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

 

US $31,500.00

 

IDS INDUSTRIES, INC.

8% CONVERTIBLE REDEEMABLE NOTE

DUE JULY 11, 2015

 

FOR VALUE RECEIV ED, IDS Industries, Inc. (the "Company") promises to pay to the
order of LG CAPITAL FUNDING, LLC and its authorized successors and permitted a
signs ("Holder"), the aggregate principal face amount of Thirty One Thousand
Five Hundred dollars exactly (U.S. $31,500.00) on July 11, 2015 ("Maturity
Date") and to pay interest on the principal amount outstanding hereunder at the
rate of 8% per annum commencing on July 11, 2014. The interest will be paid to
the Holder in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note. The principal of, and
interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY
11225 initially, and if changed, last appearing on the records of the Company as
designated in writing by the Holder hereof from time to time. The Company will
pay each interest payment and the outstanding principal due upon this Note
before or on the Maturity Date, less any amounts required by law to be deducted
or withheld, to the Holder of this Note by check or wire transfer addressed to
such Holder at the last address appearing on the records of the Company. The
forwarding of such check o transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy a charge the liability for principal on
this Note to the extent of the sum represented by such or wire transfer.
Interest shall be payable in Common Stock (as defined below) pursuant to
paragraph 4(b) herein.

 

This Note is subject to the following additional provisions:

 

1.                   This Note is exchangeable for an equal aggregate principal
amount of Note of different authorized denominations, as requested by the Holder
surrendering the same.

 

No service charge will be made for such registration or transfer or exchange,
except that shall pay any tax or other governmental charges payable in
connection therewith.

 

 

 

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

 

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

 

4.                   (a) The Holder of this Note is entitled, at its option, at
any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company's common stock
(the "Common Stock") without restrictive legend of any nature, at a price
("Conversion Price") for each share of Common Stock equal to 55% of the lowest
trading price of the Common Stock as reported on the National Quotations Bureau
OTCQB exchange which the Company's shares are traded or any exchange upon which
the Common Stock may be traded in the future ("Exchange"), for the ten prior
trading days including the day upon which a Notice of Conversion is received by
the Company (provided such Notice of Conversion is delivered by fax or other
electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing
price). If the shares have not been delivered within 3 business days, the Notice
of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business
days of receipt by the Company of the Notice of Conversion. Once the Holder has
received such shares of Common Stock, the Holder shall surrender this Note to
the Company, executed by the Holder evidencing such Holder's intention to
convert this Note or a specified portion hereof, and accompanied by proper
assignment hereof in blank. Accrued, but unpaid interest shall be subject to
conversion. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to
the nearest whole share. In the event the Company experiences a DTC "Chill" on
its shares, the conversion price shall be decreased to 45% instead of 55% while
that "Chill" is in effect.

 

(b) Interest on any unpaid principal balance of this Note shall be paid at the
rate of 8% per annum. Interest shall be paid by the Company in cash only.

2

 

 

(c) During the first six months this Note is in effect, the Company may deem
this Note by paying to the Holder an amount as follows, 140% of the face amount
plus any accrued interest. This Note may not be prepaid after the 180111 day.
The redemption must be closed and paid for within 3 business days of the Company
sending the redemption demand or the redemption will be invalid and the Company
may not redeem this Note.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company
to any person in a single transaction or series of related transactions, (ii) a
reclassification, capital reorganization or other change or exchange of
outstanding shares of the Common Stock, other than a forward or reverse stock
split or stock dividend, or (iii) any consolidation or merger of the Company
with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction
of incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"),
then, in each case, the Company shall, upon request of the redeem this Note in
cash for 140% of the principal amount, plus accrued but unpaid interest through
the date of redemption, or at the election of the Holder, such Holder may
convert the unpaid principal amount of this Note (together with the amount of
accrued but unpaid interest) into shares of Common Stock immediately prior to
such Sale Event at the Conversion Price.

 

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

 

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

 

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

 

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

3

 

 

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

 

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

 

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

 

(c)                 The Company shall fail to perform or observe, in any
respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or

 

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

 

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

 

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

 

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

 

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

 

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

 

(j)                  If a majority of the members of the Board of Directors of
the Company on the date hereof are no longer serving as members of the Board;

4

 

 

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

 

(l)                   The Company shall not replenish the reserve set forth in
Section 12,within 3 business days of the request of the Holder; or

 

(m)               The Company shall not be "current" in its filings with the
Securities and Exchange Commission; or

 

(n)                 The Company shall lose the "bid" price for its stock in a
market (including the OTCQB marketplace or other exchange).

 

Then, or at any time thereafter , unless cured, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed be a waiver of any subsequent default) at the
option of the Holder and in the Holder's sole discretion, the Holder may
consider this Note immediately due and payable, without presentment, demand,
protest or (further) notice of any kind (other than notice of acceleration), all
of which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law. Upon an Event of Default, interest shall accrue at a
fault interest rate of 16% per annum or, if such rate is usurious or not
permitted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the
shares are not issued beginning on the 4th day after the conversion notice was
delivered to the Company. This penalty shall increase to $500 per day beginning
on the101 day. The penalty for a breach of Section 8(n) shall be an increase of
the outstanding principal amounts by 20%. In case of a breach of Section 8(i),
the outstanding principal due und r this Note shall increase by 50%. If this
Note is not paid at maturity, the outstanding principa1 due under this Note
shall increase by 10%.

 

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

 

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

 

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

5

 

 

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

 

12.                The Company shall issue irrevocable transfer agent
instructions reserving 12,500,000 shares of its Common Stock for conversions
under this Note (the "Share Reserve"). The reserve shall be replenished as
needed to allow for conversions of this Note. Up conversion of this Note, any
shares remaining in the Share Reserve shall be cancelled. The Company shall pay
all costs associated with issuing and delivering the shares.

 

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

 

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

6

 

 

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

 

 

Dated: 7/14/2012

 

 

 

IDS INDUSTRIES, INC.

 

 

By: /s/ Scott Plantinga

Title CEO

7

 

 

EXHIBIT A

 

 

NOTICE OF CONVERSION

 

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

 

The undersigned hereby irrevocably elects to convert $_____________ of the above
Note into _____________Shares of Common Stock of IDS Industries, Inc. ("Shares")
according to the conditions set forth in such Note, as of the date written
below.

 

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

 

Date of Conversion:

Applicable Conversion Price:

 

Signature:

[Print Name of Holder and Title of Signer]

 

Address:

 

SSN or EIN:

Shares are to be registered in the following name:

 

Name:

Address:

Tel:

Fax:

SSN or EIN:

 

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

 

Account Name:

Address:

8