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. 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:
    $32,500.00	Issue Date: June 5, 2014
	Purchase Price: $32,500.00	 






 


CONVERTIBLE
PROMISSORY NOTE


 


FOR
VALUE RECEIVED,
CO-SIGNER, INC.,
a Nevada
corporation (hereinafter
called the
“Borrower”), hereby
promises to pay
to the order
of KBM
WORLDWIDE, INC.,
a New
York corporation,
or registered
assigns (the “Holder”)
the sum of $32,500.00 together
with any interest as
set forth herein,
on March
9, 2015 (the
“Maturity Date”), and
to pay interest
on the unpaid principal balance
hereof at the rate of eight percent
(8%) (the “Interest Rate”)
per annum from the date
hereof (the “Issue Date”) until the same
becomes due and payable,
whether at maturity or
upon acceleration or by prepayment
or otherwise. This Note
may not be prepaid in whole
or in part except as
otherwise explicitly 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
twenty two percent (22%) per
annum from the due date thereof until
the same is paid (“Default Interest”).
Interest shall commence accruing
on the date that the Note
is fully paid and shall
be computed on the basis
of a 365-day year and
the actual number of days
elapsed. All
payments due hereunder (to the
extent not converted into common stock,
$0.001 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 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 apply to this Note:


 


ARTICLE
I.
CONVERSION RIGHTS


 


1.1                            Conversion
Right. The
Holder shall have
the right from
time to time,
and at
any time during
the period beginning
on the date
which is one
hundred eighty
(180) days
following the date
of this Note
and ending
on the later
of: (i)
the Maturity
Date and
(ii) 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 amount of
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 (the
“Conversion Price”)
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. 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, provided, further,
however, that the limitations
on conversion may be waived by the Holder
upon, at the election of the
Holder, not less than
61 days’ prior notice
to the Borrower,
and the provisions
of the conversion limitation
shall continue to apply until such
61st day (or such later date,
as determined by the Holder,
as may be specified in such
notice of waiver). 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 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
before 6:00 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, 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.
The conversion
price (the
“Conversion Price”)
shall equal
the Variable
Conversion Price
(as defined
herein) (subject
to equitable
adjustments for
stock splits,
stock dividends
or rights
offerings by
the  Borrower
relating to
the Borrower’s securities
or the securities of any
subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary
distributions and similar events).
The "Variable
Conversion Price"
shall mean
58% multiplied
by the Market Price
(as defined herein)
(representing a discount rate
of 42%). “Market
Price” means
the average
of the
lowest three (3)
Trading Prices (as
defined below)
for the
Common Stock
during the ten
(10) Trading Day
period ending on the
latest complete
Trading Day prior to
the Conversion
Date. “Trading Price”
means, for any
security as of
any date, the closing
bid price on the
Over-the-Counter Bulletin Board,
or applicable trading market
(the “OTCBB”) as
reported by
a reliable reporting service
(“Reporting Service”)
designated by the
Holder (i.e. Bloomberg) or,
if the OTCBB
is not the principal trading market
for such security, the closing
bid price of such security on the principal
securities exchange or trading
market where such
security is listed or traded or,
if no closing
bid price of such
security is available in any
of the foregoing
manners, the average
of the closing bid prices
of any market
makers for such security that
are listed in
the “pink
sheets” by the National Quotation
Bureau, Inc. If the Trading
Price cannot be calculated for
such security on such
date in
the manner provided
above, the Trading Price
shall be the
fair market
value as mutually determined
by the Borrower
and the holders of a
majority in interest of the Notes
being converted for which the
calculation of the Trading Price
is required in order to determine
the Conversion Price
of such Notes.
“Trading Day” shall
mean any
day on which
the Common Stock
is tradable for
any period
on the OTCBB,
or on the principal
securities exchange
or other securities
market on which the Common Stock
is then being traded.


 


(b)                              
Conversion Price
During Major Announcements.
Notwithstanding anything contained
in Section 1.2(a)
to the contrary,
in the event
the Borrower
(i) makes
a public announcement
that it intends
to consolidate
or merge
with any
other corporation
(other than
a merger in which the Borrower
is the surviving or continuing
corporation and its capital stock
is unchanged) or sell or transfer
all or substantially all of the
assets of the Borrower
or (ii) any person,
group or entity (including the Borrower)
publicly announces a tender offer
to purchase 50% or more of the Borrower’s
Common Stock (or any
other takeover scheme) (the
date of the announcement
referred to in clause
(i) or
(ii) is
hereinafter referred
to as the
“Announcement Date”), then
the Conversion Price shall, effective
upon the Announcement Date and
continuing through the Adjusted
Conversion Price Termination Date (as
defined below), be equal to the
lower of (x)
the Conversion Price
which would
have been applicable for
a Conversion occurring on the
Announcement Date
and (y) the
Conversion Price that
would otherwise
be in effect.
From and after
the Adjusted Conversion
Price Termination
Date, the Conversion
Price shall be determined
as set forth
in this Section
1.2(a). For purposes
hereof, “Adjusted
Conversion Price
Termination Date” shall mean,
with respect to any proposed transaction or
tender offer (or takeover scheme)
for which a public announcement as contemplated
by this Section 1.2(b)
has been made,
the date
upon which
the Borrower
(in the case
of clause
(i) above)
or the person,
group or entity (in
the case
of clause
(ii) above)
consummates or
publicly announces the
termination or abandonment of
the proposed transaction or tender offer
(or takeover scheme) which
caused this Section 1.2(b) to become
operative.


 


1.3                             
  Authorized
Shares. The
Borrower covenants
that during
the period
the conversion
right exists,
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 five 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 hereunder. 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.


 


If,
at any
time the
Borrower does
not maintain
the Reserved
Amount it
will be
considered an
Event of Default under Section
3.2 of the Note.


 


1.4                             
Method of Conversion.


 


(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
the Issue
Date, by


(A)     
submitting to
the Borrower
a Notice
of Conversion
(by facsimile,
e-mail or
other reasonable
means of communication
dispatched on the
Conversion Date
prior to
6:00 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.


 



    	2



    	 



    

 





(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 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
6:00 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 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 Agent
Commission (“DWAC”) system.


 


(g)                              
Failure to
Deliver Common
Stock Prior
to 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 $2,000 per day
in cash, for each day
beyond the Deadline that
the Borrower fails
to deliver
such Common
Stock. 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 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(g)
are justified.


 


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
(iv) such shares
are transferred to an “affiliate”
(as defined in Rule 144) of the Borrower
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 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 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.
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 accepted by the
Company 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 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 Company 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.


 



    	3



    	 



    




 


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 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, thirty
(30) days prior
written notice (but in any
event at least fifteen
(15) 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, any
shares of Common
Stock for
no consideration
or 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 (“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
where the same are
issuable upon  the exercise
of Options), 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.


 



    	4



    	 



    

 





(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
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                             
Trading Market
Limitations.
Unless
permitted
by
the applicable
rules and
regulations of
the principal
securities market
on which
the Common Stock
is then
listed or
traded, in no event shall the
Borrower issue upon conversion of or
otherwise pursuant to this Note
and the other Notes issued pursuant
to the Purchase Agreement more
than the maximum number
of shares of Common
Stock that
the Borrower can
issue pursuant to any rule
of the principal United States
securities market on which the Common
Stock is then traded
(the “Maximum Share Amount”),
which shall be 4.99%
of the total
shares outstanding on the Closing
Date (as defined in the Purchase Agreement),
subject to equitable adjustment
from time to time for
stock splits, stock dividends,
combinations, capital reorganizations
and similar events
relating to the Common Stock occurring
after the date hereof.
Once the Maximum Share Amount
has been issued,
if the Borrower fails to eliminate
any prohibitions under applicable
law or the rules or regulations
of any stock exchange, interdealer
quotation system or other self-regulatory
organization with jurisdiction
over the Borrower
or any of its securities
on the Borrower’s ability
to issue shares
of Common Stock
in excess
of the Maximum Share
Amount, in lieu
of any further
right to convert this Note, this
will be considered an
Event of Default under Section
3.3 of the Note.


 


1.8                             
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.


 


1.9                              Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue
Date and ending on the date which is thirty (30)
days following the Issue Date,
the Borrower shall
have the right, exercisable on
not less than three (3)
Trading Days prior written
notice to the Holder of the Note to
prepay the outstanding Note
(principal and accrued
interest), in full, in accordance with this Section 1.9. Any notice of prepayment
hereunder (an “Optional Prepayment
Notice”) shall be delivered to
the Holder of the Note
at its registered addresses and
shall state: (1) that the Borrower is exercising its right
to prepay the Note, and (2) the date of prepayment which
shall be not more than three (3)
Trading Days from the date of the Optional Prepayment
Notice. On the date fixed for prepayment
(the “Optional Prepayment Date”),
the Borrower shall make payment of
the Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as
specified by the Holder in writing to
the Borrower at least one (1) business
day prior to the Optional Prepayment
Date. If the Borrower exercises
its right to prepay the Note, the Borrower shall make payment
to the Holder of an amount in
cash (the “Optional Prepayment
Amount”) equal to 110%, multiplied by the
sum of: (w) the then outstanding
principal amount of this Note plus (x)
accrued and unpaid interest on
the unpaid principal amount of
this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred
to in clauses (w) and (x) plus (z) any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers
an Optional Prepayment
Notice and fails to pay the Optional Prepayment Amount
due to the Holder of the Note within two (2) business days following
the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the
Note pursuant to this Section 1.9.


 


Notwithstanding
anything to
the contrary contained
in this Note,
at any
time during
the period beginning
on the date
which is
thirty-one (31)
days following
the Issue
Date and ending
on the date which is sixty
(60) days following the Issue
Date, the Borrower shall have
the right, exercisable on not
less than three
(3) Trading Days prior
written notice to the Holder
of the Note to prepay
the outstanding Note (principal
and accrued interest),
in full, in accordance with
this Section 1.9. Any
Optional Prepayment Notice
shall be
delivered to
the Holder
of the Note at
its registered
addresses and
shall state:
(1) that the Borrower
is exercising its right
to prepay the Note, and
(2) the date of prepayment
which shall be not more
than three (3) Trading
Days from the
date of
the Optional Prepayment
Notice. On the
Optional Prepayment
Date, the Borrower shall make
payment of the Second
Optional Prepayment Amount (as
defined below) to or upon the order
of the Holder as specified
by the Holder in writing to the
Borrower at least
one (1) business day
prior to the Optional Prepayment
Date. If the Borrower exercises
its right to prepay the Note,
the Borrower shall make
payment to the Holder of an amount
in cash (the “Second
Optional Prepayment
Amount”) equal to
115%, multiplied
by the sum of:
(w) the then outstanding
principal amount of this Note plus (x)
accrued and unpaid interest
on the unpaid principal
amount of this Note
to the Optional
Prepayment Date
plus (y) Default
Interest, if any,
on the amounts referred to in
clauses (w) and
(x) plus (z) any amounts owed
to the Holder pursuant
to Sections
1.3 and 1.4(g) hereof. If the
Borrower delivers an
Optional Prepayment Notice
and fails to
pay the Second
Optional Prepayment
Amount due to the Holder
of the Note within two
(2) business days following the
Optional Prepayment Date, the Borrower
shall forever forfeit its right
to prepay the Note
pursuant to this Section 1.9.


 


Notwithstanding
anything to
the contrary contained
in this Note,
at any
time during
the period beginning
on the date
which is
sixty-one (61)
days following
the Issue
Date and
ending on the
date which
is ninety (90)
days following
the Issue Date,
the Borrower
shall have the right, exercisable
on not less than three (3)
Trading Days prior written
notice to the Holder of the Note
to prepay the outstanding Note (principal
and accrued interest),
in full, in accordance with
this Section 1.9. Any Optional
Prepayment Notice shall be delivered
to the Holder of the Note at
its registered addresses and
shall state: (1) that
the Borrower is exercising its
right to
prepay the Note,
and (2)
the date
of prepayment
which shall
be not more
than three (3) Trading Days
from the date of
the Optional Prepayment Notice.
On the Optional Prepayment Date,
the Borrower
shall make
payment of
the Third Optional
Prepayment Amount
(as defined
below) to or upon the order
of the Holder
as specified by the
Holder in writing to the Borrower
at least one (1)
business day prior to the
Optional Prepayment Date.
If the Borrower exercises
its right to
prepay the Note,
the Borrower
shall make
payment to the
Holder of
an amount
in cash (the
“Third Optional Prepayment
Amount”) equal to 120%, multiplied
by the sum of: (w) the then
outstanding principal amount
of this Note plus (x)
accrued and unpaid interest
on the unpaid principal
amount of this Note to the Optional
Prepayment Date plus (y)
Default Interest, if
any, on the amounts referred
to in clauses (w) and
(x) plus (z) any amounts owed
to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof.
If the Borrower delivers an
Optional Prepayment Notice and
fails to pay the Third
Optional Prepayment Amount due
to the Holder of the Note within
two (2) business
days following the Optional Prepayment
Date, the  Borrower 
shall forever forfeit its right
to prepay the Note pursuant to
this Section 1.9.


 



    	5



    	 



    

 





Notwithstanding
any
to the
contrary stated
elsewhere herein,
at any
time during
the period
beginning on the
date that
is ninety-one
(91) day
from the
Issue Date
and ending one hundred
twenty (120) days
following the Issue Date,
the Borrower shall
have the right, exercisable
on not less than three (3)
Trading Days prior written notice
to the Holder of the
Note to prepay the outstanding
Note (principal and
accrued interest),
in full,
in accordance with
this Section 1.9. Any Optional
Prepayment Notice
shall be delivered
to the Holder of the Note
at its registered addresses
and shall state: (1)
that the Borrower is exercising
its right to prepay the Note,
and (2)
the date
of prepayment which
shall be not
more than
three (3) Trading
Days from the date
of the Optional
Prepayment Notice.
On the Optional
Prepayment Date,
the Borrower shall
make payment
of the Fourth Optional
Prepayment Amount
(as defined
below) to or upon the
order of the Holder as
specified by the
Holder in writing
to the Borrower at
least one (1) business day prior
to the Optional Prepayment
Date. If the
Borrower exercises
its right to prepay the Note,
the Borrower shall make
payment to the Holder of an
amount in cash (the “Fourth
Optional Prepayment Amount”) equal
to 125%, multiplied
by the sum of:
(w) the then outstanding principal
amount of this Note plus (x)
accrued and unpaid interest
on the unpaid principal
amount of this Note
to the Optional
Prepayment Date plus (y)
Default Interest, if any,
 on the amounts referred to in
clauses (w) and
(x) plus (z) any amounts owed
to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. If the Borrower
delivers an Optional Prepayment
Notice and fails
to pay the Fourth
Optional Prepayment
Amount due to
the Holder of the Note within
two (2) business
days following the Optional Prepayment
Date, the Borrower  shall
forever forfeit its right to prepay the
Note pursuant to this Section
1.9.


 


Notwithstanding
any
to the
contrary stated
elsewhere herein,
at any
time during
the period
beginning on
the date
that is
one hundred
twenty-one (121)
day from
the Issue
Date and
ending one
hundred fifty
(150) days
following the Issue
Date, the Borrower
shall have the right,
exercisable on not less than
three (3) Trading Days
prior written notice
to the Holder of the Note
to prepay the outstanding Note (principal
and accrued interest), in full,
in accordance with this Section
1.9. Any Optional Prepayment Notice
shall be delivered to the
Holder of
the Note
at its registered addresses
and shall state: (1)
that the Borrower is exercising
its right to prepay the Note, and
(2) the date of prepayment which
shall be not more than three
(3) Trading Days from
the date
of the Optional
Prepayment Notice. On
the Optional
Prepayment Date,
the Borrower shall
make payment of the Fifth Optional
Prepayment Amount (as defined
below) to or upon the order of
the Holder as specified by the
Holder in writing to the
Borrower at least
one (1)
business day prior to the Optional
Prepayment Date. If the Borrower
exercises its right to prepay the
Note, the Borrower shall
make payment to the Holder of an
amount in cash (the “Fifth
Optional Prepayment Amount”)
equal to 130%, multiplied
by the sum of: (w)  the then outstanding
principal amount of this Note
 plus (x) accrued and
unpaid interest on the unpaid principal
amount of this Note to the Optional
Prepayment Date plus (y) Default
Interest, if any, on the amounts
referred to in clauses (w)
and (x) plus (z) any amounts
owed to the Holder pursuant
to Sections 1.3 and 1.4(g)
hereof. If the Borrower
delivers an Optional Prepayment
Notice and fails to pay the Fifth
Optional Prepayment Amount due
to the Holder of the Note within
two (2) business days
following the Optional Prepayment
Date, the Borrower shall
forever forfeit its right to
prepay the Note pursuant
to this Section 1.9.


 


Notwithstanding
any
to the
contrary stated
elsewhere herein,
at any
time during
the period
beginning on the
date that
is one hundred
fifty-one (151)
day from
the Issue
Date and ending
one hundred eighty (180) days
following the Issue Date, the Borrower
shall have the right,
exercisable on not
less than
three (3) Trading Days
prior written
notice to
the Holder of
the Note to prepay the outstanding
Note (principal and accrued
interest), in full, in accordance
with this Section
1.9. Any Optional Prepayment
Notice shall be
delivered to
the Holder
of the Note
at its registered addresses and
shall state: (1)
that the Borrower is exercising
its right to prepay the


 


Note,
and (2)
the date
of prepayment
which shall
be not more
than three (3)
Trading Days
from the
date of
the Optional
Prepayment Notice.
On the Optional
Prepayment Date,
the Borrower
shall make
payment of the Sixth Optional
Prepayment Amount
(as defined
below) to or upon the order of the
Holder as specified
by the Holder in writing to the
Borrower at least one (1)
business day prior to the Optional Prepayment
Date. If the Borrower exercises
its right to prepay the Note,
the Borrower shall make
payment to the Holder of an amount
in cash (the “Sixth Optional
Prepayment Amount”) equal
to 135%, multiplied by the sum
of: (w) the then outstanding principal
amount of this Note plus (x)
accrued and unpaid interest
on the unpaid principal amount
of this Note to the Optional
Prepayment Date plus (y) Default
Interest, if any, on the amounts
referred to
in clauses
(w) and
(x) plus (z)
any amounts
owed to
the Holder
pursuant to Sections
1.3 and 1.4(g) hereof. If
the Borrower delivers an Optional
Prepayment Notice and fails to pay the Sixth Optional
Prepayment Amount due to the Holder
of the Note within two
(2) business days following
the Optional Prepayment Date,
the Borrower shall forever
forfeit its right to prepay the
Note pursuant to this Section
1.9.


 


After
the expiration
of one
hundred eighty
(180) following
the date
of the Note,
the Borrower shall have
no right of prepayment.


 


 


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 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 or financial institutions incurred
in the ordinary course of business
or (c) borrowings, the
proceeds of which shall be
used to repay this Note.


 



    	6



    	 



    

 





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
may be conditioned on a specified
use of the proceeds of disposition.


 


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.


 


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
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, 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, the Borrower
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, or 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. It
is an
obligation of the
Borrower to remain
current in its obligations to its
transfer agent. It shall
be an event of default
of this Note, if a conversion
of this Note
is delayed,
hindered or frustrated
due to a balance owed
by the Borrower to its
transfer agent. If at
the option of the Holder, the Holder
advances any funds to the Borrower’s
transfer agent in order to process
a conversion, such
advanced funds
shall be paid by the Borrower
to the Holder within forty eight
(48) hours of a demand from the Holder.


 


3.3                             
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
ten (10)
days after
written notice thereof to the
Borrower from the Holder.


 


3.4                             
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.


 


3.5                             
Receiver or
Trustee.
The Borrower
or any
subsidiary of
the Borrower
shall make
an assignment
for the benefit
of creditors,
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.


 


3.6                             
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
twenty (20) days
unless otherwise consented
to by
the Holder, which
consent will not be unreasonably withheld.


 


3.7                             
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.


 


3.8                             
Delisting of
Common Stock.
The Borrower shall
fail to maintain the listing
of the
Common Stock
on at least
one of the
OTCBB or an
equivalent replacement
exchange, the
Nasdaq National
Market, the
Nasdaq SmallCap
Market, the
New York Stock
Exchange, or the American
Stock Exchange.


 


3.9                             
Failure to
Comply with
the Exchange
Act.
The Borrower
shall fail
to comply with
the reporting
requirements of
the Exchange Act;
and/or the Borrower
shall cease
to be subject
to the reporting requirements
of the Exchange
Act.


 


3.10                         
Liquidation. Any
dissolution, liquidation,
or winding
up of Borrower
or any substantial
portion of its business.


 


3.11                         
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.


 



    	7



    	 



    

 





3.12                         
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).


 


3.13                         
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.


 


3.14                         
Reverse Splits.
The Borrower effectuates
a reverse
split of
its Common Stock
without twenty
(20) days prior written notice
to the Holder.


 


3.15                         
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.


 


3.16                         
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,
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, including, without
limitation, promissory notes;
provided, however, the term “Other
Agreements” shall not include
the related or companion documents to
this Note. 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.


 


Upon
the occurrence
and during
the continuation
of any
Event of
Default specified
in Section
3.1 (solely with
respect to failure
to pay the
principal hereof
or interest
thereon when
due at
the Maturity
Date), the
Note shall
become immediately due
and payable
and the
Borrower shall
pay to the Holder,
in full
satisfaction of
its obligations hereunder,
an amount
equal to the Default
Sum (as defined herein).
UPON THE OCCURRENCE AND
DURING THE CONTINUATION OF ANY
EVENT OF DEFAULT SPECIFIED
IN SECTION 3.2, THE
NOTE SHALL BECOME
IMMEDIATELY DUE AND
PAYABLE AND THE BORROWER
SHALL PAY TO THE HOLDER,
IN FULL SATISFACTION OF ITS OBLIGATIONS
HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS
DEFINED HEREIN); MULTIPLIED
BY (Z) TWO
(2). Upon the
occurrence and during the
continuation of
any Event of Default specified
in Sections 3.1 (solely with
respect to failure to pay the principal
hereof or interest thereon when
due on this Note upon a Trading Market Prepayment
Event pursuant
to Section
1.7 or upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9,
3.11, 3.12, 3.13, 3.14, and/or
3. 15 exercisable
through the delivery of written
notice to the Borrower
by such
Holders (the
“Default Notice”), and
upon the occurrence of an Event
of Default specified the remaining
sections of Articles III (other
than failure to pay the principal
hereof or interest thereon
at the Maturity Date specified
in Section 3,1 hereof),
the Note shall become
immediately due and payable
and the Borrower
shall pay to
the Holder, in
full satisfaction
of its
obligations hereunder,
an amount
equal to
the greater of (i) 150% times
the sum of (w) the
then outstanding principal
amount of this Note plus (x) accrued
and unpaid interest on the unpaid
principal amount of this Note
to the
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 (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) 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
Closing 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.


 


If
the Borrower
fails to pay
the Default
Amount within
five (5)
business days
of written
notice that
such amount
is due and
payable, then the
Holder shall
have the
right at
any time,
so long as
the Borrower remains
in default (and
so long and
to the extent that
there are sufficient
authorized shares),
to require the Borrower,
upon written
notice, to immediately issue,
in lieu
of the Default Amount, the number
of shares of Common Stock
of the Borrower equal to the
Default Amount divided by
the Conversion Price then in
effect.


 


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, 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 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:


 



    	8



    	 



    

 





If
to the Borrower, to:



 


CO-SIGNER, INC.


8275 South
Eastern Avenue -
Suite 200-661


 Las
Vegas, NV
89123


Attn:
KURTIS A. KRAMARENKO,
Chief Executive Officer



facsimile:


 





With
a copy by
fax only to (which
copy shall not constitute notice):



[enter name of law
firm]


Attn:
[attorney name]


[enter address line
1]


[enter city, state, zip]


facsimile:
[enter fax number]


 


If
to the Holder:


 


KBM
WORLDWIDE, INC.


80 Cuttermill
Road – Suite 410 


Great
Neck, NY 11021


Attn:
Seth Kramer, President


e-mail:
info@kbmworldwide.com


 


With
a copy by
fax only to (which
copy shall not constitute notice):



Naidich Wurman Birnbaum &
Maday, LLP


Attn:
Bernard S. Feldman,
Esq.


facsimile: 516-466-3555


e-mail:
dyork@nwbmlaw.com


 


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. Each
transferee of this Note
must be an
“accredited investor” (as defined
in Rule 501(a) of the 1933 Act).
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


 


4.5                             
Cost of Collection.
If default
is made in the
payment of this Note,
the Borrower shall pay
the Holder hereof 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 New
York 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 of New
York or
in the federal
courts located
in the state
and county of Nassau. 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
and Holder
waive trial by jury.
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 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.


 



    	9



    	 



    

\


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 simulta11eously
with the notification to the Holder in accordance with
the terms of this
Section 4.9.


 





4.10                         
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.


 


 


IN
WITNESS WHEREOF, Borrower has
caused this Note
to be signed
in its name by
its duly authorized officer
this June 5,
2014.


 


CO-SIGNER,
INC.


 


/s/
Kurtis A. Kramarenko 


By:
KURTIS A. KRAMARENKO


Chief
Executive Officer


 






    	10



    	 



    




 


EXHIBIT
A 
NOTICE OF
CONVERSION


 


The
undersigned hereby
elects to convert
$principal amount
of the
Note (defined
below) 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 CO-SIGNER,
INC., a Nevada
corporation (the
“Borrower”) according
to the
conditions of
the convertible
note of
the Borrower
dated as of
June 5, 2014 (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 Agent Commission
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:


 


KBM
WORLDWIDE, INC.


80
Cuttermill Road – Suite
410 Great
Neck, NY 11021 Attention:
Certificate Delivery


e-mail:
info@kbmworldwide.com


 


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: 


 


KBM
WORLDWIDE, INC.


 


By:



Name:
 Seth
Kramer


Title:
President 


Date:




 






    	11