Document:

NEITHER  THE  ISSUANCE  AND SALE  OF  THE  SECURITIES  REPRESENTED BY
THIS  CERTIFICATE NOR THE  SECURITIES INTO  WIUCH 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 (ll) 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: US$56,250

        Purchase
        Price: US$56,250
	Issue Date: September 8, 2014

 

CONVERTIBLE
PROMISSORY NOTE

 

FOR VALUE RECEIVED, ALKAME HOLDINGS, INC., a Nevada  corporation
(hereinafter called the "Borrower"), hereby promises to pay
to the order of AUCTUS
PRIVATE EQUITY FUND, LLC, a
Delaware limited liability company, or registered assigns
(the "Holder") the sum of
US$56,250 together with any interest
as set forth herein, on June 8, 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 with the written consent of the
Holder which may be withheld
for any reason or for no reason. 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, $0.001 par value per share (the "Common
Stock") in
accordance with the terms hereof) shall be made in
lawful money of the United States of
America. All payments shall be made at such address as the
Holder shall hereafter give
to the Borrower  by written notice made
in accordance with the
provisions of this Note. Whenever any amount expressed
to be due by the terms
of this Note is due on any
day which is not
a business day, the same
shall instead be due on the next succeeding day which is a
business day and, in the case
of any interest payment date which
is not the date on
which this Note
is paid in full,  the
extension of the
due date thereof shall not be taken
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 (as defined below)
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 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

    	2

    	 

    

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,
provided however, that
the Borrower shall have
the right to
pay any or all
interest in
cash plus (3)
at the Holder's option,
Default Interest,
if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) plus
(4) at the Holder's
option, any amounts
owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof.

 

1.2
Conversion Price.

 

(a)
Calculation
 of  Conversion 
Price. The
 conversion
 price  (the
"Conversion
Price")
shall equal the
Base 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 "Base
Conversion Price''
shall mean 55%
multiplied by the Market Price
(as defined herein) (representing a discount
rate of 45%). "Market Price"
means the average of the lowest
two (2) Trading Prices (as defined
below) for the Common Stock during the twenty-five
(25) 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 (the
"OTCBB"), OTCQB or applicable trading
 market as reported
by a reliable
reporting service ("Reporting
Service")
designated by the Holder
 or, if the
OTCBB is not the principal
trading market for such security, the closing
bid price of such security
on the principal
securities exchange or
trading market where such security is listed or traded
or, if no closing bid
price of such security is available in any of the foregoing
manners, the average of the closing bid
prices of any market
makers for such security that are listed in the "pink sheets" by
the National Quotation Bureau,
Inc. The  Conversion
Price may be  adjusted 
downward if, within three (3) business days
of the transmittal of
the Notice of Conversion to the
Company, the Common
Stock has a closing bid which
is 5% or lower
than that set forth in the
Notice of Conversion. If the
shares have not been delivered
within three (3) business days
to the Company, the Notice of Conversion may be rescinded.
In the case that the
Borrower's Common Stock is not deliverable by DWAC,
an additional 10%
discount will apply. In the
case that the
Borrower's
Common Stock is "chilled"
for deposit into
the DTC system
and only eligible for clearing deposit,
an additional 15% discount
shall apply while
the "chill"
is in
effect. 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 OTCBB, OTCQB
or on the principal
securities exchange or other securities market on which
the Common Stock
is then being traded.

 

(b)
 Conversion Price
During Major
Announcements.  Notwithstanding anything
contained in Section
1.2(a) to
the contrary,
in the
event the Borrower
(i) makes a
public announcement that it intends to
consolidate or merge with any
other corporation (other  than a
merger in which the Borrower
is the surviving or continuing corporation and its
capital stock is unchanged) or sell or transfer
all or substantially all of the assets
of the Borrower or
(ii) any person,

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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 pursuant to
Section

3(d)
of the Purchase Agreement.  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
th the terms and conditions of this Note.

 

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

 

1.4
Method of Conversion.

 

(a)
 Mechanics of
Conversion.  Subject to
Section 1.1, this
Note may
be converted by
the Holder in
whole or in part at any time from time to
time after the Issue Date,
by (A) submitting
to the Borrower a Notice of Conversion
(by facsimile, e-mail
or other reasonable means of communication dispatched on
the Conversion Date prior
to 5:00 p.m., New
York, New

    	4

    	 

    

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

 

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

 

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

 

(e)
Obligation of
Borrower to Deliver
Common Stock.  Upon
receipt by the
Borrower of
a 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.

    	5

    	 

    

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 5:00p.m., New York, New York time,
on such date.

 

(t)
 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
commercially reasonable 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
At Custodian ("DWAC")
system.

 

(g)
 Failure  to 
Deliver  Common
 Stock  Prior
 to  Delivery
Dealdine. 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. 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

    	6

    	 

    

Borrower
who agrees to sell
or otherwise transfer
the shares
only in accordance
with this Section 1.5
and who
is an
Accredited Investor
(as defined in the
Purchase Agreement). Except
as otherwise
provided in the
Purchase Agreement (and
subject to the removal provisions
set forth
below), until such time
as the shares of Common Stock issuable upon conversion
of this Note have been
registered under
the Act or otherwise may be
sold pursuant to Rule 144
without any restriction as to
the number
of securities as
of a particular date
that can then be immediately sold,
each certificate for
shares of Common
Stock issuable upon
conversion of this Note that
has not been so included in
an effective registration statement
or that has not been sold
pursuant to an effective
registration statement or
an exemption that permits removal of the legend,
shall bear
a legend substantially
in the following form,
as appropriate:

 

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

ARRANGEMENT
SECURED BY THE
SECURITIES."

 

The
legend set
forth above shall be
removed and the Borrower
shall issue
to the
Holder a new
certificate therefore
free of
any transfer legend
if (i) the Borrower
or its transfer
agent shall have received
an opinion of counsel, in
form, substance and scope
customary for opinions of
counsel in
comparable transactions,
to the
effect that
a public
sale or transfer
of such Common Stock
may be made without
registration under the Act, which
opinion shall be reasonably
accepted by the Borrower 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
Borrower does not accept the opinion of counsel provided
by the Buyer 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

    	7

    	 

    

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 ill) or (ii) be treated pursuant
to Section 1.6(b)
hereof.  "Person"
shall mean any individual, corporation, limited
liability company, partnership,
association,
trust or other entity or organization.

 

(b)
 Adjustment Due
to Merger, Consolidation,
Etc. If, at
any
time when this
Note is issued
and outstanding and prior to
conversion of all of the Notes, there
shall be any merger, consolidation,
exchange of shares,
recapitalization,
reorganization, or other similar event, as
a result of which shares of Common Stock
of the Borrower shall be changed into the
same or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity,
or in case of any
sale or conveyance of all or substantially all of the
assets of the Borrower
other than in connection  with a
plan of complete liquidation of the Borrower, then the Holder of this Note
shall thereafter have the right to receive upon conversion of this Note,
upon the basis and upon the terms and conditions specified
herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets
which the Holder would have been entitled
to receive in such transaction had this Note been converted in full immediately prior
to such transaction (without regard to any
limitations on conversion  set forth herein), and
in any such case appropriate
 provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that the provisions hereof 
(including, without
limitation, provisions
for adjustment of the Conversion Price and of the
number of shares issuable upon conversion of
the Note) shall thereafter be applicable,
as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion hereof.
The Borrower shall not affect any
transaction described in this Section 1.6(b) unless (a) it frrst 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 dividend,
stock repurchase, by
way of return of capital or otherwise (including
any dividend or distribution to the Borrower's
shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e.,
a spin-off)) (a "Distribution"),
then the Holder of this Note shall be entitled,
upon any conversion of this Note after the date of record for determining shareholders
entitled to such Distribution, to
receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock
issuable upon such conversion bad such Holder been the holder of such shares of Common
Stock on the record date for the determination
of shareholders entitled to such Distribution.

    	8

    	 

    

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

 

(e)
  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, (li)
the Conversion  Price
at the time in effect and (lii) the number
of shares of
Common Stock and the amount,
if any, of
other securities or property
which at the
time would be received
upon conversion of the
Note.

 

1.7
Trading  Market
 Limitations.
 Unless  permitted
 by  the 
applicable  rules 
and regulations of
the principal
securities market on which the
Common Stock is
then listed or traded,
in no event shall the Borrower issue
upon conversion
of or otherwise
pursuant to this Note and the
other Notes issued pursuant to the Purchase
Agreement more than
the maximum number of shares of Common Stock
that the Borrower can issue pursuant
to any rule
of the principal United
States securities market on which the
Common Stock is then traded
(the "Maximum
Share Amount"), which shall be 4.99% 
of the total shares outstanding on the Closing
 Date (as defmed
 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 3.2
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

    	9

    	 

    

 

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, the
Borrower may
prepay the amounts outstanding hereunder
pursuant to the following terms and
conditions:

 

(a)
At any
time  during  the 
period  beginning  on
 the Issue
 Date and
ending on the
date which is thirty (30) days
following the Issue
Date, the
Borrower shall have
the right, exercisable
on not less than three (3) Trading
Days prior written notice
to the Holder of the Note to prepay
the outstanding Note (principal
and accrued interest), in full by making a
payment to the  Holder
of an  amount 
in cash  equal  to 125%, multiplied
by the sum of:
(w) the then outstanding
principal amount of this
Note (x) accrued
and unpaid 
interest on the unpaid principal amount of this
Note plus (y) Default
Interest.

 

(b)
 At any
time during the
period beginning the
day 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 by making
a payment
to the Holder of
an amount
in cash
equal to
130%, multiplied by
the sum of: (w)
the then outstanding principal amount
of this Note
plus (x) accrued and unpaid interest
on the unpaid
principal amount of this Note
plus (y) Default Interest.

 

(c)
 At any
time during the
period beginning the
day
which is
sixty one (61)
days following the
Issue Date and ending on the date which
is
ninety (90) days
following the Issue Date, the Borrower shall
have the
right, exercisable on not
less than three (3) Trading Days
prior written notice to the Holder of
the Note to
prepay the outstanding Note
(principal and
accrued interest), in full
by making a payment to
the Holder of
an amount in cash
equal to 135%,
multiplied by the
sum of: (w)
the then outstanding
principal amount of this Note
 plus (x) accrued
and unpaid interest on the unpaid principal amount
of this Note
 plus (y) Default Interest.

 

(d)
 At any
time during
the period
beginning the day
which is
ninety one (91)
days following
the Issue Date and
ending on the
date which
is one hundred
twenty (120) days
following the Issue Date, the
Borrower shall have the
right, exercisable on not less
than three
(3) Trading  Days prior written
 notice to
the Holder  of
the Note to  prepay
 the outstanding Note (principal
and accrued interest),
in full by making a
payment to the Holder of an amount
in cash equal to 140%, multiplied by the sum of: (w)
the then outstanding 
principal amount of this Note

    	10

    	 

    

plus
(x) accrued
and unpaid interest
on the
unpaid principal amount
of this Note
plus (y)
Default Interest.

 

(e)
 At  any
 time  during 
the  period
 beginning  the 
day  which 
is one hundred
twenty  one
(121)
 days following the Issue Date and ending on the
date which is 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 by making a payment to the
Holder of an amount in cash
equal to
145%, multiplied by the sum
of: (w) the then outstanding
principal amount of this Note
plus (x) accrued and
unpaid interest on the unpaid principal
amount of this Note plus
(y) Default Interest.

 

(f)
 At any
 time  during
 the  period 
beginning  the  day 
which  is 
one hundred fifty
one (151)
days following the Issue Date and ending on the
date which is one
hundred eighty (180)
days following the Issue Date, the Borrower shall have
the right, exercisable on not less than three
(3) Trading
Days prior written notice to the Holder of the Note
to prepay the outstanding
Note (principal and accrued interest), in full
by making
a payment to
the Holder of
an amount in cash
equal to 150%, multiplied by the
sum of: (w)
the then outstanding principal amount of
this Note plus (x) accrued
and unpaid interest on
the unpaid principal amount of
this Note plus (y)
Default Interest.

 

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

 

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
applicable prepayment amount 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 delivers an Optional Prepayment Notice
and fails to pay the applicable
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.

 

ARTICLE
ll. 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.

    	11

    	 

    

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

 

2.3
Intentionally
Deleted.

 

 

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

 

2.5
Advances and Loans.
So long as
the Borrower shall
have any obligation
under this Note,
the Borrower
shall not, without the Holder's written
consent, lend
money, give
credit or make advances to any person,
firm, joint venture or corporation, including,
without limitation, officers, directors, employees,
subsidiaries and affiliates
of the Borrower, except
loans, credits or advances
(a) in existence or committed on
the date hereof and which the Borrower
has informed Holder in writing prior
to the date hereof, (b) made
in the ordinary
course of business or (c) not in excess
of$100,000.

 

ARTICLE
III. EVENTS OF
DEFAULT

 

If
any of the
following events of
default (each, an
"Event
of Default'')
shall occur:

 

3.1
Failure to Pay
Principal or Interest. 
The Borrower  fails
to pay the
principal hereof  or  interest 
thereon when due  on this  Note,
whether at  maturity,
upon acceleration or
otherwise.

 

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

 

3.3
Failure to Deliver Advance Fee. The
Borrower fails to deliver
the Advance
Fee (as defined in the
Purchase Agreement) to the Holder within three (3) business days of the date
such fee is
due.

 

3.4
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

    	12

    	 

    

from
the Holder.

 

3.5
 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.

 

3.6
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.

 

3.7
Judgments.  Any money
judgment, writ or
similar process shall
be entered or flied
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.

 

3.8
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.

 

3.9
Delisting
of Common
Stock. 
The Borrower shall
fail to maintain
the listing of the
Common Stock on at least one of the
OTCBB. OTCQB or an equivalent replacement exchange, the Nasdaq
National
Market, the Nasdaq
Small Cap Market, the New
York Stock Exchange, or
the NYSE MKT.

    	13

    	 

    

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.

 

3.11
 Liquidation. 
Any dissolution,
liquidation,
or winding
up of Borrower
or any substantial
portion of
its business.

 

3.12
Cessation of Operations.
 Any cessation
of operations by
Borrower or Borrower
admits it
is otherwise generally
unable to
pay its
debts as such
debts become due, provided, however,
that any disclosure of
the Borrower's
ability to continue as a "going concern" shall
not be an admission that the Borrower cannot pay
its debts as they become due.

 

3.13
 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).

 

3.14
 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.

 

3.15
Reverse Splits.
The Borrower
effectuates a
reverse split of
its Common

Stock
without twenty (20)
days prior written
notice to the Holder.

 

3.16
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.

 

3.17
 Cessation of
Trading.
Any cessation
of trading
of the
Common Stock
on at least
one of the
OTCBB, OTCQB or an
equivalent replacement
exchange, the Nasdaq
National Market, the
Nasdaq Small Cap Market,
the New York Stock Exchange, or the NYSE MKT,
and such cessation of trading shall continue for
a period of
five consecutive (5) Trading Days.

 

3.18
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: (I) 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 agreements and instruments defined as
the Documents. Each of the loan transactions will be cross-defaulted with
each other loan transaction and
with all other existing  and future debt
of Borrower to the Holder.

 

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

    	14

    	 

    

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 acceleration), 3.3,
3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, 3.15,
3.16. 3.17 and/or 3.18 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 Article 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 (i) 150%
times the sum of (w) the then outstanding principal
amount of this Note
plus (x) accrued and
unpaid interest
on the unpaid principal
amount of this Note to the
date of payment (the "Mandatory
Prepayment
Date") plus (y)
Default Interest, if any, on the amounts referred
to in clauses (w)
and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3
and 1.4(g) hereof (the then
outstanding principal amount of this
Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default
Sum") or (ii)
at the option of the Holder, 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 inequity.

 

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

    	15

    	 

    

Amount,
the number of
shares of
Common Stock of
the Borrower
equal to
the Default Amount divided
by the
Conversion Price then
in effect.

  

 

ARTICLE
IV. MISCELLANEOUS

 

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

 

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: Alkame Holdings,
Inc.

3651
Lindell Road,
Suite D
#356

Las
Vegas, NV 89103

Attention:
 Robert Eakle

Facsimile:
(702) 943-0233

 

If
to the
Holder:

 

Auctus
Private
Equity Fund,
LLC

101
Arch Street,
20th Floor

Boston,
MA 02110

Attn:
Lou Posner

Facsimile:
(617) 532-6420

 

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

    	16

    	 

    

 

Lucosky
Brookman LLP

101
Wood Avenue South,
5th Floor

Woodbridge,
NJ 08830

Attn:
Joseph M.
Lucosky,
Esq. Facsimile: (732)
395-4401

 

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 reasonable 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 Nevada 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 Massachusetts  or in
the federal courts located in the Commonwealth
of Massachusetts. The parties to
this Note hereby irrevocably waive any objection to jurisdiction and venue
of any action
instituted hereunder and shall not assert
any defense based on lack
of jurisdiction or venue or
based upon forum non conveniens. The
Borrower and Holder waive trial by jury. The prevailing party shall be entitled to
recover  from the other party
its reasonable  attorney's fees and costs. In the event that any
provision  of this Note or any other agreement 
delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law,
then such provision shall be
deemed inoperative to the extent
that it may conflict therewith and
shall be deemed modified to conform with such
statute or rule of
law.  Any such  provision which may
prove invalid or unenforceable under any law shall 
not affect the validity or enforceability of any other
provision of any
agreement.  Each party hereby irrevocably
waives personal service of process and consents to process 
being served in any suit, action
or proceeding in connection with this Agreement or any
other Transaction  Document by mailing a copy thereof via
registered or certified
mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and
sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any
other manner permitted by law.

 

4.7
Certain Amounts.  Whenever
pursuant to this Note
the Borrower is
required to pay an
amount in excess
of the outstanding principal amount (or
the portion thereof required to be

    	17

    	 

    

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

 

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

 

 

[signature
page follows]

 

    	18

    	 

    

IN
WITNESS WHEREOF,
Borrower has
caused this Note
to be signed
in its
name by its du1y
authorized officer
as of the date first
above written.

 

ALKAME HOLDINGS, INC.

 

By: /s/ Robert Eakle

Name: Robert Eakle

Title: Chief Executive Officer

 

    	19

    	 

    

EXHIBIT
A NOTICE
OF CONVERSION

 

The
undersigned hereby
elects to
convert $_____________ principal amount
of the Note
(defmed below)
together with
$_____________of accrued and
unpaid interest thereto,
totaling $
_____________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
Alkame Holdings, Inc.,
a Nevada corporation
(the "Borrower")
according to the conditions of the
convertible note of the Borrower dated as of September
8, 2014 (the "Note"),
as of the date written below. 
No fee will be charged to the Holder
for any conversion, except
for transfer
taxes, if any.

 

Box
Checked as to
applicable instructions:

 

[
]  The Borrower
shall electronically transmit
the Common
Stock issuable pursuant
to this Notice
of Conversion to the
account of the undersigned or its nominee
with DTC through
its Deposit Withdrawal At Custodian 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:

 

Name:
[NAME] Address:
[ADDRESS]

 

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: _____________

Accrued
and unpaid
interest remaining:
_____________

 

[HOLDER]

 

 

Name: [NAME]

Title: [TITLE]

Date: [DATE]

    	20NEITHER
 THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED  BY THIS  NOTE 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 ABSENCEOF (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: $55,000

Date: October 24,
2014

 

CONVERTIBLE PROMISSORY
NOTE

 

Alkame
Holdings, Inc., (hereinafter called the "Company" or "ALKM"), hereby promises to pay to the order of WHC Capital,
LLC, a Delaware Limited Liability Company, or its registered assigns (the "Holder'') the sum of$55,000, together with any
interest as set forth herein, on October 24, 2015 (the "Maturity Date"),
and to pay interest on the unpaid principal balance hereof at the rate of Twelve percent (12%) (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. There exists a
Five thousand dollar ($5,000) Issuance Discount ("OlD") on this Note.

 

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) 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 Company 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 the supporting
documents of same date (attached hereto).

    	 

    	 

    

 

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 Company 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 and at any time during the period beginning on the date 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 Company
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 Company 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 Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later
date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of conversion, (the "Notice of Conversion"),
delivered to the Company by the Holder in accordance with the Sections 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 Company before 6:00p.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 Company'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 Company'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.

 

 

1.2Conversion
Price.

 

(a)
Calculation of Conversion Price. Holder, at its discretion, shall have the right to convert this Note in its entirety
or in part(s) into common stock of the Company valued at a Forty percent (40%) discount off the lowest intra-day trading price
for the Company's common stock during the Twenty (20) trading days immediately preceding a conversion date, as reported by Quotestream.

 

(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in the preceding section to the contrary,
in the event the Company (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other
than a merger in which the Company is the surviving or continuing corporation and its capital stock is unchanged) or sell or

    	2

    	 

    

transfer
all or substantially all of the assets of the Company or (ii) any person, group or entity (including the Company) publicly
announces a tender offer to purchase 50% or more f the Company'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. 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 has been made, the date
upon which the Company (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 Company covenants  that during the period the conversion  right exists the Company 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. The Company 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 Company's obligations.

 

The
Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition,
if the Company 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 Company 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
Company (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.

    	3

    	 

    

If,
at any time the Company does not maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.

 

1.4 Method of
Conversion.

 

(a)
Mechanics of Conversion.  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 Company  a  Notice of  Conversion (by facsimile,  e-mail  or other reasonable
means of communication dispatched on the Conversion Date prior to 6:00p.m., New York, New York time).

 

(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 Company
unless the entire unpaid principal amount of this Note is so converted. The Holder and the Company 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 Company, 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 Company shall, prima facie, be controlling and determinative in the absence
of manifest error. 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 Company 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 Company 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 Company the amount
of any such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Company from the Holder of a facsimile transmission or
e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided
in this Section, the Company 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.

 

Within Five (5)
business days of having received certificate(s) for common stock pursuant to a Notice of Conversion, Holder may elect to rescind
the Notice of Conversion and return the shares, at Holder's expense, to the Company's Transfer Agent. In the event of such rescission,
the principal amount outstanding under this Note shall be adjusted to include the Conversion Amount which was deducted from the
Note as part of the rescinded Notice of Conversion.

 

(e) Obligation of Company to Deliver Common Stock. Upon receipt by the
Company 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

    	4

    	 

    

accrued
and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company 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 Company'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 Company 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 Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company 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 Company before 6:00p.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  Company 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 Company 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 Broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system.

 

(g)
 Failure to Deliver Common Stock Prior to Deadline.  Without in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline the Company shall pay to the Holder $2,000

per
day in cash, for each day beyond the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid
to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written
notice to the Company 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 Company 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 are justified. Any delay or failure of performance by the Company hereunder shall be excused
if and to the extent caused by Force Majeure. For purposes of this agreement,
Force Majeure shall mean a cause or event that is not reasonably foreseeable and/or caused by the Company, including acts of God,
fires, floods, explosions, riots wars, hurricanes, etc.

 

1.5Concerning 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 Company 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 Company who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who
is an Accredited Investor. Except as otherwise provided herein (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:

 

"NEITHERTHE
ISSUANCE ANDSALE OF THE SECURITIES REPRESENTED  BY  THIS  CERTIFICATE  NOR  THE  SECURITIES  INTO WHICH
THESE  SECURITIESARE  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 AGENERALLY ACCEPTABLEFORM, THAT REGISTRATION
IS  NOT REQUIRED  UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE  MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES."

 

The
legend set forth above shall be removed and the Company shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Company 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 Buyer 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 this note.

 

 

1.6Effect 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 Company, the effectuation by the Company of a transaction or series
of related transactions in which more than50% of the voting power of the Company is disposed of, or the consolidation, merger
or other business combination of the Company with or into any other Person (as defined below) or Persons when the Company
is not the survivor shall either:(i) be deemed to be an Event of Default (as defined in Article ill) pursuant to which the
Company 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 IID 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.

    	5

    	 

    

 

(b) Adjustment
Due to Merger. Consolidation. Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Company or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set vforth 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 Company 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 Company) 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 Company shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Company's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e.,
a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after
the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would
have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been
the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

 

(d)
Adjustment Due to Dilutive Issuance.  If, at any time when any Notes are issued and outstanding, the Company issues
or sells, or in accordance with this Section hereof is deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share (before deduction of reasonable expenses or commissions or

    	6

    	 

    

underwriting
discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed
issuance) of such shares of Common Stock (a "Dilutive Issuance"),
then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share
received by the Company in such Dilutive Issuance.

 

The
Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or grants any warrants,
rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options")
and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price
then in effect, then the Conversion Price shall be equal to such price per share.For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise of such Options" is determined by dividing (i)
the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options,
plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of  additional
consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible
or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming
full conversion of Convertible Securities, if applicable).

 

Additionally,
the Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues, sells or
converts any Convertible Securities (whether or not the security's issuance preceded this Note), whether or not immediately
convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion
Price shall be equal to such price per share. For the purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such Convertible Securities.

 

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

    	7

    	 

    

 

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

 

1.7Trading
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 Company 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 Company 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 Company 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 Company or any of its securities on the Company'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.

 

1.8Status
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 Company 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 bolder of Common Stock by so notifying the Company) the Holder shall regain
the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Company 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 Company's failure to convert
this Note.

 

1.9Prepayment.
Maker may prepay this Note, in accordance with the following schedule: If within 180 calendar days of the execution of this Note,
$135% of all outstanding principal and interest due on each outstanding Note in one payment; After 180 Calendar
days of this Note being executed, any prepayments must be approved by both parties in writing.

    	8

    	 

    

 

ARTICLE II.
 CERTAIN COVENANTS

 

2.1Distributions
on Capital Stock. So long as the Company shall have any obligation under this Note, the Company 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
Company's disinterested directors.

 

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

 

2.3
Borrowings. So long as the Company shall have any obligation under this Note,  the  Company shall  not,  without  the
Holder's  written consent,  create,  incur, assume guarantee,  endorse, contingently agree to purchase or otherwise become liable
upon the obligation  of any person, firm, partnership,  joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence
or committed on the date hereof and of which the Company has informed Holder in writing prior to the date hereof, (b) indebtedness
to trade  creditors or financial  institutions  incurred  in the  ordinary  course of business  or (c) borrowings, the proceeds
of which shall be used to repay this Note.

 

2.4
Sale of Assets. So long as the Company shall have any obligation under this Note, the Company 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.

 

2.5Advances
and Loans. So long as the Company shall have any obligation under this Note, the Company 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 Company, except loans, credits or advances (a) in existence
or committed on the date hereof and which the Company has informed Holder in writing prior to the date hereof, (b) made in the
ordinary course of business or (c) not in excess of$100,000.

 

ARTICLE III EVENTS OF
DEFAULT

 

If any
of the following events of default (each, an "Event of
Default") shall occur:

 

3.1Failure
to Pay Principal or Interest. The Company fails to pay the principal hereof or interest thereon when due on this Note,
whether at maturity, upon

    	9

    	 

    

acceleration
or otherwise.

 

3.2Conversion
 and  the  Shares. The  Company  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 Company 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 Company 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 Company to its transfer agent. If at the option of the Holder, the Holder advances any funds to the
Company's transfer agent in order to process a conversion, such advanced funds shall be paid by the Company to the Holder within
forty eight (48) hours of a demand from the Holder.

 

3.3
Breach of Covenants. The Company 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 Company from the Holder.

 

3.4
Breach  of  Representations  and  Warranties. Any  representation  or warranty of the Company 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.

 

3.5Receiver
or Trustee. The Company or any subsidiary of the Company 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 Company or any subsidiary
of the Company 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

    	10

    	 

    

or any law for
 the relief of debtors shall  be instituted  by or against the Company or any subsidiary of the Company.

 

3.8
Delisting of Common Stock. The Company shall fail to maintain the listing of the Common Stock on at least one of the
OTC tiers or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small Cap Market, the New York Stock Exchange,
or the American Stock Exchange.

 

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

 

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

 

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

 

3.12
 Maintenance of Assets.  The  failure  by  Company 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 Company 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 original financial statement, have constituted a material adverse effect
on the rights of the Holder with respect to this Note or supporting documents.

 

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

 

3.15Replacement
of Transfer Agent. In the event that the Company proposes to replace its transfer agent, the Company 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 Company and the Company.

 

3.16Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Company 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 Company, 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 Company, and, or for the benefit of, (2) the Holder and any

    	11

    	 

    

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 Company 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 Company shall pay to the Holder, in
full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).UPON THE
OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE COMPANY 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 Company by such
Holders (the "Default Notice"), and upon the occurrence of an Event of Default specified the remaining sections of
Articles ill (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 Company shall pay to the Holder, in full satisfaction
of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to
the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts
referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in
clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value" of
the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date" for
purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in
respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by
(b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the "Default Amount") and all other amounts
payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation, legal
fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law
or in equity.

 

If
the Company 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 Company remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in
effect.

 

ARTICLE IV. MISCELLANEOUS

 

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

 

4.2
Notices.All notices, demands, requests, consents, approvals, and other

    	12

    	 

    

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 Company,
to: 

 

Attn:

Facsimile:

  

If to the Holder:

 

WHC Capital, LLC.

200 Stonehinge Lane

Suite 3

Carle
Place, NY 11514

Facsimile: 212.574.3326 

 

 

4.3
 Amendments.  This Note and any provision hereof may only be amended by an instrument in writing signed by the Company
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 Company and its successors and assigns, and shall inure to be the benefit
of the Holder and its successors and assigns. 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.

 

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

 

4.6Governing
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 Company
and Holder waive trial by jury. The prevailing party shall
be entitled to recover from

    	13

    	 

    

the other party its
reasonable attorney's fees and costs.  In the event that any provision of this Note or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other
provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served
in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law.

 

4.7
Certain  Amounts. Whenever  pursuant  to  this  Note  the  Company 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 Company 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 Company 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 Company 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.

 

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

documents of same date.

 

 

4.9Notice
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 Company shall provide the Holder with prior
notification of any meeting of the Company's shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Company 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 Company or any proposed liquidation, dissolution or winding up of the Company,
the Company 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 Company
shall make a public announcement of any event  requiring notification  to the Holder  hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10Remedies.The
Company 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 Company 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 Company 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, Company has caused this Note to be signed
in its name by its duly authorized officer:

 

Alkame Holdings, Inc.

 

By: /s/ Robert Eakle

Print: Robert Eakle

Title/Date:
CEO/ 10/27/14

    	14

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