Filed by Avantafile.com - Homeland Resources Ltd. - Exhibit 10.2







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: $88,500.00 	Issue Date: September 8, 2014
	Purchase
Price: $88,500.00	 


CONVERTIBLE PROMISSORY
NOTE

FOR
VALUE RECEIVED, HOMELAND RESOURCES LTD., 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 $88,500.00 together with any interest as set forth herein,
on June 12, 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, $0.0001 par value per share (the “Common
Stock”) in accordance with the terms hereof) shall be made in
lawful money of the United States of America.  All payments shall be
made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions of
this Note.  Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business day, the same
shall instead be due on the next succeeding day which is a business
day and, in the case of any interest payment date which is not the
date on which this Note is paid in full, the extension of the due
date thereof shall not be taken into account for purposes of
determining the amount of interest due on such date.  As used in this



Note, the term “business day” shall mean any day other
  than a Saturday, Sunday or a day on which commercial banks in the
  city of New York, New York are authorized or required by law or
  executive order to remain closed.  Each capitalized term used herein,
  and not otherwise defined, shall have the meaning ascribed thereto in
  that certain Securities Purchase Agreement dated the date hereof,
  pursuant to which this Note was originally issued (the “Purchase
  Agreement”).

       This
Note 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 


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	 	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 61% multiplied by the Market     Price (as defined herein) (representing a discount rate of 39%).    “Market Price” means the average of the lowest five     (5) 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, Pink Sheets electronic   quotation system or applicable trading market (the “OTC”)     as reported by a reliable reporting service (“Reporting     Service”) designated by the Holder (i.e. Bloomberg) or, if     the OTC 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”.  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


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	 	 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 OTC, 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 


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	 	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 


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	 	paragraph,   following conversion of a portion of this Note, the unpaid and   unconverted principal amount of this Note represented by this Note   may be less than the amount stated on the face hereof. 




	 	            (c) Payment of   Taxes.  The Borrower shall not be required to pay any tax   which may be payable in respect of any transfer involved in the   issue and delivery of shares of Common Stock or other securities   or property on conversion of this Note in a name other than that   of the Holder (or in street name), and the Borrower shall not be   required to issue or deliver any such shares or other securities   or property unless and until the person or persons (other than the   Holder or the custodian in whose street name such shares are to be   held for the Holder’s account) requesting the issuance   thereof shall have paid to the Borrower the amount of any such tax   or shall have established to the satisfaction of the Borrower that   such tax has been paid. 




	 	            (d) Delivery     of Common Stock Upon Conversion.  Upon     receipt by the Borrower from the Holder of a facsimile     transmission or e-mail (or other reasonable means of     communication) of a Notice of Conversion meeting the requirements     for conversion as provided in this Section 1.4, the Borrower shall     issue and deliver or cause to be issued and delivered to or upon     the order of the Holder certificates for the Common Stock issuable     upon such conversion within three (3) business days after such     receipt (the “Deadline”) (and, solely in the case of     conversion of the entire unpaid principal amount hereof, surrender     of this Note) in accordance with the terms hereof and the Purchase     Agreement. 




	 	            (e) Obligation   of Borrower to Deliver Common Stock.  Upon receipt by the   Borrower of a Notice of Conversion, the Holder shall be deemed to   be the holder of record of the Common Stock issuable upon such   conversion, the outstanding principal amount and the amount 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 


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	 	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 through willful or   deliberate hindrances on the part of the Borrower.  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 


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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

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provided by the Holder with respect to the transfer of Securities
  pursuant to an exemption from registration, such as Rule 144 or
  Regulation S, at the Deadline, it will be considered an Event of
  Default pursuant to Section 3.2 of the Note.

	 	            1.6 Effect of     Certain Events.




	 	            (a) Effect of     Merger,  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, other than a     private placement for cash consideration that is not a Dilutive     Issuance, 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,  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,  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 


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	 	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,  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 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

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 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. 


11



 
	 	            (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    


12



 
	 	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 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 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 

13



 
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
  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 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
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 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.

                      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

14



 
 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 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 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
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 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.

15



 
                      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
140%, 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 


16



 
	 	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) convertible debt issued in a   private placement that is not a Dilutive Issuance (c) indebtedness   to trade creditors or financial institutions incurred in the   ordinary course of business or (d) borrowings, a portion of the   proceeds of which shall be used to repay this Note. 




	 	            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 all or   substantially all 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 through   willful or deliberate hindrances on the part of the Borrower, fails   to issue shares of Common Stock to the Holder (or announces or   threatens in writing that it will not honor its 


17



 
	 	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 


18



 
	 	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 OTC (which     specifically includes the Pink Sheets electronic quotation system)     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. 




	 	            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


19



 
	 	 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   written notice to the Holder on the date such news     is made public. 


                      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 

20



 
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.


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	 	            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: 



If to the Borrower, to:

      HOMELAND RESOURCES LTD.

      9120 Double Diamond Parkway H269

      Reno, NV 89521

      Attn: THOMAS CAMPBELL,
President

      facsimile:

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


      Northwest
Law Group

      Attn:
Stephen O’Neill

      595 Howe
Street, Suite 704

      Vancouver,
BC  V6C 2T5

      facsimile:
(604) 687-6560

      e-mail:
son@stockslaw.com

                 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

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

      Naidich
Wurman Birnbaum & Maday, LLP

      Att:
Judah A. Eisner, Esq.

      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 


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	 	served in any suit, action or   proceeding in connection with this Agreement or any other   Transaction Document by mailing a copy thereof via registered or   certified mail or overnight delivery (with evidence of delivery) to   such party at the address in effect for notices to it under this   Agreement and agrees that such service shall constitute good and   sufficient service of process and notice thereof.  Nothing   contained herein shall be deemed to limit in any way any right to   serve process in any other manner permitted by law. 




	 	            4.7  Certain     Amounts.  Whenever pursuant to this Note the Borrower is     required to pay an amount in excess of the outstanding principal     amount (or the portion thereof required to be paid at that time)     plus accrued and unpaid interest plus Default Interest on such     interest, the Borrower and the Holder agree that the actual damages     to the Holder from the receipt of cash payment on this Note may be     difficult to determine and the amount to be so paid by the Borrower     represents stipulated damages and not a penalty and is intended to     compensate the Holder in part for loss of the opportunity to     convert this Note and to earn a return from the sale of shares of     Common Stock acquired upon conversion of this Note at a price in     excess of the price paid for such shares pursuant to this Note.      The Borrower and the Holder hereby agree that such amount of     stipulated damages is not plainly disproportionate to the possible     loss to the Holder from the receipt of a cash payment without the     opportunity to convert this Note into shares of Common Stock. 




	 	            4.8 Purchase     Agreement.  By its acceptance of this Note, each party agrees     to be bound by the applicable terms of the Purchase Agreement. 




	 	            4.9 Notice of   Corporate Events.  Except as otherwise provided below, the   Holder of this Note shall have no rights as a Holder of Common   Stock unless and only to the extent that it converts this Note into   Common Stock. The Borrower shall provide the Holder with prior   notification of any meeting of the Borrower’s shareholders   (and copies of proxy materials and other information sent to   shareholders).  In the event of any taking by the Borrower of a   record of its shareholders for the purpose of determining   shareholders who are entitled to receive payment of any dividend or   other distribution, any right to subscribe for, purchase or   otherwise acquire (including by way of merger, consolidation,   reclassification or recapitalization) any share of any class or any   other securities or property, or to receive any other right, or for   the purpose of determining shareholders who are entitled to vote in   connection with any proposed sale, lease or conveyance of all or   substantially all of the assets of the Borrower or any proposed   liquidation, dissolution or winding up of the Borrower, the   Borrower shall mail a notice to the Holder, at least twenty (20)   days prior to the record date specified therein (or thirty (30)   days prior to the consummation of the transaction or event,   whichever is earlier), of the date on which any such record is to   be taken for the purpose of such dividend,


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	 	 distribution, right or   other event, and a brief statement regarding the amount and   character of such dividend, distribution, right or other event to   the extent known at such time.  The Borrower shall make a public   announcement of any event requiring notification to the Holder   hereunder substantially simultaneously with the notification to the   Holder in accordance with the terms of this Section 4.9. 




	 	            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 September 8, 2014.

HOMELAND RESOURCES LTD.

By:
        /s/ Thomas Campbell


              _______________________________

          THOMAS CAMPBELL

         President

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  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 HOMELAND RESOURCES LTD.,
a Nevada corporation (the “Borrower”) according to the
conditions of the convertible note of the Borrower dated as of September 8, 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:


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