Document:

THE SECURITIES OFFERED
HEREBY 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 BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT)

 

 

 US $27,000.00 

 

RX SAFES, INC

8% CONVERTIBLE REDEEMABLE NOTE

DUE OCTOBER 26, 2017

 

 

FOR VALUE RECEIVED,
RX Safes, Inc. (the “Company”) promises to pay to the order of the ADAR BAYS, LLC and its authorized successors and
permitted assigns ("Holder"), the aggregate principal face amount of Twenty Seven Thousand dollars exactly (U.S.
$27,000.00) on October 26, 2017 ("Maturity Date") and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on October 26, 2015. 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 tax or other
governmental charges payable in connection therewith.

 

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.

 

    	 	1	 

     

    

4.(a)The Holder of this Note
is entitled, at its option, after full cash payment for the shares convertible hereunder, 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")
at a price ("Conversion Price") for each share of Common Stock equal to 65% of the average of the three
lowest trading prices 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
ten 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.
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. To the extent the Conversion
Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit
the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all
conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the
conversion price shall be decreased to 55% instead of 65% while that “Chill” is in effect. In no event shall the
Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned
by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company. The conversion
discount and look back period will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount (whether
through a straight discount or in combination with an original issue discount) or look back period to another party while this
note is in effect.

 

(b)Interest on any unpaid principal
balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in Common Stock ("Interest
Shares"). 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. Notwithstanding the foregoing, in the event of a prepayment
on this Note, interest shall be paid in cash

 

(c)The Notes may be prepaid
with the following penalties: (i) if the note is prepaid within 60 days of the issuance date, then at 115% of the face amount plus
any accrued interest; (ii) if the note is prepaid after 60 days after the issuance date but less than 121 days after the issuance
date, then at 125% of the face amount plus any accrued interest and (iii) if the note is prepaid after 120 days after the issuance
date but less than 180 days after the issuance date, then at 135% of the face amount plus any accrued interest. This Note may not
be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption
of the right to redeem shall be null and void.

 

(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, 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 135% 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.

 

    	 	2	 

     

    

(e) In case of any Sale Event
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.

 

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 thirty (30) 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

 

    	 	3	 

     

    

(g)One or more money judgments,
writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000) 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;
or

 

(h)Intentionally Deleted

 

(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)Intentionally Deleted

 

(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

 

(l) The Company shall not replenish
the reserve set forth in Section 12, within 3 business days of the request of the Holder.

 

(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 OTCPINK marketplace or other exchange).

 

Then, or at any time thereafter, unless
cured within 5 days, 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 24% 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%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary
of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price
for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion
discount is 50% the Holder may elect to convert future conversions at $0.005 per share. 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.

    	 	4	 

     

    

 

Make-Whole for Failure
to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares
by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure
to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder
in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

Failure to Deliver Loss = [(High trade
price at any time on or after the day of exercise) x (Number of conversion shares)]

 

The Company must pay the Failure to Deliver
Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written
notice to the Company.

 

9.In case any provision of this
Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and 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.

 

11.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 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 25,641,000 shares of its Common Stock for conversions under this Note (the
“Share Reserve”). 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. If such amounts are to be paid by the Holder,
it may deduct such amounts from the Conversion Price. Conversion Notices may be sent to the Company or its transfer agent via electric
mail. The company should at all times reserve a minimum of three times the amount of shares required if the note would be fully
converted.  The Holder may reasonably request increases from time to time to reserve such amounts.

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.

 

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

 

 

Dated: 

 

 

 

RX SAFES, INC

 

 

 

 

__________________________

By: Lorraine Yarde

 

    	 	5	 

     

    

Title: CEO

EXHIBIT A

 

 

NOTICE OF CONVERSION

 

(To be Executed by
the Registered Holder in order to Convert the Note)

 

The undersigned hereby
irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of RX Safes, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be
issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable
with respect thereto.

 

Date of Conversion: 

Applicable Conversion Price: 

Signature: 

[Print Name of Holder and Title of Signer]

Address: 

 

 

SSN or EIN:  

Shares are to be registered in the following name: 

 

Name:  

Address: 

Tel:  

Fax:  

SSN or EIN:  

 

Shares are to be sent or delivered to the following account:

 

Account Name:  

Address:  

 

    	 	6NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL
SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal
Amount: $50,000.00Issue Date: November 11,
2015

 

 

8% CONVERTIBLE
NOTE

 

FOR
VALUE RECEIVED, RX SAFES, INC., a Nevada corporation (“Borrower” or “Company”), hereby promises
to pay to the order of EMA FINANCIAL,
LLC, a Delaware limited liability company, or its registered assigns (the “Holder”), on November 11, 2016, (subject
to extension as set forth below, the “Maturity Date”), the sum of
$50,000.00 as set forth herein, together with interest on the unpaid principal balance hereof at the rate of eight (8%)
per annum (the “Interest Rate”) from the date of issuance hereof until this Note
plus any and all amounts due hereunder are paid in full, and any additional
amounts set forth herein, including without limitation any Additional Principal (as defined herein). Interest shall be computed
on the basis of a 365-day year and the actual
number of days elapsed. Any amount of principal or interest on this Note
which is not paid when due shall
bear interest at the rate of twenty-four (24%) per annum from the due date thereof until the same is
paid (“Default Interest”). All payments due hereunder shall be made
in lawful money of the United States of
America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms
of this Note is
due on any day which is not a business day, the same shall instead be
due on the next succeeding day which is a business day and, in
the case of any interest payment date which is
not the date on which this Note is paid
in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the amount of
interest due on such date. As used in this
Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in
the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement entered into by and between the Company and Holder dated on or about the date
hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).
The Holder may, by written notice to the Borrower at least
five

(5) days before the Maturity Date (as may have
been previously extended), extend the Maturity Date to up to one (1) year following
the date of the original Maturity Date hereunder.

    	 	1	 

    	 

    

This
Note is free from all taxes, liens, claims
and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of
the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to
this Note:

 

ARTICLE I. CONVERSION
RIGHTS

 

1.1.   
Conversion Right. The Holder shall have
the right, in its sole and absolute discretion, at any time and from time to
time to convert all or any part
of the outstanding amount due under this Note into fully paid and non-assessable shares
of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of
the Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be
entitled to convert any portion of this Note
in excess of that portion of this
Note upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially
owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of
any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common
Stock issuable upon the
conversion of
the portion of
this Note
with respect to which
the determination of this proviso is being
made, would result in beneficial ownership by the Holder and its affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived
by the Holder upon, at the election of the
Holder, not less than 61 days’ prior notice to
the Borrower, and the provisions of the conversion limitation shall continue to apply
until such 61st day (or such later date, as determined by the Holder, as may be specified
in such notice of waiver). The number of shares of
Common Stock to be issued upon each Conversion of
this Note (“Conversion Shares”) shall be
determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in
effect on the date specified in the notice of
conversion, in the form attached hereto as Exhibit
A (the “Notice of Conversion”), delivered to
the Borrower by the Holder in accordance with Section 1.4 below; provided that
the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting
in, or reasonably expected to result in,
notice) to the Borrower before 11:59 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) accrued and unpaid interest, if any, on such principal amount being
converted at the interest rates provided in this Note
to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if
any, on the amounts referred to in the immediately preceding clauses (1) and/or
(2), plus (4) any
Additional Principal for such Conversion, plus (5) at the Holder’s option, any amounts owed to the Holder pursuant
to Sections 1.2(c) and 1.4(g) hereof.

    	 	2	 

    	 

    

		1.2.	Conversion Price.

 

Calculation of
Conversion Price. The conversion price hereunder (the “Conversion Price”) shall equal the 65% of the lowest
sale price for the Common Stock on the Principal Market during the twenty (20) consecutive Trading Days immediately preceding the
Conversion Date, provided, however, if the Company’s share price at any time loses the bid (ex: 0.0001 on the ask
with zero market makers on the bid on level 2), then Conversion Date.
However, if Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the outstanding principal amount t due hereunder shall be
at the Holder’s sole and absolute discretion be increased by 20%. If such
Common Stock is not traded on the OTCBB, OTCQB, NASDAQ, or NYSE, then such sale price
shall be the sale price of such security on the principal securities exchange or trading market where such security is
listed or traded or, if no sale 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 such sale price cannot be
calculated for such security on such date in the manner provided above, such
price shall be the fair market value as mutually determined by the Borrower and the
Holder. If the Borrower’s Common stock is
chilled for deposit at DTC, becomes chilled at any point while this Note remains
outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop
Sign or other trading restrictions, or if the closing sale price at any time falls
below 0.50 then such 65% figure specified in clause 1.2(a)(ii) above shall be reduced
to 50%. Additionally, the Borrower acknowledges that it will take all reasonable steps
necessary or appropriate, including providing a board of directors resolution authorizing the issuance of
common stock and an opinion of counsel confirming the rights of Holder to sell
shares of Common Stock issuable or issued
to Holder on conversion of this
Note pursuant to Rule 144 as promulgated by the SEC (“Rule 144"), as such Rule may be
in effect from time to time. If the
Borrower does not promptly provide a board of directors’ resolution and an opinion from Company counsel, and so long as the
requested sale may be made pursuant to Rule 144, the Company agrees to accept an opinion
of counsel to the Holder which opinion will
be issued at the Company’s expense and the conversion dollar amount will be
reduced by $500.00 to cover the cost of such legal opinion. “Trading Day” shall mean any day on
which the Common Stock is tradable for any period on the OTC Pink, or on the
principal securities exchange or other securities market on which the Common Stock is then
being traded. Additionally, if the Company ceases to
be a reporting company pursuant to the 1934 Act
or if the Note cannot be
converted into free trading shares after 181 days from the issuance date, an additional 15% discount will be
attributed to the Conversion Price.

a)    
If at any time the Conversion Price as determined hereunder for any
Conversion would be less than the par value of
the Common Stock, then the Conversion Price hereunder shall equal such par value for such Conversion and the Conversion
Amount for such Conversion shall be increased to include Additional Principal, where
“Additional Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of Conversion Shares issuable
upon such Conversion to equal the same number of Conversion Shares as would have been
issued had the Conversion Price not been subject to the minimum price set forth in this
Section 1.2(b).

 

b)    
Without in any way
limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock
issuable upon conversion of this Note is not delivered by the Deadline (as defined
below) the Borrower shall pay to the Holder $500.00 per day in
cash, for each day beyond  the

    	 	3	 

    	 

    

Deadline that the Borrower
fails to deliver such Common Stock. Such cash amount shall be paid to
Holder by the fifth day of the month following the month in
which it has accrued or, at the
option of the Holder, shall be added to
the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note
and such additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note. The Borrower agrees that the right to convert this Note
is a valuable right to the Holder. The damages resulting from a failure, attempt
to frustrate, or interference with such conversion right are difficult if not impossible
to quantify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section are
justified.

 

1.3.   
Authorized Shares. The Borrower covenants that the Borrower will at all times while
this Note is outstanding reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of this
Note. The Borrower is required at all times to have
authorized and reserved four (4) times the number of shares that is actually
issuable upon full conversion of this Note (based
on the Conversion Price of the Notes in effect
from time to time)(the “Reserved Amount”). Initially, the Company will instruct
the Transfer Agent to reserve two hundred fifty-two thousand two hundred and seven (252,207) shares of common stock in
the name of the Holder for issuance upon conversion hereof. The Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In
addition, if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which
this Note shall be convertible at the then
current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be
a sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of this Note in
full. 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 and from time to time after the Issue Date, by submitting to
the Borrower a Notice of Conversion
(by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m.,
New York, New York time).

 

b)    
Book Entry upon Conversion. Notwithstanding anything to
the contrary set forth herein, upon conversion of this Note in accordance with
the terms hereof, the Holder shall not be required to
physically surrender this Note to the Borrower unless the entire unpaid principal
amount of this Note is so converted. The
Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Borrower, so as
not to require physical surrender of this Note upon each such conversion. In the event
of any dispute  or

    	 	4	 

    	 

    

discrepancy, such records
of the Borrower shall, prima facie, be
controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if any portion of
this Note is converted as aforesaid,
the Holder may not transfer this Note unless
the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower
will forthwith issue and deliver upon the order of the Holder a new Note
of like tenor, registered as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid principal
amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of
a portion of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be
less than the amount stated on the face hereof.

 

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

 

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

 

e)    
Obligation of Borrower to Deliver Common Stock.
Upon receipt by the Borrower of a duly and properly executed Notice of Conversion, the Holder shall be
deemed to be the holder of record
of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest
on this Note shall be reduced to reflect
such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion
of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.
If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s
obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other obligation
of the Borrower to the holder of record,
or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation
to the Borrower, and irrespective of any
other circumstance which might otherwise limit
such obligation of the Borrower to the Holder in connection with such conversion.
The Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion
is received by the Borrower before 11:59 p.m., New York, New York time, on such
date.

    	 	5	 

    	 

    

f)    
Delivery of Common Stock by Electronic Transfer.
In lieu of delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in
the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request
of the Holder and its compliance with the provisions contained in Section 1.1 and
in this Section 1.4, the Borrower shall use its best
efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission
(“DWAC”) system.

 

g)    
Failure to Deliver Common Stock Prior to Deadline. Without in
any way limiting the Holder’s right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the
Common Stock issuable upon conversion of this Note is
not delivered by the Deadline, the Borrower shall pay to the Holder $500.00 per
day in cash, for each day beyond the Deadline that the Borrower fails
to deliver such Common Stock to the Holder. 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, shall be added
to the principal amount of this Note, in which
event interest shall accrue thereon in accordance with the terms of this Note
and such additional principal amount shall be convertible into Common Stock
in accordance with the terms of this Note.
The Borrower agrees that the right to convert is a valuable right to the Holder. The
damages resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if
not impossible to qualify. Accordingly the
parties acknowledge that the liquidated damages provision contained in this
Section 1.4(g) are justified.

 

h)    
The Borrower acknowledges that it will take all
reasonable steps necessary or appropriate, including providing an opinion of counsel confirming the rights of Holder to sell shares
of Common Stock issued to
Holder on conversion of the Note pursuant
to Rule 144 as promulgated by the SEC (“Rule 144"), as such Rule may be
in effect from time to time. If the
Borrower does not promptly provide an opinion from Borrower counsel,
and so long as the requested sale may
be made pursuant to Rule 144, the Borrower
agrees to accept an opinion of counsel to the
Holder which opinion will be issued
at the Borrower’s expense.

 

1.5.   
Restricted Securities. The shares of Common Stock issuable upon conversion of this
Note may not be
sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act
or (ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that the shares to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (iii) such shares are sold or transferred pursuant to
Rule 144 under the Act (or a successor
rule) (“Rule 144”) or (iv) such shares are transferred to
an “affiliate” (as defined in Rule 144) of the Borrower who agrees
to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Purchase Agreement). Any legend set forth on any
stock certificate evidencing any Conversion Shares 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 form, substance and scope customary for opinions
of counsel in comparable transactions,
to the effect that a public sale or transfer of such Common Stock may be made without
registration under the Act, which opinion shall be reasonably acceptable to
the Company, or (ii) in the case of the Common Stock issued
or issuable upon conversion of this Note, such security is registered for sale
by the Holder under an effective

    	 	6	 

    	 

    

registration statement filed
under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be
immediately sold.

 

		1.6.	Effect of Certain Events.

 

a)    
Effect of Merger, Consolidation, Etc. At the
option of the Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in
which more than 50% of the voting power of the Borrower is disposed of, or
the consolidation, merger or other business combination of the Borrower with or into any
other Person (as defined below) or Persons when the Borrower is not the survivor shall
either: (i) be deemed to be
an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to
the Holder upon the consummation of and as a condition to such transaction an
amount equal to the Default Amount (as defined
in Article III) or (ii) be
treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.

 

b)    
Adjustment Due to Merger, Consolidation, Etc.
If, at any time when this Note is
issued and outstanding and prior to conversion of all of
the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another class or classes
of stock or securities of the Borrower or another entity, or in
case of any sale or conveyance of all
or substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion
of this Note, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Note
been converted in full immediately prior to such transaction (without regard
to any limitations on conversion set forth herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder of this Note
to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price
and of the number of shares issuable upon
conversion of the Note) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the conversion hereof.
The Borrower shall not affect any transaction described in this Section 1.6(b) unless
(a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the record date of
the special meeting of shareholders to approve,
or if there is no such record date, the
consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets
(during which time, for clarification, the Holder shall be entitled to convert this
Note) and (b) the resulting successor or acquiring entity 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

    	 	7	 

    	 

    

distribution to
the Borrower’s shareholders in cash or shares (or rights to acquire shares)
of capital stock of a subsidiary (i.e., a spin-off) (a “Distribution”),
then the Holder of this Note shall be entitled,
upon any conversion of this Note after the
date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common Stock issuable upon
such conversion had such Holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution. Such
assets shall be held in escrow by the Company pending any such
conversion

 

d)   
Purchase Rights. If, at any time when
any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then
the Holder of this Note will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if
such Holder had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or
sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale
of such Purchase Rights.

 

e)    
Stock Dividends and Stock Splits. If the Company, at any time while this Note
is outstanding: (A) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of Common Stock on shares of
Common Stock or any securities convertible into or exercisable for Common Stock; (B) subdivides outstanding shares of
Common Stock into a larger number of
shares; (C) combines (including
by way of
a reverse stock
split) outstanding shares of Common
Stock into a smaller number of shares;
or (D) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price (and each sale or bid
price used in determining the Conversion
Price) shall be multiplied by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding immediately before such event and of
which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event. Any adjustment made pursuant
to this Section shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision, combination
or re-classification.

 

f)    
Notice of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price as a result of the events described in
this Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is
based. The Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if
any, of other securities or property which at the time would be received upon conversion of the
Note.

 

1.7.   
Revocation. If any Conversion Shares are
not received by the Deadline, the Holder may revoke the applicable Conversion pursuant to which such Conversion Shares 
were

    	 	8	 

    	 

    

issuable. This Note
shall remain convertible after the Maturity Date hereof until this Note is
repaid or converted in full.

 

1.8.   
Prepayment. Notwithstanding anything to the
contrary contained in this Note, subject to the terms of this Section, at any time
during the period beginning on the Issue Date and ending on the date which is six
(6) months following the Issue Date (“Prepayment Termination Date”), Borrower shall have the right, exercisable on
not less than five (5) Trading Days prior written notice to
the Holder of this Note, to prepay
the outstanding balance on this Note (principal and accrued interest), in
full, in accordance with this Section. 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 ten (10) 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 the Prepayment Factor
(as defined below), multiplied by the sum of:

(w) the then outstanding principal
amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to
in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment
Notice and fails to pay the Optional Prepayment Amount due to
the Holder of the Note within two (2) business days following the Optional Prepayment
Date, the Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section. After the Prepayment Termination Date, the Borrower shall have no
right to prepay this Note. For purposes hereof, the “Prepayment Factor” shall equal one hundred and thirty-five
percent (135%), provided that such Prepayment factor shall equal one hundred and twenty-five percent (125%) if
the Optional Prepayment Date occurs on or before the date which is ninety (90)
days following the Issue Date hereof.

 

 

ARTICLE II. CERTAIN
COVENANTS

 

2.1.                                   
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.

 

2.2.                                   
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 in existence or committed on the
date hereof and which the Borrower has informed Holder in writing prior to the date
hereof.

 

2.3.                                   
Charter. So long as the Borrower shall
have any obligations under this Note, the Borrower
shall not amend
its charter documents,
including without limitation
its certificate of

    	 	9	 

    	 

    

incorporation and bylaws, in
any manner that materially and adversely affects any rights of the Holder.

 

ARTICLE III. EVENTS OF
DEFAULT

 

Any
one or more of the following events which shall occur and/or be continuing shall constitute
an event of default (each, an “Event of Default”):

 

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
at any time following the execution hereof or) 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 five (5)
business days after the Holder shall have delivered a Notice of Conversion. It is an
obligation of the Borrower to remain current in
its obligations to its transfer agent. It shall be
an event of default of this Note, if a conversion of this Note
is delayed, hindered or frustrated due to a balance owed by the Borrower to
its transfer agent. If at the option of the Holder, the Holder advances any funds to
the Borrower’s transfer agent in order to process a conversion, such advanced
funds shall be paid by the Borrower to the Holder within forty eight (48) hours of
a demand from the Holder.

 

3.3.   
Breach of Covenants. The Borrower breaches any material covenant or other material
term or condition contained in this Note
and any collateral documents including but not limited to the Purchase Agreement
and such breach continues for a period of seven (7) 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.

    	 	10	 

    	 

    

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 $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably
withheld.

3.7.   
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings, voluntary or involuntary, for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower.

3.8.   
Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common
Stock on at least one of the OTCBB, or OTCQB, or OTC Pink, or an equivalent replacement
exchange, NASDAQ, the NYSE or AMEX.

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

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

3.11.   
Cessation of Operations. Any cessation of
operations by Borrower or Borrower admits it is
otherwise generally unable to pay its debts as such debts become due, provided,
however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as
they become due.

3.12.   
Maintenance of Assets. The failure by Borrower,
during the term of this Note, to maintain
any material intellectual property rights, personal, real property or other assets which are necessary to
conduct its business (whether now or in the
future).

3.13.   
Financial Statement Restatement. The restatement of any financial statements filed
by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note
is no longer
outstanding, if the result of such restatement would, by comparison to
the unrestated financial statement, have constituted a material adverse effect
on the rights of the Holder with respect to this Note
or the Purchase Agreement.

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

3.15.   
Replacement of Transfer Agent. In the event that the Borrower proposes to replace its
transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer
Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement
(including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16.   
Cross-Default. Notwithstanding anything to the
contrary contained in this Note or the other related or companion documents, a breach
or default by the Borrower of  any

    	 	11	 

    	 

    

covenant or other term or condition
contained in any of the Other Agreements, after the passage of
all applicable notice and cure or grace periods, shall, at the option of
the Holder, be considered a default under this Note
and the Other Agreements, in which event the Holder shall be entitled (but
in no event required) to apply all rights and remedies of the
Holder under the terms of this Note and
the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively,
all agreements and instruments between, among or by: (1) the Borrower, and, or for
the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however,
the term “Other Agreements” shall not include the related or companion
documents to this Note. Each of the loan transactions will be cross-defaulted with
each other loan transaction and with all other existing and future debt of Borrower to the
Holder.

Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with
respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in
full satisfaction of its obligations hereunder, an amount equal to the Default
Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE
NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS
HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT
SUM (AS DEFINED
HEREIN); MULTIPLIED BY
(Z) TWO

(2). Upon the occurrence
and during the continuation of any Event of Default specified in 
Sections

3.1 (solely with respect to failure
to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section
1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of
written notice to the Borrower by such Holders (the “Default Notice”),
and upon the occurrence of an Event of Default specified in 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.

    	 	12	 

    	 

    

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. The Holder may still convert any amounts due hereunder, including without limitation the Default Sum,
until such time as this Note has been repaid in
full.

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, email 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 or email, with accurate confirmation generated by the transmitting facsimile
machine or computer, at the address, email or number designated in
the Purchase Agreement (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.

 

4.3.   
Amendments. This Note and any provision
hereof may only be amended by an instrument
in writing signed by the Borrower and the
Holder. The term “Note” and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Notes issued pursuant to the
Purchase Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.

 

4.4.   
Assignability. This Note shall be
binding upon the Borrower and its successors and assigns, and shall inure to be
the benefit of the Holder and its successors and assigns. Each transferee of this
Note must be
an “accredited investor” (as defined in Rule 501(a) of the 1933
Act). Notwithstanding anything in this Note to the contrary, this Note
may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.

 

4.5.   
Cost of Collection. If default is
made in the payment of this Note, the Borrower
shall pay the
Holder hereof costs
of collection, including
reasonable attorneys’ fees.

 

4.6.   
Governing Law. This Note shall be
governed by and construed in accordance with the laws of
the State of New York without regard to conflicts of laws principles that would result in
the application of the substantive laws of another jurisdiction. Any action
brought  by

    	 	13	 

    	 

    

either party against the
other concerning the transactions contemplated by this Agreement must be brought only
in the civil or state courts of New York or in
the federal courts located in the State and county of
New York. Both parties and the individual signing this Agreement on behalf of the
Borrower agree to submit to the jurisdiction of
such courts. 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
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 unenforceability
of any other provision of this Note. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against the
Borrower in any other jurisdiction to collect on the Borrower’s obligations
to Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other decision in favor of the Holder. This Note shall
be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder,
may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar
rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or
statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder,
which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are
deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart
from this Note.

 

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

 

4.8.   
Disclosure. Upon receipt or delivery by the Company of
any notice in accordance with the terms of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, non-public information relating
to the Company or any of its Subsidiaries, the Company shall within one (1) Trading
Day after any such receipt or delivery, publicly disclose such material, non-public information on a Current Report on Form 8-K
or otherwise. In the event that the Company believes that a notice contains material, non- public information relating to
the Company or any of its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice,
and in the absence of any such indication,
the Holder shall be allowed to presume
that all matters relating to such notice do not constitute material, non-public information
relating to the Company or its Subsidiaries.

 

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

    	 	14	 

    	 

    

converts this Note
into Common Stock. The Borrower shall provide the Holder with prior notification of
any meeting of the Borrower’s shareholders (and copies of
proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its
shareholders for the purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution,
any right to subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of
all or substantially all of the assets of the Borrower or any proposed liquidation,
dissolution or winding up of the Borrower, the Borrower shall mail a notice to
the Holder, at least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction or event, whichever is
earlier), of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder hereunder substantially 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.

 

4.11.   
Usury. This Note shall be
subject to the anti-usury limitations contained in the Purchase
Agreement.

    	 	15	 

    	 

    

 (Remainder
of Page intentionally left blank)

 

IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in
its name by its duly authorized officer as of the Issue Date first set forth
above.

 

 

RX SAFES, INC.

 

 

	By:
	Name: Lorraine Yarde
	Title: CEO

    	 	16	 

    	 

    

EXHIBIT A
NOTICE OF CONVERSION

The undersigned hereby elects
to convert principal under the 8% Convertible Note of
RX Safes, Inc., a Nevada corporation (the Company”), into shares of common
stock (the “Common Stock”), of the Company according to
the conditions hereof, as of the date written below. If shares of Common Stock are to
be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.

 

By
the delivery of this Notice of Conversion
the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 1.1 of this Note, as determined
in accordance with Section 13(d) of the Exchange
Act.

 

The
undersigned agrees to comply with the prospectus delivery requirements under the applicable
securities laws in connection with any transfer of the aforesaid shares of
Common Stock pursuant to any prospectus.

 

Conversion
calculations:

Date to Effect
Conversion:  

 

Conversion
Price:  

 

Principal Amount
of Note to be Converted:  

 

Interest Accrued on
Account

of Conversion
at Issue:  

 

Additional Principal on Accountof
Conversion

Pursuant to Section 1.2(b) of
the Note:  

 

Number of
shares of Common Stock to be issued:
 

 

 

 

 

Signature:
 

 

Name:
 

 

Address for
Delivery of Common Stock Certificates:
 

 

 

 

 

 

Or

 

DWAC
Instructions:

Broker
No:   Account No: 

    	 	17

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