NEITHER THE ISSUANCE AND SALE OFTHIS NOTENOR THE SECURITIES INTO WHICHTHIS NOTE ISCONVERTIBLE 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
IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(II) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.  NOTWITHSTANDING THE FOREGOING,THIS NOTEMAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE.  ANY TRANSFEREE OF THIS NOTE
SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE.THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO THIS
NOTE.





DESIGN SOURCE INC.


10%CONVERTIBLEPROMISSORYNOTE





Issuance Date:__________,
      2010
            Principal Amount: U.S.
      $75,000.00





FOR VALUE RECEIVED,Design Source
Inc.aNevadacorporation (the"Company"), hereby promises to pay to___________________or registered assigns ("Holder") the amount set out above as the
Original Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the"Principal") when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest at the rate of 10.00% per
annum("Interest")from the date set out above as the
Issuance Date (the"Issuance
Date") untilthe same becomes due and payable on
theMaturity
Date.





1.           PAYMENTS OF
PRINCIPAL; MATURITY.Payment of principal
and interest due on this Note is payable no later than __________, 20___ (the
“Maturity
Date”);provided,
however, that each of the
parties hereto may mutually agree to extend the term of this Note beyond the
Maturity Date.





2.           PREPAYMENT.The Company and the Holder
understand and agree that the principal amount of the Note and any interest
accrued thereon be prepaid by the Company at any time without
penalty.





3.           CONVERSION
OF NOTE.




The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Company's Common Stock, $.001 par value per share
(“Common Stock”) as set
forth below.











3.1.           Conversion into the
Company's Common Stock.





(a)           The
Holder shall have the right from and after the Issuance Date and then at any
time until this Note is fully paid, to convert any outstanding and unpaid
principal portion of this Note, and accrued interest, at the election of the
Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully
paid and non-assessable shares of Common Stock as such stock exists on the date
of issuance of this Note, or any shares of capital stock of Company into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 3.1(b) hereof
(the "Fixed Conversion
Price"), determined as provided herein.  Upon delivery to the
Company of a completed Notice of Conversion, a form of which is annexed hereto
as Exhibit A,
Company shall issue and deliver to the Holder within five (5) business days
after the Conversion Date (such fifth day being the “Delivery Date”) that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing.  The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest, if any, to be converted, by the Conversion
Price.





(b)           Subject
to adjustment as provided in Section 3.1(c)
hereof, the fixed conversion price per share shall be equal to $0.10 (“Fixed Conversion
Price”).





(c)           
The Fixed Conversion Price and number and kind of shares or other securities to
be issued upon conversion determined pursuant to Section 3.1(a), shall
be subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:





A.           Merger, Sale
of Assets, etc.  If (A) theCompanyeffects any merger
or  consolidation of theCompanywith or into another entity, (B) theCompanyeffects any sale of all or
substantially all of its assets in one or a series of related
transactions,  (C) any tender offer or exchange offer (whether by theCompanyor another entity) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, (D) theCompanyconsummates a stock purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with one or more persons or
entities whereby such other persons or entities acquire more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by such other persons or entities making or party to, or associated or
affiliated with the other persons or entities making or party to, such stock
purchase agreement or other business combination), (E) any "person" or "group"
(as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934
Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of
theCompany, or (F) theCompanyeffects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental  Transaction"),this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to convert into such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such Fundamental Transaction, upon or with respect to the securities subject
to the conversion right immediately prior to such Fundamental
Transaction.  The foregoing provision shall similarly apply to
successive Fundamental Transactions of a similar nature by any such successor or
purchaser.  Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such Fundamental
Transaction.





2


B.           Reclassification,
etc.  If the Company at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.





C.           Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.




D.           Share
Issuance.   So long as this Note
is outstanding, if theCompanyshall issue any Common Stock prior to
the complete conversion or payment of this Note, for a consideration per share
that is less than the Fixed Conversion Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issuance, the
Fixed Conversion Price shall be reduced to such other lower issue
price.  For purposes of this adjustment, the issuance of any security
or debt instrument of theCompanycarrying the right to convert such
security or debt instrument into Common Stock or of any warrant, right or option
to purchase Common Stock shall result in an adjustment to the Fixed Conversion
Price upon the issuance of the above-described security, debt instrument,
warrant, right, or option and again upon the issuance of shares of Common Stock
upon exercise of such conversion or purchase rights if such issuance is at a
price lower than the then applicable Fixed Conversion Price.Common Stock
issued or issuable by the Company for no consideration will be deemed issuable
or to have been issued for $0.001 per share of Common Stock.





(d)           Whenever
the Conversion Price is adjusted pursuant to Section 3.1(c) above,
the Company shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a statement of the
facts requiring such adjustment.





(e)           During
the period the conversion right exists, Company will reserve from its authorized
and unissued Common Stock not less than an amount of Common Stock equal to 150%
of the amount of shares of Common Stock issuable upon the full conversion of
this Note.  Company represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable.  Company
agrees that its issuance of this Note shall constitute full authority to its
officers, agents, and transfer agents who are charged with the duty of executing
and issuing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the conversion of this Note.





3


3.2           Method of
Conversion.  This Note may be converted by the Holder in whole
or in part as described in Section 3.1(a)
hereof.  Upon partial conversion of this Note, a new Note containing
the same date and provisions of this Note shall, at the request of the Holder,
be issued by the Company to the Holder for the principal balance of this Note
and interest which shall not have been converted or paid.





3.3.           Maximum
Conversion.  The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Company on such Conversion
Date.  For the purposes of the provision 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, and Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of 4.99%.  The Holder shall have the
authority and obligation to determine whether the restriction contained in this
Section 3.3
will limit any conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the Notes are convertible shall be the responsibility and
obligation of the Holder.  The Holder may waive the conversion
limitation described in this Section 3.3, in whole
or in part, upon and effective after 61 days prior written notice to the Company
to increase such percentage to up to 9.99%.





4.           EVENT OF
DEFAULT.Failure by the Company to
make payment pursuant to Section 1 hereof shall constitute an event of default
(“Event of Default”).  In an Event of Default, the Holder shall be
entitled to all legal remedies available to it to pursue collections, and the
Company shall bear all reasonable costs of collection, including but not limited
to necessary attorneys’ fees.





5.           NO
WAIVER.No
failure or delay by the Holder in exercising any right, power or privilege under
this Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  The rights and remedies
herein provided shall be cumulative and not exclusively of any rights or
remedies provided by applicable law.  No course of dealing between the
Company and the Holder shall operate as a waiver of any rights by the
Holder.








4




6.NOTICES;
PAYMENTS.





(a)           Notices.  Whenever notice is required to
be given under this Note, unless otherwise provided herein, such notice shall be
given in accordance with the Securities Purchase Agreement.Unless a specific notice is
otherwise required under this Note, the Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason
therefore.





(b)           Payments.Except as otherwise provided in this
Note, whenever any payment
of cash is to be made by the Company tothe Holder, such payment shall be made in lawful
money of the United States of America by a check drawn on the account of the
Company and sent via overnight courier service tothe Holderat such address as previously provided
to the Company in writing (which addressshall be set forth in theSecurities Purchase Agreement);
provided that the Holder may elect to receive a payment of cash via wire
transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions.  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.





7.           TRANSFER.  The Holder acknowledges and agrees thatthis Note may only be
offered, sold, assigned or transferred by the Holderifconsented to in writing by the
Company.





8.           CONSTRUCTION;
HEADINGS.  This Note
shall be deemed to be jointly drafted by the Company andthe Holderand shall not be construed against
anyperson as the drafter
hereof.


The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.





9.           SEVERABILITY.In the event that one or
more of the provisions of this Note shall for any reasons be held invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note, but this
Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.





10.         GOVERNING
LAW.This Note and the rights and
obligations of the Company and the Holder shall be governed by and construed in
accordance with the laws of the State of New York.





[SIGNATURE PAGE
FOLLOWS]





5




IN WITNESS WHEREOF, the Company has
caused this Note to be duly executed as of the Issuance Date set out
above.




DESIGN SOURCE
      INC.By:Name:
              Peter
      ReichardTitle:
              President
      & Principal Chief Executive Officer
 6


EXHIBIT
A




NOTICE OF
CONVERSION






(To
be executed by the Holder in order to convert the Note)




TO:





The
undersigned hereby irrevocably elects to convert $ ______________of the
principal amount of the above Note into Shares of Common Stock of Design Source
Inc., according to the conditions stated therein, as of the Conversion Date
written below.




Conversion
      Date:Applicable
      Conversion Price:Signature:Name:Address:Amount
      to be converted:
            
            $Amount
      of Note unconverted:
            
            $Conversion
      Price per Unit:
            
            $Number
      of shares of Common Stock and Warrants to be issued including as payment
      of interest, if applicable:Please
      issue the shares of Common Stock and Warrants in the following name and to
      the following address:Issue
      to the following account of the Holder:Authorized
      Signature:Name:Title:Phone
      Number:Broker
      DTC Participant Code:Account
      Number:






7