTS REFERRED TO IN CLAUSES (W) AND/OR
(X) PLUS (Z) ANY AMOUNTS OWED TO THE HOLDER PURSUANT TO SECTIONS 1.3 AND 1.4(G) HEREOF, MULTIPLIED BY TWO (2); OR (B) IN THE EVENT
OF THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN ANY OTHER SECTION, THE THEN OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE PLUS
(X) ACCRUED AND UNPAID INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF THIS NOTE TO THE MANDATORY PREPAYMENT DATE, PLUS (Y) DEFAULT
INTEREST, IF ANY, ON THE AMOUNTS REFERRED TO IN CLAUSES (W) AND/OR (X) PLUS (Z) ANY AMOUNTS OWED TO THE HOLDER PURSUANT TO SECTIONS
1.3 AND 1.4(G) HEREOF (THE THEN OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE TO THE DATE OF PAYMENT PLUS THE AMOUNTS REFERRED TO IN
CLAUSES (X), (Y) AND (Z) SHALL COLLECTIVELY BE KNOWN AS THE “DEFAULT SUM”) or (ii) at the option of the Holder, the “parity
value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless
the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be
the Conversion Date), multiplied by (b) the highest trading price for the Common Stock during the period beginning on the date
of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”)
and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder
shall be entitled to exercise all other rights and remedies available at law or in equity. Further, if a breach of Sections 3.9, 3.10
and/or 3.19 occurs or is continuing after the nine (9) month anniversary of this Note, then the principal amount of the Note shall increase
by Fifteen Thousand and No/100 United States Dollars ($15,000) (under Holder’s and Borrower’s expectation that any principal
amount increase will tack back to the Issue Date) and the Holder shall be entitled to use the lowest trading price during the delinquency
period as a base price for the conversion with the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied
by the Market Price, subject to adjustment as provided in this Note. For example, if the lowest trading price during the delinquency period
is $0.50 per share and the conversion discount is 50%, then the Holder may elect to convert future conversions at $0.25 per share. If
this Note is not paid at Maturity Date, then the outstanding principal due under this Note shall increase by Fifteen Thousand and No/100
United States Dollars ($15,000).
The Holder shall have the right at any time after
an Event of Default occurs under this Note to require the Borrower, to immediately issue, in lieu of the Default Amount and/or Default
Sum, the
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number of shares of Common Stock of the Borrower equal
to the Default Amount and/or Default Sum divided by the Conversion Price then in effect, pursuant to the terms of this Note (including
but not limited to any beneficial ownership limitations contained herein). This requirement by the Borrower shall automatically apply
upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
If the Holder shall commence an action or proceeding
to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action,
the Holder shall be reimbursed by the Borrower for its attorneys' fees and other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
If the Holder shall commence an action or proceeding
to enforce any provisions of this Note, including, without limitation, engaging an attorney, the Holder shall be entitled to use the lowest
trading price during the delinquency period as a base price for the conversion and the Variable Conversion Price shall be redefined to
mean forty percent (40%) multiplied by the Market Price, subject to adjustment as provided in this Note.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
4.2 Notices. All notices,
demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage
prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, electronic
mail, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by electronic mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address
or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
Auto Parts 4Less Group, Inc.
4580 N Rancho Suite 110
Las Vegas, NV 89130
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Attn: Christopher Davenport, CEO
If to the Holder:
Cavalry Fund I, LP
82 E. Allendale Road, Suite 5B,
Saddle River, New Jersey 07458
Attn: Thomas Walsh, Cavalry Fund
I Management, LLC
4.3 Amendments. This Note
and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note”
and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the
Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note
shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors
and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor”
(as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that
term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note
may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee,
by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal
amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If
default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable
attorneys’ fees.
4.6 Governing Law. This Note
shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws.
Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the
state courts located in the State of Florida or federal courts located in the State of Florida. The parties to this Note hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction
or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION
CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable
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under any law shall not affect the validity or enforceability
of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever
pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof
required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount
to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss
of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this
Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such
amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without
the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. By
its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
4.9 Notice of Corporate Events.
Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent
that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s
shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of
a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets
of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder,
at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially
simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name
changes, recapitalizations, etc. as soon as possible under law.
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4.10 Usury. If it shall be
found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision
shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The
Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit
or forgive the Borrower from paying all or a portion of the principal or interest on this Note.
4.11 Remedies. The Borrower
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose
of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations
under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this
Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
4.12 Severability. In the
event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall
be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any
other provision hereof.
4.13 Dispute Resolution.
In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount,
Default Sum, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation
of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed
determinations or arithmetic calculations via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving
rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned
of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation
within two (2) Business Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower
or the Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion
Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the
Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment
amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the
Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations
and notify the Borrower and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations
or
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calculations. Such investment bank’s or accountant’s
determination or calculation shall be binding upon all parties absent demonstrable error.
4.14 Registration Statement.
As required by Section 4(q) of the Purchase Agreement, the Borrower shall promptly, but in any event no later than 90 days from the date
of this Note, the Company shall prepare and file with the SEC a registration statement covering the resale of all of the Conversion Shares,
Commitment Fee Shares, and Warrant Shares
[signature page follows]
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IN WITNESS WHEREOF, Borrower has
caused this Note to be signed in its name by its duly authorized officer as of the date first above written.
AUTO PARTS 4LESS GROUP, INC.
By: /s/ Christopher Davenport
Name: Christopher Davenport
Title: CEO
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EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to
convert $________________ principal amount of the Note (defined below) together with $_____________ of accrued and unpaid interest thereto,
totaling $__________ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”)
as set forth below, of Auto Parts 4Less Group Inc., a Nevada corporation (the “Borrower”), according to the conditions of
the convertible note of the Borrower dated as of July __, 2022 (the “Note”), as of the date written below. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
| |
[ ] |
The Borrower
shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or
its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
| |
|
|
| |
|
Name of DTC Prime Broker: |
| |
|
Account Number: |
| |
|
|
| |
[ ] |
The undersigned hereby
requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers
are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is
necessary, on an attachment hereto: |
| |
|
|
| |
|
Name: [NAME] |
| |
|
Address: [ADDRESS] |
| |
Date of Conversion: |
_____________ |
| |
Applicable Conversion Price: |
$____________ |
| |
Number of Shares of Common
Stock to be Issued |
|
| |
Pursuant
to Conversion of the Notes: |
_____________ |
| |
Amount of Principal Balance
Due remaining |
|
| |
Under
the Note after this conversion: |
_____________ |
| |
Accrued and unpaid interest
remaining: |
_____________ |
| |
[HOLDER] |
| |
|
| |
|
| |
By: ______________________________ |
| |
Name: [NAME] |
| |
Title: [TITLE] |
| |
Date: [DATE] |
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