Document:

THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

LG CAPITAL FUNDING, LLC

COLLATERALIZED SECURED PROMISSORY NOTE

BACK END NOTE

	$106,000.00	Brooklyn,
NY
	 	August 6, 2014

1.                                                                    
 Principal and Interest

FOR
VALUE RECEIVED, LG Capital Funding, LLC, a New York Limited Liability Company
(the "Company") hereby absolutely and unconditionally promises to pay to Labor Smart, Inc.
(the "Lender"), or order, the principal amount of One Hundred Six Thousand Dollars ($106,000.00)
no later than April 6, 2015, unless
the Lender does not meet the "current information requirements"
required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company
may declare the offsetting note issued by the Lender on the same date herewith to be in Default
(as defined in that note) and cross cancel its payment obligations under this Note as well as the
Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest
at the rate of 10%.

2.                                                                    
 Repayments and Prepayments: Security.

a.                    
All principal under this Note shall be due and payable no later
than April 6,

2015, unless the Lender does not meet the "current information requirements"
required under Rule 144 of the Securities Act of 1933, as amended,
in which case the Company may declare the offsetting note issued
by the Lender on the same date herewith to be in Default (as defined in that note) and cross cancel
its payment obligations under this Note as well as the Lenders payment obligations under the offsetting
note.

b.               
The Company may pay this Note at any time.
This note may not be assigned

by the Lender, except by operation of law.

c.               This
Note shall initially be secured by the pledge of the $106,000.00 10% convertible
promissory note issued to the Company by the Lender on even date herewith (the “Lender

 

    	1

    	 

    

Note"). The Company may
exchange this collateral for other collateral with an appraised
value of at least $1 06,000.00, by providing 3 days prior written notice to the Lender. If
the Lender does not object to the substitution of collateral in that 3 day period, such substitution
of collateral shall be deemed to have been accepted by the Lender. All
collateral shall be retained by New Venture Attorneys, P.C., which
shall act as the escrow agent for the collateral for the benefit of
the Lender. The Company may not effect any conversions under the Lender Note until it has
made full cash payment for the portion of the Lender Note being converted.

 

Lender Initials to Acceptance of bolded section above.

3.                                                                    
Events of Default Acceleration.

a.                  
The principal amount of this Note is subject to prepayment in whole or in part upon the
occurrence and during the continuance of any of the following events (each, an "Event of Default"):
the initiation of any bankruptcy, insolvency, moratorium, receivership or reorganization by or against the Company, or a general
assignment of assets by the Company for the benefit of creditors. Upon the occurrence
of any Event of Default, the entire unpaid principal balance of this Note and all of
the unpaid interest accrued thereon shall be immediately due and payable. The Company
may offset amounts due to the Lender under this Note by similar amounts that may be due to the Company by the Lender resulting
from breaches under the Lender Note.

b.                 
No remedy herein conferred upon the Lender is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and in addition to
every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts and agrees
that this Note is a full recourse note and that the holder may exercise any and all remedies available to it under law.

 

4.                                                                    
Notices.

a.                  
All notices, reports and other communications required or permitted hereunder shall be
in writing and may be delivered in person, by telecopy with written confirmation, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified or registered, postage
prepaid, addressed (i) if to a Lender, at such Lender's address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.

b.                 
Each such notice, report or other communication shall for all purposes under
this Note be treated as effective or having been given when delivered if delivered personally
or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid, or, if
sent by electronic communication with confirmation, upon the delivery of electronic communication.

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5.                                                                    
Miscellaneous.

a.                  
Neither this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by
a signed statement in writing.

b.                 
No failure or delay by the Lender to exercise any right hereunder shall operate as a waiver
thereof. nor shall any single or partial exercise of any right, power or privilege preclude any other
right, power or privilege. The provisions of this Note are severable and if any one provision hereof
shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity or
unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire
understanding of the parties with respect to the transactions contemplated hereby. The Company
and every endorser and guarantor of this Note regardless of the time, order or place of signing hereby waives presentment,
demand, protest and notice of every kind, and assents to any extension or postponement of
the time for payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release
of any other party or person primarily or secondarily liable.

c.                 
If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is

brought for the recovery of all, or any part
of, or for protection of the indebtedness respected by this Note, then the Company agrees
to pay all costs and expenses of the suit or proceeding, or any appeal thereof, incurred by the Lender, including without
limitation, reasonable attorneys' fees.

d.                 
This Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York
(without reference to conflict of laws).

e.                  
This Note shall be binding upon the Company's successors and assigns,
and shall inure to the benefit of the Lender's successors and assigns.

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IN
WITNESS WHEREOF, the Company has caused this Note to be executed by its duly authorized
officer to take effect as of the date first hereinabove written.

LG CAPITAL
FUNDING, LLC

 

By:

 

Title:

APPROVED:

LABOR SMART, INC.

 

By: /s/ Ryan Schadel

 

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

US $106,000.00

LABOR SMART, INC.

10% CONVERTIBLE REDEEMABLE NOTE

DUE AUGUST 6, 2015

FOR VALUE RECEIVED,
Labor Smart, Inc. (the "Company") promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted assigns ("Holder"), the aggregate principal face amount of One Hundred Six Thousand Dollars exactly
(U.S. $106,000.00) on August 6, 2015 ("Maturity Date") and to pay interest on the principal amount outstanding
hereunder at the rate of 10% per annum commencing on August 6, 2014. The interest will be paid to the Holder in whose name this
Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest
on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225 initially, and if changed, last appearing on the records
of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and
the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or
withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records
of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and
shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire
transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

This Note is subject to the following additional
provisions:

1.This Note is exchangeable for an equal aggregate
principal amount of Notes

of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except
that Holder shall pay any or other governmental charges payable in connection therewith.

Initials

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

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

4.                                     
(a)The Holder of this Note is entitled, at its option, at any time after

180 days, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's
common stock (the "Common Stock") without restrictive legend of any nature, at a price ("Conversion Price")
for each share of Common Stock equal to 58% of the lowest daily
closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company's
shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the
twelve prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder's intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank.
Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company
experiences a DTC "Chill" on its shares, the conversion price shall be decreased to 48% instead of 58 % while that "Chill"
is in effect.

(b)Interest on any unpaid principal balance of this
Note shall be paid at the rate

of 10% per annum. Interest shall be
paid by the Company in Common Stock ("Interest Shares"). The Holder may, at any time, send in a Notice of Conversion
to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest
Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of
such notice.

 

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(c)               
During the first six months
this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i) if the redemption is
within the first 90 days this Note is in effect, then for an amount equal to 125%
of the unpaid principal amount of this Note along with any interest that has accrued during that period, (ii) if the
redemption is after the 91st day this Note is in effect, but less than the 151"
day this Note is in effect, then for an amount equal to 130% of the unpaid principal amount of this Note along with any accrued
interest and (iv) if the redemption is after the 151st day this Note is in effect, but less than the 181St day this Note is in
effect, then for an amount equal to 135% of the unpaid
principal amount of this Note along with any accrued interest This Note may not be redeemed after 180 days. The redemption must
be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and
the Company may not redeem this Note.

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

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

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

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

    	 	3	 

    	 

    

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

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

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

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

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

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

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

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

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

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

 

    	 	4	 

    	 

    

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

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

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

(1)The Company shall not replenish the reserve
set forth in Section 12, within

3 business days of the request of the Holder; or

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

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

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

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

9.In case any provision of this Note is held by
a court of competent jurisdic-

tion to be excessive
in scope or otherwise invalid or unenforceable, such provision shall be ad-

justed rather than voided, if possible, so that it is enforceable to the maximum extent possible,
and

    	 	5	 

    	 

    

the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10.Neither this Note nor any term hereof may be
amended, waived, discharged

or terminated other than by a written instrument signed
by the Company and the Holder.

II.The Company represents that it is not a "shell"
issuer and has never been a

"shell" issuer or that
if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported form 10
type information indicating it is no longer a "shell issuer. Further. The Company will instruct its counsel to either (i)
write a 144- 3(a) (9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder's counsel.

12.The Company shall issue irrevocable transfer
agent instructions reserving

3,482,000 shares of its Common Stock
for conversions under this Note (the "Share Reserve"). The reserve shall be replenished as needed to allow for conversions
of this Note. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall
pay all costs associated with issuing and delivering the shares.

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

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

    	 	6	 

    	 

    

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

Dated: 8/6/14

LABOR SMART, IN By: /s Ryan Schadel, CEO

 

 

 

 

 

 

 

 

    	 	7

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