TSO3 Inc (fka TSTIF)

[teq0904]

Convertible note conversion milestones :

The terms of the Convertible Note also provide for the following automatic conversion of portions of the principal amount of the Convertible Note into Common Shares at the Conversion Price when the Issuer reaches certain operational milestones which are (i) the installations in hospitals or medical clinics of at least 400 sterilizers, and (ii) annual trailing consumables revenue equivalent to at least US$10 million:

(a) 33% of the principal shall be converted when the market price of the Common Shares on the Toronto Stock Exchange (the “TSX”) calculated in accordance with the Convertible Note is at 200% or above of the Conversion Price;

(b) an additional 33% of the principal shall be converted when the market price of the Common Shares on the TSX calculated in accordance with the Convertible Note is at 250% or above of the Conversion Price; and

(c) the balance of the principal shall be converted when the market price of the Common Shares on the TSX calculated in accordance with the Convertible Note is at 300% or above of the Conversion Price.

The debt deal assumes $25k annual recurring revenue per VP4 from consumables.