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 SECURIlTIES A OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITlES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFRED 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 SO PURSUANT TO RULE 144 OR RULE l44A UNDER SAID
ACT NOTWlTIISTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


	Principal Amount: $53,000.00	Issue
    Date: May 20, 2014
	Purchase Price: $53,000,000	 


 


COVERTIBILE PROMISSORY NOTE


 


FOR
VALUE RECEIVED IDS INDUSTRIES, INC., a Nevada corporation (hereinafter called the Borrower) hereby promises to pay to the
order or KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the "Holder") the sum or
$53.000.00 together with any interest as set forth herein on February 23, 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 expicitly set forth in 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
lapsed. 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 in 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 th e ri ght 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 i n 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
th is Note into fully paid and non-asscssable 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'') determind 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 conversin
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 unexcrcised
r 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. purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance wit h Section l3(d) of the Securities Exchange Act or 1934, as
amended (the '"Exchange Act"') and Regulations 13D-G thereunder except as otherwise provided in clause (1) of such provision
provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election
of the Holder, not less than 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 conversion, in the
form attached hereto as Exhibit A (the "Notice of Conversion'") delivered the Borrower by the Holder in accordance with
Section 1.4 below; provided that the Notice 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
a, 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 immediatly 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 l .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 or any subsidiary of the Borrower combinations.
recapitialization, reclassifications. extraordinary distributions and similar event). The "Variable Conversion Price"
shall mean 51% multiplied by the Market Price (as defined herein) (representing a discount rate of 49%). "Market Price"
means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the thirty (30) 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 Hoard 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 s 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 or the assers or the Borrower or (ii) any person, group or entity
(including the Borrower) publicly announces a lender after 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 here inafter 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 l.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) as 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 after (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 or 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 its capital structure which would change the number or shares of Common Stock into which 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 or share 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 reason  means of co munication dispatched on the Conversion Date prior to 6:00
p.m., New York, New York time) and (8) subject to Section 1.4(b), surrendering this Note at the principal office of he Borrower.


 


(b)                 Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion or this Note in
accordance with the terms hereof, he Holder shall not be required to physically surrender this Note to the Borrower unless
the en ire 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 conversion, or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as no to require physical surrender of this Note upon each such conversion. In the event
of any dispuet or discrepancy, such records of the Borrower shall, prima facie, be controlling and detenninativ in the
absence of manifest error. Notwithstanding the foregoing, if any port ion of this Note is converted as aforesaid, the Holder
may no 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 or 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 share 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 Holders 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.


 






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(d)                
Delivery of Common Stock Upon Conversion. Upon receipt by he 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 f con version or the entire unpaid principal amount hereto
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 recevied the Common Stock or other securities, cash
or other asset, as herein provided on such conversion. If the Holder shall have given a Notice or 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 or 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 longs 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 Stcok 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 an or equitable relief the parties agree that if
delivery of the Common Stock issuable upon conversion or this Note is not delivered by the Deadline (other than a failure due to
the circumstanes 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 10 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 interests shall accrue thereon in accordance with the terms or·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 result g from a failure attempt to frustrate.
interference with such conversion right are difficult if ot im possible to qualify. Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section l.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 an effective registration statement under the Act or (ii) the Borrower or its transfer agents 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 ( a successor rule) ("'Rule
l44") or (iv) such shares arc transferred to an "affiliate" (as defined in Rule l44) 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 immediatly sold each certificate for shares of Common Stock issuable upon conversion of this Note that as 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 b ar 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 WllICH 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 PLEDGE 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 or opinions
of counsel in com parable transactions. to the effect that a pubI ic 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 th is 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 the be immediately sold. In the event that the Company does not accept
the opinion of cour el 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 Even of Default pursuant to Section 3.2 of the Note.


 



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1.6               
Effect of Certain Events.


 


(a)                 
Effect of Merger. Consolidation. Etc. At the option of the Holder,
he 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 i n which more than 50% or the voting power of the Borrower is disposed of, or
the consolidation. merger or o er 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 Even of Default (as defined in Article III) pursuant
to which the Borrower shall be required to pay to he Holder upon the consummation of and as a condition to such transaction an
amount equal to he 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 simliar event. as a result of which shares or Common Stock of the Borrower
shall be changed into he same or a different number of shares of another class or classes of stock or securities of he Borrower
or another entity, or in case of' any sale or conveyance of all or substantially all or he assets or 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 he 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
lo the rights and interests of the Holder or 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) or the record date or
the special meeting of shareholders to approve, or if there is no such record date, the consummation of such merger consolidation
exchange of share 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 or a subsidiary (i.e., a spin-off)) (a '"Distribution) then the Holdcr of this
Note shall be entitled, upon any conversion or this Note after the date of record for determinig shareholders entitled to such
Distribution, to receive the amount or such assets which would have been payable to the Holder with respect to the shares or Common
Stock issuable upon such conversion had such Holder been the holder or 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 or a consideration per share (before deduction of reasonable expenses
or commissions or underwriting discount or allowances in connection therewith) less than the Conversion Price in effect on the
date or 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 or 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 considerat ion 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 or 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 or such Options or upon the conversion or exchange or 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 or 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 Borrowers 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 Converitble Securities first become convertible or exchangeable by (ii) the maximum total number of shares or 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. It: at any time when any Notes are issued and outstanding the Borrower issues any convertible securities or
rights to purchase stock, warrant, 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 l 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 holder 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 readjustment
of the Conversion Price as a result of the events described in this Section 1.6, Borrower at its expense, shall promptly compute
such adjustment or readjustment and pre and furnish to the Holder a certificate setting setting 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 or 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 is 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 split stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount as 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 or the Maximum Share Amount in lieu of any furthter right to convert this Note this will
be considered an Event or 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) e 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 so as practicable, return such unconverted Note to the Holder or, if the Note has not be
surrendered, adjust its records to reflect that such portion of this Note has not been converted all cases. the Holder shall retain
all of its rights and remedies (including, without limitation, the right to receive Conversion Default Payments pursuant to Section
1.3 to the extent require thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right 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 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 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 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 Optional Prepayment Amount due lo 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 ninety-one (91) days
following the Issue Date and ending on the date which is 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 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 145%, 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 one hundred twenty-one
(121) days following the Issue Date and ending on the date which is 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 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 150%, 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.


 


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


 






    	5



    	 



    




 
















ARTICLE II.
CERTAIN COVENANTS


 


2.                                          
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 securiries) on shares of capital
stock other than dividends on shares of Common Stock solely in the form or additional shares or 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 .


 


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) hour s 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 (I0) 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.


 



    	6



    	 



    

 





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 Small Cap 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 requirement s 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 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 propose s 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 Agreement s, 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 TN 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.



    	7



    	 



    




 


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:


 


	If to the Borrower, to:
	 
	IDS INDUSTRIES, INC. (f/k/a/ IDS Solar Technologies, Inc.)
	533 Birch Street
	Lake Elsinore, CA 92530
	Attn:
    SCOTT     PLANTINGA, 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     207 Great     Neck, NY. 11021
	Attn:Seth  Kramer , President
	email: info@kbmworkdwide.com
	 
	With a copy by fax only to (which copy shall not constitute notice):
	 
	Naidich
    Wurman Birbaum & Maday, LLP
	Att: Bernard S. Feldman, Esq.
	facsimile: 516-466-3555


 



    	8



    	 



    




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 am ended 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.


 


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 disproportion ate 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 shareholder s). In the
event of any taking by the Borrower of a record of its shareholder s 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 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  May 20, 2014.


 


	IDS INDUSTRIES, INC.
	(f/k/a/ IDS Solar Technologies)
	By: /s/
    Scott Plantinga
	Scott Plantinga
	Chief Executive Officer


 




    	9



    	 



    

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 IDS INDUSTRIES, INC. (f/k/a/ IDS
Solar Technologies, Inc.), a Nevada corporation (the "Borrower") according to the conditions of the convertible
note of the Borrower dated as of May 20, 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:


 


KMB WORLDWIDE, INC.


 80 Cuttermill Road - Suite 410


Great Neck, NY. 11021


Attention: Certificate Delivery (516) 498-9890


 


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:


 


KMB WORLDWIDE, INC.


By:


Name: Seth  Kramer


Title: President Date:


   80 Cuttermill Road - Suite 410 Great Neck, NY. 11021



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