Document:

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

 

Principal
Amount: $42,500.00 Purchase Price: $42,500.00

Issue
Date: July 9, 2014

 

 

CONVERTIBLE
PROMISSORY NOTE

 

FOR
VALUE RECEIVED, ENDEAVOR IP, INC., a Nevada corporation (hereinafter called the "Borrower"), hereby promises to
pay to the order of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the "Holder") the sum of
$42,500.00 together with any interest as set forth herein, on April 14, 2015 (the "Maturity Date"), and to pay
interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the "Interest Rate") per annum
from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly
set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate
of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default Interest").
Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year
and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001 par
value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the
United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a
business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on
such date. As used in this Note, the term "business day" shall mean any day other than a Saturday, Sunday or a day
on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain
closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain
Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase
Agreement").

    	 

    	 

    

 

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

 

The
following terms shall apply to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

1.1   
Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which
is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of
the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount
of this Note into fully paid and non assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of
the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion
or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion
of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days' prior notice to the Borrower, and the provisions of the conversion
limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified

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in
such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in
the notice of conversion, in the form attached hereto as Exhibit A (the ''Notice of Conversion"), delivered to the Borrower
by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail
(or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New
York time on such conversion date (the "Conversion Date"). The term "Conversion Amount" means, with respect
to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at
the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note
to the Conversion Date, plus

(3)
at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)
plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.3 and l .4(g) hereof.

 

		1.2	Conversion
                                         Price.

 

(a)   
Calculation  of Conversion  Price.  The  conversion  price
 (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein)  (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower's securities or the securities
of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar
events). The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as defined herein) (representing
a discount rate of 42%). "Market Price" means the average of the lowest three (3) Trading Prices (as defined below)
for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion
Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin
Board, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting
service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading
market for such security, the closing bid price of such security on the principal securities exchange or trading market where
such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the
average of the closing bid prices of any market makers for such security that are listed in the "pink sheets".  If the
Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the
fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted
for which the  calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. "Trading
Day" shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded.

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

 

1.3   
Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all
times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note
(based on the Conversion Price of the Notes in effect from time to time)(the "Reserved Amount"). The Reserved Amount
shall be increased from time to time in accordance with the Borrower's obligations hereunder. The Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue
any securities or make any change to its capital structure which would change the number of shares of Common Stock into which
the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision
so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer
agent to issue certificates for the Common Stock issuable upon conversion of this Note, and

(ii)  
agrees that its issuance of this Note shall constitute full authority
to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and conditions of this Note.

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

 

		1.4	Method
                                         of Conversion.

 

(a)   
Mechanics  of  Conversion.  Subject to Section  1.1, this
Note may  be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by

(A) 
submitting to the Borrower a Notice of Conversion (by facsimile,
e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time)
and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b)  
Surrender of Note Upon Conversion. Notwithstanding anything
to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The
Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of
this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima
facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of
this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this
Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge
and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

(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

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in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the "Deadline")
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.

 

(e)   
Obligation  of  Borrower  to  Deliver  Common  Stock.  Upon
receipt  by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, the outstanding principal  amount and the amount of accrued and unpaid interest on this Note shall
be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock
or other securities,  cash or other assets, as herein provided, on such conversion. If the Holder shall have given  a Notice of
Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute
and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect
to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay
in the enforcement of any  other obligation  of the  Borrower to  the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of
any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

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

 

(g)   
Failure  to Deliver  Common  Stock Prior  to Deadline.  Without
in any way limiting the  Holder's  right  to  pursue  other  remedies,  including  actual  damages  and/or equitable relief, the
parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other
than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower
shall pay to the Holder $2,000 per day in cash, for each day beyond  the Deadline that the Borrower fails to deliver such Common
Stock through willful or deliberate hindrances on the

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part
of the Borrower. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued
or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which
it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance
with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the
terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from
a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly
the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5   
Concerning  the  Shares.  The  shares  of  Common  Stock  issuable  upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to  be sold  or  transferred may  be sold  or transferred
pursuant to  an  exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the
Act (or a successor rule) ("Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined in
Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who
is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of
this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in
the following form, as appropriate:

 

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

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The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not
accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section
3.2 of the Note.

 

		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)  
Ad justment 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,

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securities
or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately
prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion
of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless
(a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days
prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date,
the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c)   
Adjustment Due to Distribution. If the Borrower shall declare
or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a stock repurchase, by
way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder
of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled
to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares
of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date
for the determination of shareholders entitled to such Distribution. 

 

(d)  
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.

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1.7 
Trading  Market  Limitations.  Unless permitted by the applicable rules  and regulations of the principal securities market
on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant
to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock
that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is
then traded (the "Maximum Share Amount"), which shall be 4.99% of the total shares outstanding on the Closing Date (as
defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation  system or other self-regulatory organization with jurisdiction over the Borrower or
any of its securities on the Borrower's ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu
of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

 

1.8  
Status  as  Shareholder.  Upon submission of a Notice of
Conversion by  a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance
would exceed such Holder's allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares
of Common Stock and (ii) the Holder's rights as a Holder of such converted portion of this Note shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available
at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding
the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day
after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the
Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain
the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as
practicable, return such unconverted Note to the Holder or, if  the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including,
without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby
for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Section 1.3) for the Borrower's failure to convert this Note.

 

1.9  
Prepayment. Notwithstanding anything to the contrary contained
in this Note, at any time during the period beginning on the Issue Date and ending on the date which is thirty

(30)
days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note to prepay the outstanding

    	10

    	 

    

 

Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an "Optional
Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower
exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Optional
Prepayment Amount") equal to 112%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment
Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
anything to the contrary contained in this Note, at any  time during the period beginning on the date which is thirty-one (31)
days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Borrower shall have
the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding
Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined
below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one

(1)
business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall
make payment to the Holder of an amount in cash (the "Second Optional Prepayment Amount") equal to 117%, multiplied
by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in
clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower
delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within
two (2) business days following the Optional Prepayment Date, the  Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section 1.9.

 

Notwithstanding
anything to the contrary contained in this Note, at  any  time during the period beginning  on the date which is sixty-one (61)
days following the Issue Date

    	11

    	 

    

  

and
ending on the date which is ninety (90) days following the Issue Date, the Borrower shall have the right, exercisable on not
less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and
accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the
Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the
Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional
Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower
shall make payment to the Holder of an amount in cash (the "Third Optional Prepayment Amount") equal to 122%,
multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the
amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to
the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from
the Issue Date and ending one hundred twenty (120) days following the Issue Date, the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the
Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note,
and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.
On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to
or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. Ifthe Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the "Fourth Optional Prepayment Amount") equal to 127%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus
(z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment
Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following
the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

    	12

    	 

    

 

Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one
(121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the "Fifth Optional Prepayment Amount") equal to 132%, 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. Ifthe Borrower delivers an Optional Prepayment Notice
and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one
(151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the "Sixth Optional Prepayment Amount") equal to 140%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. Ifthe Borrower delivers an Optional Prepayment Notice
and fails to pay the Sixth Optional  Prepayment Amount due to the Holder of the Note within two (2)

    	13

    	 

    

  

business
days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this
Section 1.9.

 

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

 

 

ARTICLE
II. CERTAIN COVENANTS

 

2.1 
Distributions  on  Capital  Stock.  So long as the Borrower
 shall have  any obligation under this Note, the Borrower shall not without the Holder's written consent (a) pay, declare or set
apart for such payment, any dividend or other distribution (whether in  cash, property or other securities) on shares of capital
stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or
indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions
pursuant to any shareholders' rights plan which is approved by a majority of the Borrower's disinterested directors.

 

2.2 
Restriction  on Stock Repurchases.  So long as the Borrower
shall have  any obligation under this Note, the Borrower shall not without the Holder's written consent redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series
ofrelated transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any
such shares.

 

2.3 
Borrowings. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's written consent, (a) create, incur, assume guarantee, endorse, contingently
agree to purchase or otherwise become liable upon the obligation of any other person, firm, partnership, joint venture or corporation,
except by the endorsement of negotiable instruments for deposit or collection, or (b) suffer to exist any liability for borrowed
money, except any borrowings that does not render the Borrower a "Shell" company as defined in Rule 12b-2 under the
Securities Exchange Act of 1934.

 

2.4  
Sale of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant
portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned
on a specified use of the proceeds of disposition.

 

2.5 
Advances  and  Loans.  So long as the Borrower shall have
any  obligation under this Note, the Borrower shall not, without the Holder's written consent, lend money, give credit or make
advances to any person, firm, joint venture or corporation,  including, without limitation, officers, directors, employees, subsidiaries
and affiliates of the Borrower, except

    	14

    	 

    

  

loans,
credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior
to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000. 

 

ARTICLE
III.  EVENTS OF DEFAULT

 

Ifany
of the following events of default (each, an "Event of Default") shall occur: 3.1 Failure  to Pay  Principal  or
Interest. The Borrower fails to pay the principal

hereof
 or interest  thereon  when  due on this Note,  whether  at maturity,  upon  acceleration  or

otherwise.

 

3.2   
Conversion  and  the  Shares.  The Borrower fails to issue
shares of  Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon
exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or
cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock
issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required  by this Note,  the Borrower directs
its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically
or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise
pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs,
 delays, and/or hinders  its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant
to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend
to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement,
statement or  threat not to honor  its obligations shall not be rescinded  in writing) for three (3) business days after the Holder
shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer
agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a
balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's
transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty
eight (48) hours of a demand from the Holder.

 

3.3   
Breach of Covenants. The Borrower breaches any material covenant
or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

    	15

    	 

    

  

3.4  
Breach  of Representations  and Warranties.  Any representation
or warranty  of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in
connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect
when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement.

 

3.5   
Receiver  or  Trustee.  The Borrower  or any subsidiary of
the Borrower  shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6   
Judgments. Any money judgment, writ or similar process shall
be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty

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

 

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

 

3.8  
Delisting of Common Stock. The Borrower shall fail to maintain
the listing of the Common Stock on at least one of the OTC (which specifically includes the Pink Sheets electronic quotation system)
or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or
the American Stock Exchange.

 

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

 

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

 

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

    	16

    	 

    

  

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

 

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

 

3.14          
Reverse Splits.The Borrower effectuates a reverse split
of its Common Stock without written notice to the Holder once information regarding the reverse split is made publicly available
..

 

 

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

 

3.16          
Cross-Default. Notwithstanding anything to the contrary contained
in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or
condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall,
at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall
be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other
Agreements by reason of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all
agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate
of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall
not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other
loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable
and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the

    	17

    	 

    

  

Default
Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2,
THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS
OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the
occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section
1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of
written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of an Event of
Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon
at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of
(w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and
l .4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to
in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value"
of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable
Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which
case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common
Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the "Default Amount") and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all
costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.

 

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

    	18

    	 

    

 

ARTICLE
IV. MISCELLANEOUS

 

4.1 
Failure  or  Indulgence  Not  Waiver.  No failure or delay
on the part of  the Holder in the exercise of any power, right or privilege hereunder shall operate as a  waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any
other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

 

4.2 
Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If
to the Borrower, to: ENDEAVOR IP, INC.

140
Broadway - 46th Floor New York, NY 10005

Attn:
RAVINDER DHAT, Chief Executive Officer facsimile:

 

With
a copy by fax only to (which copy shall not constitute notice): [enter name of law firm]

Attn:
[attorney name] [enter address line 1] [enter city, state, zip]

facsimile:
[enter fax number]

 

If
to the Holder:

KBM
WORLDWIDE, INC.

80
Cuttermill Road - Suite 410

Great
Neck, NY 11021 Attn: Seth Kramer, President

e-mail:
info@kbmworldwidc .com

    	19

    	 

    

 

With
a copy by fax only to (which copy shall not constitute notice): Naidich Wurman Birnbaum & Maday, LLP

Att:
Judah A. Eisner, Esq.

Attn:
Bernard S. Feldman, Esq. facsimile: 516-466-3555

e-mail:
dyork@nwbmlaw.com

 

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

 

4.4 
Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee
of this Note must be an "accredited investor" (as defined in Rule 50l(a) of the 1933 Act). Notwithstanding anything
in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.

 

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

 

4.6 
Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by
either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts
of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive
any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction
or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be
entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note
or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the
validity  or enforceability of any other provision of any agreement. Each party hereby

    	20

    	 

    

 

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

 

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

 

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

 

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

    	21

    	 

    

  

event
 requmng  notification  to  the  Holder  hereunder  substantially  simultaneously  with  the notification to the Holder in accordance
with the terms of this Section 4.9.

 

4.10
Remedies. The Borrower acknowledges that a breach by it of  its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent  and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that
the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.

 

 

IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this July 9, 2014.

 

ENDEAVOR
IP, INC.

 

By:
/s/ Ravinder Dhat

 

RAVINDER
DHAT

Chief
Executive Officer

    	22

    	 

    

 

EXHIBIT
A - NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert $_______________principal amount of the Note (defined below) into that number of shares of Common Stock
to be issued pursuant to  the conversion of the Note ("Common Stock") as set forth below, of ENDEAVOR IP, INC., a Nevada
corporation (the "Borrower") according to the conditions of the convertible note of the Borrower dated as of July 9,
2014 (the "Note"), as of the date written below. No fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.

 

Box
Checked as to applicable instructions :

 

[
] The Borrower  shall electronically transmit the Common Stock issuable pursuant  to this Notice of Conversion to the account
of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC Transfer").

 

Name
of DTC Prime Broker: Account Number:

 

[
 ]  The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock
set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below
or, if additional space is necessary, on an attachment hereto:

 

KBM
WORLDWIDE, INC.

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

e-mail:
info@kbmworldwide.com

 

Date
of Conversion:

 

Applicable
Conversion Price:$ _____________

Number
of Shares of Common Stock to be Issued 

Pursuant
to Conversion of the Notes: _____________

Amount
of Principal Balance Due remaining

Under
the Note after this conversion: _____________

 

 

 KBM WORLDWIDE, INC.

By:____________

Name:
 Seth Kramer Title:President Date:

    	23exhibit10_1.htm

 

EXHIBIT 10.1

EXECUTION VERSION

FOURTH AMENDMENT TO CREDIT AGREEMENT, CONSENT AND WAIVER

 

This Fourth Amendment to Credit Agreement, Consent and Waiver (this “Fourth Amendment”) is entered into as of July 30, 2014 by and among ITT EDUCATIONAL SERVICES, INC., a Delaware corporation (the “Borrower”), the Lenders party hereto, and JPMORGAN CHASE BANK, N.A., as administrative agent (the “Administrative Agent”).

RECITALS

 

A.           The Borrower, the financial institutions from time to time party thereto as lenders (the “Lenders”) and Administrative Agent are party to that certain Credit Agreement dated as of March 21, 2012, as amended by the First Amendment thereto dated as of March 31, 2014, the Second Amendment thereto dated as of May 29, 2014 and the Third Amendment thereto dated as of June 30, 2014 (the “Credit Agreement”).  Unless otherwise specified herein, capitalized terms used in this Fourth Amendment shall have the meanings ascribed to them by the Credit Agreement.

B.           The Borrower has requested that the Lenders and the Administrative Agent amend certain provisions of the Credit Agreement, and grant certain consents and waivers, on the terms and conditions set forth below.

Now, therefore, in consideration of the mutual execution hereof and other good and valuable consideration, the parties hereto agree as follows:

1. Amendments to Credit Agreement.  The Credit Agreement is amended as follows:

 

(a)           The defined term “Collateral” in Section 1.01 of the Credit Agreement is hereby deleted and replaced with the following:

 

“Collateral” means all properties, rights, interests and privileges from time to time subject to Liens granted to the Administrative Agent, or any security trustee therefor, by the Security Documents.

 

(b)           The final sentence of the defined term “Commitment” in Section 1.01 of the Credit Agreement is hereby amended by deleting the phrase “September 30, 2014” used therein and replacing it with “October 31, 2014”.

 

(c)           The defined term “Credit Documents” in Section 1.01 of the Credit Agreement is hereby deleted and replaced with the following:

 

“Credit Documents” means this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each promissory note, if any, delivered pursuant to Section 2.10(e), the Mortgages, the Subsidiary Guaranty, the Security Documents, each amendment or waiver hereof or hereunder and each other document or agreement executed and delivered from time to time by any Credit Party in connection with or pursuant to the terms of this Agreement or any other Credit Document.

 

  

  

  

(d)           The defined term “Liquidity” in Section 1.01 of the Credit Agreement is hereby amended by deleting the reference to “$75,000,000” therein and replacing it with “$98,000,000”.

 

(e)           The defined term “Significant Regulatory Event” in Section 1.01 of the Credit Agreement is hereby deleted and replaced with the following:

 

“Significant Regulatory Event” means, as the context may require, (a) failure of the Borrower or any Material Subsidiary to maintain its status as an “eligible institution,” as defined in 34 C.F.R. Sections 600.2 and 600.5, (b) a failure of the Borrower or any Material Subsidiary to maintain its eligibility to participate in Title IV Programs (including, without limitation, suspension or termination in Title IV funding, or a delay of more than five days in receipt of Title IV funding following notice to Borrower from the DOE that the DOE intends to implement funding delays), or (c) a failure of the Borrower or any Material Subsidiary to maintain in effect any of its Accreditations, which failure of any of the types described in clauses (a), (b) and (c) (each a “Relevant Failure”), when taken together with all other such failures of any of the types described in clauses (a), (b) or (c) occurring during the fiscal quarter in which such Relevant Failure occurred (the “Relevant Quarter”) and the three fiscal quarters of the Borrower immediately preceding the Relevant Quarter, affects educational institutions of the Borrower or any Material Subsidiary which, in aggregate, (x) contributed more than 20% of the consolidated EBITDA of the Borrower and its Subsidiaries for the most recent four complete fiscal quarters of the Borrower or (y) comprise more than 20% of the consolidated Total Assets of the Borrower and is Subsidiaries as of the end of the most recent complete fiscal quarter of the Borrower.

 

(f)           Section 1.01 of the Credit Agreement is amended by adding the following definitions in appropriate alphabetical order:

 

“Mortgage” or “Mortgages” means, individually and collectively, as the context requires, each of the fee mortgages, deeds of trust and deeds executed by a Credit Party that purport to grant a Lien to the Administrative Agent (or a trustee for the benefit of the Administrative Agent) for the benefit of the Secured Creditors in any Mortgaged Properties, in form and substance satisfactory to the Administrative Agent.

 

“Mortgaged Property” means Real Property of a Credit Party listed on Schedule 3.05 and any other Real Property of a Credit Party that is or will become encumbered by a Mortgage in favor of the Administrative Agent in accordance with the terms of this Agreement.

 

  

- 2 -

  

“Mortgaged Property Support Documents” means with respect to the fee interest of the Borrower or Subsidiary Guarantor in any Real Property:

 

	
(a)  

	
a fully executed and notarized Mortgage encumbering the fee interest of such Borrower or Subsidiary Guarantor in such Real Property;

 

	
(b)  

	
if requested by the Administrative Agent or the Syndication Agent, maps or plats of any as-built survey of the sites of such Real Property certified to the Administrative Agent and the title insurance company issuing the policies referred to in clause (c) of this definition in a manner satisfactory to the Administrative Agent or the Syndication Agent requesting same and such title insurance company, dated a date satisfactory to each of the Administrative Agent or the Syndication Agent requesting same and such title insurance company by an independent professional licensed land surveyor;

 

	
(c)  

	
ALTA mortgagee title insurance policies issued by a title insurance company acceptable to the Administrative Agent or the Syndication Agent requesting same with respect to such Real Property, assuring the Administrative Agent that the Mortgage covering such Real Property creates a valid and enforceable first priority mortgage lien on such Real Property, free and clear of all defects and encumbrances except Permitted Encumbrances, which title insurance policies shall otherwise be in form and substance satisfactory to the Administrative Agent or the Syndication Agent requesting same and shall include such endorsements as are requested by the Administrative Agent or Syndication Agent requesting same;

 

	
(d)  

	
evidence as to (i) whether such Real Property is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards (a “Flood Hazard Property”) and (ii) if such Real Property is a Flood Hazard Property, (A) whether the community in which such real property is located is participating in the National Flood Insurance Program, (B) the applicable Credit Party’s written acknowledgment of receipt of written notification from the Administrative Agent or Syndication Agent (1) as to the fact that such Real Property is a Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program and (C) copies of insurance policies or certificates of insurance of the Borrower and its Subsidiaries evidencing flood insurance satisfactory to the Administrative Agent or Syndication Agent requesting same and naming the Administrative Agent and its successors and/or assigns as sole lender’s loss payee on behalf of the Lenders;

 

	
(e)  

	
if requested by the Administrative Agent or the Syndication Agent, an environmental assessment report, as to such Real Property, in form and substance and from professional firms reasonably acceptable to the Administrative Agent or the Syndication Agent requesting same;

 

  

- 3 -

  

 

	
(f)  

	
if requested by the Administrative Agent or the Syndication Agent, evidence reasonably satisfactory to the Administrative Agent or Syndication Agent requesting same that such Real Property, and the uses of such Real Property, are in compliance in all material respects with all applicable zoning Laws (the evidence submitted as to which should include the zoning designation made for such Real Property, the permitted uses of such Real Property under such zoning designation and, if available, zoning requirements as to parking, lot size, ingress, egress and building setbacks);

 

	
(g)  

	
if requested by the Administrative Agent or the Syndication Agent, satisfactory evidence as to the valuation of such Real Property from a third party source reasonably acceptable to the Administrative Agent or the Syndication Agent requesting same; and

 

	
(h)  

	
if requested by the Administrative Agent or the Syndication Agent, an opinion of legal counsel to the Credit Party granting the Mortgage on such Real Property, addressed to the Administrative Agent and each Lender, in form and substance reasonably acceptable to the Administrative Agent or the Syndication Agent requesting same.

 

 “Real Property” of any Person means such Person’s fee ownership interest in land, improvements and fixtures.

 

“Syndication Agent” means Bank of America, N.A.

 

(g)           Section 2.06(b) of the Credit Agreement is hereby amended by deleting the reference to “$80,000,000” therein and replacing it with “$98,000,000”, and further amended by deleting the reference to “September 30, 2014” therein and replacing it with “October 31, 2014”.

 

(h)           Section 2.06(j) of the Credit Agreement is hereby deleted and replaced with the following:

 

  

- 4 -

  

(j)           Cash Collateralization.  If (i) any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII, (ii) any Letter of Credit shall have an expiration date after the Maturity Date, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 103% of the face amount of such Letter of Credit, on the date five Business Days prior to the Maturity Date, (iii) any Letter of Credit shall be issued after July 30, 2014, concurrently with the issuance thereof (or, with respect to Letters of Credit issued prior to July 30, 2014, upon the earlier to occur of December 31, 2014 and receipt of any net cash proceeds required to be applied as cash collateral pursuant to Section 2.11(c)), the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 103% of the face amount of such Letter of Credit; provided, that this clause (iii) shall not be applicable to the DOE Letter of Credit until December 31, 2014 (except to the extent of any net cash proceeds required to be applied as cash collateral pursuant to Section 2.11(c)).  Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement.  The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement.  If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.  If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.10(f), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower to the extent that, after giving effect to such return, the total Revolving Credit Exposure would not exceed the total Commitments and no Default shall have occurred and be continuing.  If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.20(c), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower to the extent that, after giving effect to such return, no Issuing Bank shall have any exposure in respect of any outstanding Letter of Credit that is not fully covered by the Commitments of the non-Defaulting Lenders and/or the remaining cash collateral and no Default shall have occurred and be continuing.  If the Borrower is required to provide cash collateral pursuant to clause (iii) above or pursuant to Section 2.11(c), such cash collateral (to the extent not applied as aforesaid) shall, following any cancellation, termination, expiry, or reduction of the face amount of any corresponding Letter of Credit  (in whole or in part) be applied to repay outstanding Revolving Loans until repaid in full and thereafter returned to the Borrower, but solely to the extent that, after giving effect to such repayment and/or return, the Administrative Agent shall continue to hold 103% of the amount available to be drawn under all Letters of Credit; further provided that any amounts so applied to repay Revolving Loans or returned to the Borrower shall be accompanied by a corresponding pro rata reduction of the Commitment of each Lender.  The Borrower shall deliver such agreements as the Administrative Agent shall request with respect to establishing any cash collateral arrangements for Letters of Credit required by this Agreement.

 

  

- 5 -

  

(i)           Section 2.11 of the Credit Agreement is hereby amended by adding a new clause (c) as follows:

 

(c)           In the event and on each occasion that any net cash proceeds are received by or on behalf of the Borrower or any Material Subsidiary in connection with any sale, transfer, lease or other disposition of Mortgaged Property, including in connection with any Sale and Leaseback Transaction, or any mortgage financing or similar transaction with respect to Mortgaged Property, such net cash proceeds shall be applied within three (3) Business Days of receipt thereof as follows (i) first, to be delivered to the Administrative Agent to cash collateralize all outstanding Letters of Credit until such time as the Administrative Agent holds cash collateral equaling 103% of the face amount of such Letters of Credit in the manner described in Section 2.06(j), and (ii) second, to repay outstanding Revolving Loans which repayments shall be accompanied by a corresponding pro rata reduction of the Commitment of each Lender.

 

(j)           Section 3.05 of the Credit Agreement is hereby amended by adding a new clause (c) as follows:

 

(c)           All Real Property having a fair market value in excess of $1,000,000 owned by the Borrower or any of the Subsidiary Guarantors is set forth on Schedule 3.05 and attached as Exhibit A to that certain Fourth Amendment to Credit Agreement, Consent and Waiver dated as of July 30, 2014 among the Borrower and the Lenders party thereto.

 

(k)             Section 5.01(d) of the Credit Agreement is hereby deleted and replaced by adding new clauses (d) and (e) as follows:

 

(d)           deliver to the Administrative Agent a monthly cash flow budget for the upcoming 12 month period, which shall be reasonably acceptable to the Administrative Agent, on the first Business Day following the end of each month commencing on August 1, 2014, and on the first Business Day of each month thereafter; and

 

  

- 6 -

  

(e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.

 

(l)           Section 5.11 of the Credit Agreement is hereby deleted and replaced with the following:

 

Section 5.11 Further Assurances; etc.  (a) The Borrower will, and will cause each of the Subsidiary Guarantors to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Administrative Agent from time to time such schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports, and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents and Mortgages as the Administrative Agent may reasonably require to assure the creation and continuation of perfected security interests in the Collateral and as are generally consistent with the terms of this Agreement, the Security Documents and Mortgages.  Furthermore, the Borrower will, and will cause its Subsidiary Guarantors to, deliver to the Administrative Agent such opinions of counsel and other related documents as may be reasonably requested by the Administrative Agent to assure compliance with this Section 5.11.

 

(m)           Article V of the of the Credit Agreement is hereby amended by adding a new Section 5.12 as follows:

 

SECTION 5.12  Real Property.  (a) If any Borrower or Subsidiary Guarantor acquires a fee ownership interest in any Real Property and such Real Property has a fair market value in excess of $1,000,000, it shall provide to the Administrative Agent or the Syndication Agent requesting same within sixty (60) days (or such extended period of time as agreed to by the Administrative Agent or the Syndication Agent requesting same), the Mortgaged Property Support Documents and other such deliverables as the Administrative Agent or the Syndication Agent reasonably may request for such Real Property in writing, and cause such Real Property to be subject at all times to a perfected Lien (subject in each case to Liens permitted by Section 6.02) in favor of the Administrative Agent for the benefit of the Secured Creditors to secure the Secured Obligations; provided, that notwithstanding the foregoing, with respect to Real Property owned on July 30, 2014 and set forth on Schedule 3.05, the foregoing conditions must be satisfied within sixty (60) days (or such extended period of time as agreed to by the Administrative Agent or the Syndication Agent requesting same) of receipt of written request for same from the Administrative Agent or the Syndication Agent (it being understood and agreed that as of July 30, 2014, the Administrative Agent has requested in writing the deliverables set forth in clauses (a), (c) and (d) of the definition of Mortgaged Property Support Documents with respect to such Real Property).

 

  

- 7 -

  

(n) Section 6.01(m) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

(m)           other secured Indebtedness in an aggregate principal amount not exceeding $5,000,000 at any time outstanding; and

 

(o) Section 6.02(l) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

Liens not described in clauses (a) through (k) above to secure Indebtedness, obligations or liabilities in the aggregate principal amount not to exceed $5,000,000 at any one time outstanding.

 

(p) Section 6.03(b)(iii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

(iii) other Asset Dispositions for fair market value and adequate cash purchase consideration as reasonably determined by the Administrative Agent; provided that (w) at the time of such Asset Disposition, no Default shall exist or would result from such Asset Disposition, (x) the aggregate net book value of all property disposed of in reliance on this clause (iii) shall not exceed $5,000,000 in the aggregate during the period from July 30, 2014 through the term of this Agreement, (y) immediately before and after giving effect to such Asset Disposition, the financial covenants set forth in Section 6.12 (a), (b) and (c), determined on a pro forma basis, shall not exceed the limits specified in Section 6.12 (a), (b) and (c); further provided, that the restrictions set forth in this clause (iii) shall not be applicable to any Asset Disposition of Mortgaged Property to the extent such Asset Disposition generates net cash proceeds of at least 75% of the appraised value of such Mortgaged Property (which in the case of the Mortgaged Property listed on Schedule 3.05 shall be the value set forth on the relevant appraisal delivered to the Administrative Agent in July of 2014 or any subsequent appraisal requested by the Administrative Agent or the Syndication Agent), and all net cash proceeds are applied in accordance with Section 2.11(c),

 

(q) Section 6.03 of the Credit Agreement is hereby amended by adding the following as the ultimate sentence thereof.

 

Notwithstanding the foregoing or any other provision of this Agreement or any other Loan Document to the contrary, neither the Borrower nor any other Credit Party shall transfer any Real Property to any Subsidiary which is not a Credit Party.

 

(r) Section 6.11 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

  

- 8 -

  

SECTION 6.11  Sale and Leaseback Transactions. The Borrower shall not, nor shall it permit any Material Subsidiary to, enter into any Sale and Leaseback Transaction, other than Sale and Leaseback Transactions for fair market value and adequate cash purchase consideration as reasonably determined by the Administrative Agent (it being understood and agreed that any Sale and Leaseback Transaction of Mortgaged Property generating net cash proceeds of at least 75% of the appraised value of such Mortgaged Property (which in the case of the Mortgaged Property listed on Schedule 3.05 shall be the value set forth on the relevant appraisal delivered to the Administrative Agent in July of 2014 or any subsequent appraisal requested by the Administrative Agent or the Syndication Agent), shall be deemed to be for fair market value and adequate cash purchase consideration, without further determination by the Administrative Agent) in respect of which the net cash proceeds received in connection therewith does not exceed $125,000,000 in the aggregate during the term of this Agreement, determined on a consolidated basis for the Borrower and its Material Subsidiaries.

 

(s) Clause (o) of Article VII of the Credit Agreement is hereby deleted and placed with the following:

 

(o)           Security Documents and Mortgages.  Any Security Document or Mortgage shall cease to be in full force and effect, or shall cease to give the Administrative Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby, or any of the Borrower, any Subsidiary Guarantor, or any other Subsidiary shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to such Security Document or Mortgage and such default shall continue beyond the period of grace, if any, specifically applicable thereto pursuant to the terms of such Security Document or Mortgage; or

 

(t) Section 8.08 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

SECTION 8.08  Other Titles.  No Lender identified in this Agreement as a “Documentation Agent” or a “Syndication Agent” (except as otherwise expressly set forth herein with regards to matters relating to Mortgaged Property) shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender.  Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Administrative Agent in this Article VIII.

 

(u) Section 9.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

  

- 9 -

  

SECTION 9.14  Release of Liens and Guarantees.  Without limiting the foregoing, if any Collateral or any Subsidiary is sold in a transaction permitted hereunder, including without limitation, any Asset Disposition of Mortgaged Property permitted by Section 6.03(b)(iii) or Sale and Leaseback Transaction of Mortgaged Property permitted by Section 6.11  (excluding sales to the Borrower or a Subsidiary thereof) or is financed by Indebtedness permitted by this Agreement, (a) such Collateral shall be sold or financed free and clear of the Liens created by the Pledge Agreement, any Security Document, or any Mortgage, subject in the case of an Asset Disposition of Mortgaged Property, a Sale and Leaseback Transaction of Mortgaged Property, or a financing of Mortgaged Property to the Administrative Agent’s receipt of such evidence as the Administrative Agent may reasonably request that such transaction is permitted hereunder, and (b) in the case of such a sale of a Subsidiary Guarantor, such Subsidiary Guarantor and its subsidiaries shall be released from the Subsidiary Guaranty and, in each case, the Administrative Agent shall take any actions deemed appropriate or necessary in order to effect the foregoing (including, without limitation, executing and delivering Lien terminations, Mortgage releases or satisfactions or other releases), and the Administrative Agent agrees to take such actions, it being understood and agreed that the authorization to take such actions is granted to the Administrative Agent by the Lenders.

 

(v) The final sentence of Schedule 2.01 of the Credit Agreement is hereby amended by deleting the phrase “September 30, 2014” used therein and replacing it with “October 31, 2014”.

 

2. Consents.

 

(a)           Notwithstanding anything to the contrary in Sections 5.01(a) or 5.01(c) of the Credit Agreement, the audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows described in Section 5.01(a) of the Credit Agreement, and the certificate of a Financial Officer of the Borrower as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal year ending December 31, 2013, required to be furnished by the Borrower to the Administrative Agent and each Lender pursuant to Sections 5.01(a) and 5.01(c) of the Credit Agreement, are required to be furnished by September 15, 2014.

 

(b)           Notwithstanding anything to the contrary in Sections 5.01(b) or 5.01(c) of the Credit Agreement, the internally prepared consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows described in Section 5.01(b) of the Credit Agreement, and the certificate of a Financial Officer of the Borrower as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal quarters ending March 31, 2014, required to be furnished by the Borrower to the Administrative Agent and each Lender pursuant to Sections 5.01(b) and 5.01(c), are required to be furnished by September 15, 2014.

 

(c) Notwithstanding anything to the contrary in Sections 5.01(b) or 5.01(c) of the Credit Agreement, the internally prepared consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows described in Section 5.01(b) of the Credit Agreement, and the certificate of a Financial Officer of the Borrower as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal quarters ending June 30, 2014, required to be furnished by the Borrower to the Administrative Agent and each Lender pursuant to Sections 5.01(b) and 5.01(c), are required to be furnished by September 30, 2014.

 

  

- 10 -

  

3. Waivers.  The Administrative Agent and the Lenders hereby waive the following Defaults or Event of Defaults:

 

(a) any violation of the covenants in Section 5.01(b), Section 5.06, and Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement, solely to the extent that such violations or Events of Default relate to or arise from inaccuracies in, or adjustments to, the financial statements for the fiscal quarters ending March 31, 2013, June 30, 2013, and September 30, 2013 delivered pursuant to Section 5.01(b) of the Credit Agreement;

 

(b)  any violation of the covenants in Section 5.03 and Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement with respect thereto, solely to the extent that such violations or Events of Default relate to or arise from the Borrower’s failure to file audited financial statements for the fiscal year ending December 31, 2013 and compliance audits of its institutions’ administration of federal student financial aid programs with the DOE on or before June 30, 2014;

 

(c) any violation of the covenant in Section 5.01(c) of the Credit Agreement and any Event of Default under Article VII(c) and (d) of the Credit Agreement with respect thereto, solely to the extent it results from or is related to the matters described in clauses (a) or (b) above; and

 

(d) any violation of Section 5.02(b) of the Credit Agreement and any Event of Default under Article VII (c) and (d) of the Credit Agreement with respect thereto,  solely to the extent it results from or is related to the matters described in clauses (a) through (c) above.

 

The Borrower hereby acknowledges and agrees that the waivers set forth in this Section 3 shall not in any way waive or limit the rights of the Lenders to request from the Borrower any additional interest or fees owed to them under the Loan Documents as a result of any discrepancy between the Leverage Ratio reported for fiscal quarters ending after February 28, 2013, and the actual Leverage Ratios for such fiscal quarters.

4. Representations and Warranties of the Borrower.  The Borrower represents and warrants that:

 

(a) This Fourth Amendment has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

  

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(b) After giving effect to this Fourth Amendment, each of the representations and warranties of the Credit Parties set forth in the Credit Documents are true and correct in all material respects (except that any such representation or warranty which is already qualified as to materiality or by reference to Material Adverse Effect are true and correct in all respects) on and as of the date hereof, other than any such representations and warranties that specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date in all material respects (except that any such representation or warranty which is already qualified as to materiality or by reference to Material Adverse Effect shall be true and correct in all respects).

 

(c) After giving effect to this Fourth Amendment, no Default has occurred and is continuing.

 

5. Effectiveness.  This Amendment shall become effective upon the execution and delivery hereof by the Borrower, the Administrative Agent and the Required Lenders, and when the following additional conditions have been satisfied:

 

(a) Each of the Subsidiary Guarantors has executed and delivered a Reaffirmation of Guaranty and Security Documents in the form of Exhibit B hereto

 

(b) The Borrower shall have paid (i) to the Administrative Agent for the account of each Lender consenting to this Fourth Amendment an amendment fee equal to .10% of such Lender’s Commitment as of the date hereof after giving effect to this Fourth Amendment, (ii) to the Administrative Agent for its own account any other agreed fees relating hereto, which fees shall be deemed fully earned and non-refundable on the date hereof, and (iii) to Winston & Strawn LLP all outstanding legal fees and expenses in connection with this Fourth Amendment and the other Loan Documents.

 

6. Reference to and Effect Upon the Credit Agreement.

 

(a)           Except as specifically set forth above, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed.

 

(b)           The execution, delivery and effectiveness of this Fourth Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement, except as specifically set forth herein.  Upon the effectiveness of this Fourth Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby.

 

(c)           This Fourth Amendment shall constitute a Credit Document.

 

7. Costs and Expenses.  The Borrower hereby affirms its obligation under Section 9.03 of the Credit Agreement to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the preparation and administration of this Fourth Amendment (whether or not the transactions contemplated hereby shall be consummated).

 

  

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8. Governing Law.  This Fourth Amendment shall be construed in accordance with and governed by the law of the State of New York.

 

9. Headings.  Section headings in this Fourth Amendment are included herein for convenience of reference only and shall not constitute a part of this Fourth Amendment for any other purposes.

 

10. Counterparts.  This Fourth Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Fourth Amendment by email or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Fourth Amendment.

 

11. Release of Claims. The Borrower and the other Credit Parties hereby releases, remises, acquits and forever discharges each Lender, the Administrative Agent and each L/C Issuer and each of their respective employees, agents, representatives, consultants, attorneys, officers, directors, partners, fiduciaries, predecessors, successors and assigns, subsidiary corporations, parent corporations and related corporate divisions (collectively, the “Released Parties”), from any and all actions, causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct or indirect, at law or in equity, of whatever nature or kind, whether heretofore or hereafter arising, for or because of any manner of things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, and in any way directly or indirectly arising out of any or in any way connected to this Amendment or the other Credit Documents (collectively, the “Released Matters”).  The Borrower and each other Credit Party each hereby acknowledges that the agreements in this Section 11 are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters.  The Borrower and each other Credit Party each hereby represents and warrants to each Lender, Agent and each L/C Issuer that it has not purported to transfer, assign or otherwise convey any right, title or interest of the Borrower or any other Credit Party in any Released Matter to any other Person and that the foregoing constitutes a full and complete release of all Released Matters.

 

  

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THE BORROWER AND EACH OTHER CREDIT PARTY AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED, WAIVED AND DISCHARGED BY THIS AMENDMENT.  THE BORROWER AND EACH OTHER CREDIT PARTY HEREBY WAIVES AND RELINQUISHES ALL RIGHTS AND BENEFITS WHICH IT MIGHT OTHERWISE HAVE UNDER ANY CIVIL CODE OR ANY SIMILAR LAW, TO THE EXTENT SUCH LAW MAY BE APPLICABLE, WITH REGARD TO THE RELEASE OF SUCH UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS.  TO THE EXTENT THAT SUCH LAWS MAY BE APPLICABLE, THE BORROWER AND EACH OTHER CREDIT PARTY WAIVES AND RELEASES ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER ANY OTHER LAW OR ANY APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF THEIR WAIVERS OR RELEASES HEREUNDER.

 

[signature pages follow]

 

 

  

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IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date and year first above written.

 

ITT EDUCATIONAL SERVICES, INC.

 

 

By:   /s/ Daniel M. Fitzpatrick

Name: Daniel M. Fitzpatrick

Title: EVP CFO

 

  

  

  

JPMORGAN CHASE BANK, N.A.,

as a Lender and as the Administrative Agent

 

 

By:   /s/ Matt Kolarik

Name: Matt Kolarik

Title: Vice President

 

  

  

  

BANK OF AMERICA, N.A., as a Lender

 

 

By:   /s/ Jonathan M. Phillips

Name: Jonathan M. Phillips

Title: Senior Vice President

 

 

 

 

 

 

 

 

  

  

  

REGIONS BANK, as a Lender

 

 

By:   /s/ J. Richard Baker

Name: J. Richard Baker

Title: Senior Vice President

 

 

 

 

 

 

  

  

  

Associated Bank, National Association, as a Lender

 

 

By:   /s/ Paul Korrison

Name: Paul Korrison

Title: Senior Vice President

 

 

 

 

 

 

 

 

  

  

  

KeyBank, NA, as a Lender

 

 

By:   /s/ Brian D. Smith

Name: Brian D. Smith

Title: Senior Vice President

 

 

 

 

 

 

 

 

  

  

  

[other Lenders], as a Lender

 

 

By:   /s/ Josh Bailey

Name: Josh Bailey

Title: VP – Citizens Bank

 

 

 

 

 

 

 

 

  

  

  

The Northern Trust Company,

[other Lenders], as a Lender

 

 

By:   /s/ Olga Georgiev

Name: Olga Georgiev

Title: Senior Vice President

 

 

 

 

 

 

 

 

  

  

  

[other Lenders], as a Lender

 

By:   /s/ Paul D. Burch

Name: Paul D. Burch, Fifth Third Bank

Title: Vice President

7/30/14

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

EXHIBIT A

 

Schedule 3.05

 

	
ITT/ESI Owned Properties

	  
	  	
State

	
Campus

	  	  	  
	
1)

	
Idaho

	
Boise

	
2)

	
Missouri

	
Kansas City

	
3)

	
New York

	
Liverpool

	
4)

	
Ohio

	
Dayton

	
5)

	
Washington

	
Spokane Valley

	
6)

	
Michigan

	
Troy

	
7)

	
Tennessee

	
Nashville

	
8)

	
Texas

	
San Antonio

	
9)

	
Wisconsin

	
Green Bay

	
10)

	
Wisconsin

	
Greenfield

	
11)

	
Alabama

	
Bessemer

	
12)

	
Georgia

	
Kennesaw

	
13)

	
Illinois

	
Orland Park

	
14)

	
Missouri

	
Earth City

	
15)

	
Texas

	
Webster

	
16)

	
California

	
San Bernardino

	
17)

	
California

	
San Dimas

	
18)

	
Michigan

	
Swartz Creek

	
19)

	
Michigan

	
Wyoming

	
20)

	
Ohio

	
Maumee

	
21)

	
Ohio

	
Youngstown

	
22)

	
Tennessee

	
Cordova

	
23)

	
Texas

	
Houston

	
24)

	
Texas

	
Richardson

	
25)

	
Florida

	
Lake Mary

	
26)

	
Florida

	
Tampa

	
27)

	
Indiana

	
Indianapolis

	
28)

	
Indiana

	
Fort Wayne

	
29)

	
Indiana

	
Newburgh

	
30)

	
Indiana

	
Carmel HQ

 

 

  

  

  

EXHIBIT B

 

REAFFIRMATION OF GUARANTY AND SECURITY DOCUMENTS

 

The undersigned acknowledges receipt of a copy of Fourth Amendment to Credit Agreement, Consent and Waiver dated as of July 30, 2014, consents to such amendment and consents to each of the transactions referenced therein and hereby reaffirms its obligations under the Subsidiary Guaranty and the Security Documents.

 

Dated as of July 30, 2014

 

	
  

	
ESI SERVICE CORP.

 

By:   _________________________________

Name:

Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00233-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00233-of-00352.parquet"}]]