Document:

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

 

	Principal
    Amount: $42,500.00	Purchase
    Price: $42,500.00
	Issue
    Date: September
    4, 2014	 

 

CONVERTIBLE
 PROMISSORY NOTE

 

FOR
VALUE RECEIVED, AL.KAME
HOLDINGS, INC.,
a Nevada
corporation (hereinafter
called the
''Borrower"),
hereby promises
to pay to the order
of KBM WORLDWIDE, INC., a New York corporation, or registered assigns
(the "Holder")
the sum of

$42,500.00
together with
any interest
as set forth
herein, on 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. 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 l.6(a) or Article III, each
in respect of the remaining outstanding principal
amount of this Note to convert all or any
part of the outstanding and unpaid principal amount of this
Note into fully paid and non assessable shares of Common Stock, as
such Common Stock exists on the Issue Date, or any shares of capital stock
or other securities of the Borrower into which such
Common Stock shall hereafter be changed
or reclassified at the
conversion price (the "Conversion
Price") determined as provided
herein (a "Conversion"); provided,
however, that in no event shall the
Holder be entitled to convert any
portion of this Note in excess of
that portion of this Note
upon conversion of which the sum
of (1) the number.
of shares of Common Stock beneficially owned
by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower subject
to a limitation on conversion or exercise analogous
to the limitations contained herein)
and (2) the number of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination
of this proviso is being made,
would result
in beneficial ownership by the Holder and
its affiliates of more than 4.99% of
the outstanding shares of Common
Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"),
and Regulations 130-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

    	2

    	 

    

 

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 any conversion of this Note, the sum
of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder's option, accrued
and unpaid interest, if any, on such principal amount
at the interest rates provided in
this Note to the Conversion Date, plus

(3)
at the Holder's
option, Default Interest,
if any, on
the amounts referred
to in the
immediately preceding clauses (1)
and/or (2) plus (4)
at the Holder's option, any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof.

 

		1.2	Conversion
                                         Price.

 

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

    	3

    	 

    

 

(b) 
Conversion  Price 
During  Major  Announcements.
 Notwithstanding
anything contained in
Section l.2(a) to
the contrary, in
the event the
Borrower (i) makes a
public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving
or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of
the Borrower or (ii) any person, group
or entity (including the Borrower) publicly 
announces a tender offer to purchase 50%
or more of the Borrower 's
Common Stock (or any other takeover scheme)
(the date of the announcement referred to in clause (i)
or (ii) is hereinafter referred to as
the "Announcement
Date"),
then the Conversion Price shall,
effective upon the Announcement Date
and continuing through the Adjusted Conversion Price Termination Date (as
defined below), be
equal to the lower
of (x) the Conversion Price which would
have been applicable for a Conversion occurring on
the Announcement Date and (y) the
Conversion Price that would
otherwise be in effect.
From and after the Adjusted Conversion Price Term ination Date,
the Conversion
Price shall be determ ined as set forth in this Section l.2(a).
For purposes hereof, "Adjusted
Conversion Price Termination Date"
shall mean,
with respect to any proposed
transaction or tender offer (or takeover scheme) for
which a public announcement as contemplated
by this Section 1.2(b) 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
l .2(b) to become operative.

 

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

    	4

    	 

    

 

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

 

		1.4	Method
                                         of Conversion.

 

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

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

 

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

 

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

 

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

    	5

    	 

    

 

 

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

 

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

 

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

    	6

    	 

    

 

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 l .4(g) are justified.

 

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

 

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

 

    	7

    	 

    

 

The
legend set forth
above shall be
removed and the
Borrower shall issue
to the Holder a
new certificate therefore
free of any
transfer legend if (i)
the Borrower or its transfer agent
shall have received an opinion of counsel,
in form, substance and scope customary
for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Common
Stock may be made without registration under the Act, which opinion shall be accepted
by the Company so that the sale or transfer
is effected or (ii) in the
case of the Common Stock issuable
upon conversion of this Note, such security
is registered for sale by the Holder under an effective registration statement filed
under the Act or otherwise may
be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately
sold. 1n the event that the Company does not accept the opinion of counsel provided
by the Holder with respect to the
transfer of Securities pursuant
to an exemption from registration, such as Rule 144 or Regulation S, at the
Deadline, it will be considered an
Event of Default pursuant to Section 3.2 of the Note.

 

		1.6	Effect
                                         of Certain Events.

 

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

 

(b) 
Ad
justment  Due to
Merger,  Consolidation,  Etc.
 If, at
any time when
this Note is
issued and outstanding
and prior to conversion of all of the
Notes, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization,
or other  similar event, as a result of
which shares of
Common Stock of the Borrower shall be changed into
the same or a different  number
of shares of another class or classes
of stock or securities of the Borrower or another
entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than in
connection  with a plan  of complete
liquidation of the Borrower, then
the Holder of this
Note shall thereafter have the right to receive
upon conversion of this Note,
upon the basis and upon the
terms and conditions specified herein
and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the Holder would have been
entitled to receive in such transaction had

 

    	8

    	 

    

 

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

 

(c)  
Adjustment Due
to Distribution. If
the Borrower
shall declare or
make any distribution
of its assets (or rights
to acquire
its assets)
to holders of Common Stock as a 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 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) 
Ad justment
Due to Dilutive
Issuance. If, at
any time when
any Notes are issued
and outstanding,
the Borrower
issues or sells,
or in
accordance with this Section 1.6(d) hereof is
deemed to have issued or sold, any shares
of Common Stock for no consideration or
for a consideration per share (before deduction
of reasonable expenses or commissions or 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 Borrower in such Dilutive
Issuance.

 

The
Borrower shall
be deemed to
have issued or
sold shares of
Common Stock if
the Borrower in any manner issues or grants any warrants,
rights or options (not including employee
stock option plans), whether
or not immediately exercisable,
to subscribe for or to purchase Common Stock
or other securities convertible into
or exchangeable
for Common

    	9

    	 

    

 

 

Stock
("Convertible Securities")
(such warrants, rights
and options to
purchase Common Stock
or Convertible Securities
are hereinafter referred to as "Options")
and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price
then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the
preceding sentence, the "price
per share
for which Common Stock is issuable upon
the exercise of such Options" is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration
for the issuance or granting of all such Options, plus the m inimum aggregate
amount of additional consideration , if
any, payable to the Borrower 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 maxim um total number of shares
of Common Stock issuable upon the exercise of all
such Options (assuming full conversion
of Convertible Securities, if applicable).
No further adjustment to the
Conversion Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion
or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally,
the Borrower shall
be deemed to
have issued or
sold shares of Common
Stock if the
Borrower in any manner issues or sells
any Convertible Securities, whether or not immediately convertible
(other than where the same are
issuable upon the exercise of Options), and
the price per share for
which Common Stock is issuable upon such
conversion or exchange is less than the
Conversion Price then in effect, then
the Conversion Price shall be equal to such price
per share. For the purposes
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 Borrower
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 Borrower 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. No further
adjustment to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e)  
Purchase
Rights. 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

    	10

    	 

    

 

 

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.

 

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

 

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

 

1.8 
Status as 
Shareholder.
 Upon
 submission  of 
a Notice  of 
Conversion  by  a
Holder,
(i) the
 shares covered
thereby  (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder's allocated
portion of the Reserved Amount or
Maxim um Share Amount) shall be deemed converted into shares of Common Stock and
(ii) the Holder's
rights as a Holder of such converted portion
of this Note shall cease and terminate,
excepting
only
the right
to receive certificates  for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such Holder because of a failure by the Borrower
to comply with the terms of this Note.  Notwithstanding the foregoing,
if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of
the Deadline with respect to
a conversion of any portion of this Note for any reason, then (unless the Holder
otherwise elects to retain its status as a holder of
Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder
of

    	11

    	 

    

 

this
Note with respect
to such unconverted
portions of this
Note and the
Borrower shall, as
soon as practicable ,
return such
unconverted Note to
the Holder or, if the
Note has not been surrendered, adjust its records to reflect that
such portion of this Note has not been
converted. In all cases, the Holder shall
retain all of its rights and
remedies (including,
without limitation ,
(i) the right to
receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for
such Conversion Default and any subsequent
Conversion Default and (ii) the right
to have the Conversion Price with respect to subsequent conversions
determined in accordance with Section
1.3) for the Borrower 's
failure to convert this Note.

 

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

(30)
days following
the Issue Date,
the Borrower shall
have the right,
exercisable on not
less than three (3)
Trading Days prior written
notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued
interest),
in full, in accordance with this Section 1.9.
Any notice of prepayment hereunder (an
"Optional Prepayment Notice") shall
be delivered to the Holder
of the Note at its registered addresses and shall state: (I ) that the Borrower
is exercising its right to prepay the Note,
and (2)
the date of prepayment which shall be not more
than three (3) Trading Days from
the date of the Optional Prepayment Notice. On the
date fixed for prepayment (the
"Optional
Prepayment Date"),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one
(I) business day prior to the
Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash
(the "Optional
Prepayment Amount") equal to 115%,
multiplied
by the sum of: (w) the then outstanding principal amount of
this Note pl us (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment
Date plus (y) Default Interest, if any,
on the amounts referred to in clauses (w) and
(x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.If
the Borrower delivers an Optional Prepayment Notice and
fails to pay the Optional Prepayment
Amount due to the Holder of the Note within
two (2) business days
following the Optional Prepayment Date,
the Borrower shall
forever forfeit its right
to prepay the Note pursuant
to this Section 1.9.

 

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

    	12

    	 

    

 

(I)  
) business day
prior to the
Optional Prepayment Date. 
If the Borrower
exercises its right  to
prepay the Note,
the Borrower
shall make payment to the Holder of an amount
in cash (the "Second
Optional Prepayment Amount ")
equal to
120%, multiplied by the sum of: (w) the then outstanding principal amount
of this Note plus (x) accrued and unpaid interest on
the unpaid principal amount of this Note to the Optional Prepayment
Date plus (y) Default Interest, if any,
on the amounts
referred to in clauses (w) and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and l .4(g) hereof.
If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment
Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit its right to
prepay the Note pursuant to this Section
1.9.

 

Notwithstanding
anything to the
contrary contained in
this Note,
at any
time during the
period beginning on
the date which is
sixty-one (61) days following the
Issue Date and ending on the date which
is ninety (90) days following the Issue Date, the
Borrower shall have the right, exercisable on not
less than three (3) Trading Days
prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest),
in full,
in accordance with this
Section 1.9. Any
Optional Prepayment Notice shall be delivered to
the Holder of the Note at its registered addresses and shall
state: (1) that the Borrower is exercising its right
to prepay the Note,
and (2)
the date of prepayment which shall
be not more than three

(3)
Trading Days from
the date of
the Optional Prepayment
Notice. On the
Optional Prepayment Date, the
Borrower shall make payment of
the Third Optional Prepayment Amount (as defined below) to
or upon the order
of the Holder
as specified by the
Holder in writing to the
Borrower at least one (1) business day prior to the Optional Prepayment Date.
If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the
Holder of an amount in cash (the "Third Optional Prepayment Amount ")
equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount
of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this
Note to the Optional Prepayment Date plus
(y) Default Interest,
if any,
on the amounts
referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3
and 1.4(g) hereof. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the
Holder of the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit
its right to prepay the Note
pursuant to this
Section 1.9.

 

Notwithstanding
any to the
contrary stated elsewhere
herein, at any
time during the period
beginning on the
date that is ninety-one (91) day
from the Issue Date and ending one hundred twenty (120) days following the
Issue Date, the
Borrower shall have
the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note
to prepay the outstanding Note (principal
and accrued interest), in full, in accordance
with this Section 1.9. Any Optional Prepayment
Notice shall be delivered to the Holder of the Note at its registered addresses and shall
state: ( 1) that the Borrower is
exercising its right to prepay the Note, and (2)
the date of prepayment which shall
be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the Optional Prepayment Date,
the Borrower

    	13

    	 

    

 

 

shall
make payment of
the Fourth Optional
Prepayment Amount (as
defined below) to
or upon the order
of the Holder
as specified by
the Holder in writing to
the Borrower at least one (1) business
day prior to the Optional Prepayment Date. Ifthe Borrower exercises its right to prepay
the Note, the Borrower shall
make payment to the Holder of
an amount in cash (the
"Fourth Optional
Prepayment Amount") equal to 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
to the Optional Prepayment Date plus
(y) Default Interest, if any, on the
amounts referred to in clauses (w) and (x) plus
(z) any amounts owed to the Holder pursuant
to Sections 1.3 and l.4(g)
hereof. If the Borrower delivers
an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment
Amount due to the Holder
of the Note within two (2) business days
following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this
Section 1.9.

 

Notwithstanding
any to the
contrary stated elsewhere
herein, at any
time during the period
beginning on the
date that is one
hundred twenty-one (121) day from the Issue Date and ending
one hundred fifty (150) days following the
Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued
interest), in full, in accordance with this Section
1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall
state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which
shall be not more than three (3) Trading
Days from the date of the
Optional Prepayment Notice. On the Optional
Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment
Amount (as defined below) to or upon the
order of the Holder as specified by the Holder in writing to the Borrower at least
one (1) business day prior to the Optional Prepayment Date. If the
Borrower exercises its right to prepay the Note, the Borrower
shall make payment to the Holder
of an amount in cash (the "Fifth
Optional Prepayment Amount") equal to
135%, multiplied by the sum of: (w) the then outstanding principal
amount of this Note plus (x) accrued and unpaid interest on
the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and (x) plus (z) any amounts
owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. Ifthe Borrower delivers an
Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due
to the Holder of the Note within two (2) business days following
the Optional Prepayment Date, the Borrower
shall forever forfeit its right
to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding
any to the
contrary stated elsewhere
herein, at any
time during the period
beginning on the
date that is one
hundred fifty-one (151) day from the Issue Date and ending one
hundred eighty (180) days following
the Issue Date, the Borrower shall have the right, exercisable on
not less than three (3) Trading Days prior written notice to
the Holder of the Note to prepay the
outstanding Note (principal and accrued interest), in full, in accordance with this
Section 1.9. Any Optional Prepayment
Notice shall be delivered to
the Holder of the
Note at its registered addresses and shall state: (1) that the Borrower is
exercising its right
to prepay the

 

    	14

    	 

    

 

Note,
and (2) the
date of prepayment
which shall be
not more than
three (3) Trading
Days from the date of the Optional Prepayment Notice. On the Optional Prepayment
Date, the Borrower shall make payment of
the Sixth Optional Prepayment Amount (as defined below) to or upon the order
of the Holder as specified by the Holder in
writing to the Borrower at least one
(1) business day prior to the Optional Prepayment Date.
If the Borrower exercises its right to prepay the Note, the
Borrower shall make payment to the
Holder of an amount in
cash (the "Sixth
Optional Prepayment Amount")
equal to 140%, multiplied by the sum of: (w) the then outstanding
principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid 
principal amount of this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to
in clauses (w) and (x) plus (z) any amounts
owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof. Ifthe Borrower
delivers an Optional Prepayment Notice and
fails to pay the Sixth Optional Prepayment Amount due to the Holder of
the Note within two (2) business days following the Optional Prepayment Date,
the Borrower shall forever forfeit its right to prepay the Note pursuant to this
Section 1.9.

 

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

 

ARTICLE
II.  CERTAIN COVENANTS

 

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

 

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

 

2.3
Borrowings. So
long as the
Borrower shall have
any obligation under
this Note, the Borrower shall
not,
without
the Holder's written consent, (a)
create, incur, assume guarantee,
endorse, contingently
agree to purchase or otherwise
become liable upon the obligation of
any other person, firm, partnership,
joint venture or corporation, except by
the endorsement of negotiable instruments for deposit
or collection , or
(b) suffer to exist any liability

    	15

    	 

    

 

 

for
 borrowed  money, 
except  any  borrowings 
that  does  not 
render  the  Borrower 
a  "Shell" company as
defined in Rule
12b-2 under the
Securities Exchange Act
of 1934.

 

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

 

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

    	16

    	 

    

 

shall
continue uncured (or
any written announcement,
statement or
threat not to
honor its obligations
shall not be rescinded in writing)
for three (3) business days after the Holder shall have delivered a Notice
of Conversion.
It is an obligation of the Borrower
to remain current in its obligations to its transfer agent. It shall be an event of default of this Note,
if a conversion of this Note is delayed, hindered
or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option
of the Holder, the
Holder advances any funds to the Borrower 's
transfer agent in order to process a conversion,
such advanced funds shall be paid by the Borrower
to the Holder within forty eight (48) hours of a demand from the Holder.

 

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

 

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

 

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

 

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

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

 

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

 

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

    	17

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.16        
Cross-Default. Notwithstanding
anything to the
contrary contained in
this Note or the
other related or
companion documents, a breach
or default by the
Borrower of any covenant or other term or condition
contained in any of the Other Agreements,
after the passage of all applicable notice
and cure or grace periods, shall, at the option
of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be
entitled (but in no event required)
to apply all rights and remedies of the
Holder under the terms of this

    	18

    	 

    

 

 

Note
and the Other
Agreements by reason
of a default
under said Other
Agreement or hereunder .
"Other
Agreements"
means, collectively, all
agreements and instruments between, among or by: (1) the Borrower, and, or for the
benefit of, (2) the Holder
and any affiliate of the Holder, including, without limitation, promissory notes;
provided, however, the term "Other Agreements" shall not
include the related or companion
documents to this
Note. Each of the loan
transactions will be cross-defaulted with each other loan
transaction and with all other existing and future debt of Borrower to the
Holder.

 

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

    	19

    	 

    

 

presentment
or notice, all
of which hereby
are expressly waived,
together with
all costs, including,
without limitation,
legal fees and expenses,
of collection ,
and the Holder shall be
entitled to exercise all other rights
and remedies available at law or in equity.

 

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

 

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,
(i i) 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 89013

Attn:
ROBERT EAKLE, Chief
Executive
Officer facsimile:

 

    	20

    	 

    

 

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

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

facsimile:
[enter fax number]

 

If
to the Holder:

KBM
WORLDWIDE,
INC.

80
Cuttermill Road -
Suite 410 Great Neck,
NY 11021

Attn:
Seth Kramer,
President

e-mail:
info@kbmworldwide.com

 

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

Att:
Judah A.
Eisner, Esq.

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

e-mail
: dyork@nwbmlaw
.com

 

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

 

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

 

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

 

4.6 
Governing Law.
This Note shall
be governed by
and construed in
accordance with the laws
of the State
of New York without regard to principles of conflicts
of laws. Any action brought by either
party against the
other concerning the transactions
contemplated by this

    	21

    	 

    

 

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

 

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

 

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

 

4.9
Notice
of Corporate Events. Except
as otherwise provided
below,
the Holder
of this Note
shall have no rights
as a Holder of Common Stock unless and only to the extent that it converts
this Note into Common Stock. The Borrower shall provide the Holder with prior notification
of any meeting of the Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of
any taking by the Borrower of a record
of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution,
any right
to subscribe for, purchase or
otherwise

 

    	22

    	 

    

 

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 req uired.

 

 

IN
WITNESS WHEREOF, Borrower
has caused this
Note to be
signed in its
name by its duly
authorized officer
September 4, 2014.

 

ALKAME
HOLDINGS, INC.

 

 

By:
/s/ Robert Eakle

Chief
Executive Officer

    	23SECURITIES
PURCHASE AGREEMENT

This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 5, 2014, by and between Alkame Holdings,
Inc., a Nevada corporation, with headquarters located at 3651 Lindell Road, Suite D #356, Las Vegas, NV 89103 (the “Company”),
and LG Capital Funding, LLC., a New York Limited Liability Company, with its address at 1218 Union Street, Suite #2, Brooklyn,
NY 11225 (the “Buyer”).

WHEREAS:

 

A.                 
The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);

 

B.                 
Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement
two 8% convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of
$105,000.00 (with the first note being in the amount of $52,500.00 and the second note being in the amount of $52,500.00 (together
with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of
the two notes (the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second
Note”) shall initially be paid for by the issuance of an offsetting $52,500.00 secured note issued to the Company by the
Buyer (“Buyer Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer
Note in cash such that the Second Note may not be converted until it has been paid for in cash. 

 

C.                 
The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set
forth immediately below its name on the signature pages hereto; and

 

NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1.                 
Purchase and Sale of Note.

 

a.                  
Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees
to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature
pages hereto.

    	 

    	 

    

 

b.                 
Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be
issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available
funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the
principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto,
and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such
Purchase Price. 

 

c.                  
Closing Date. The date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about September 5, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated
by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
Subsequent Closings shall occur when the Buyer Note is repaid. 

 

2.                 
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

 

a.                  
Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.

 

b.                 
Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D (an “Accredited Investor”).

 

c.                  
Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of the Buyer to acquire the Securities.

 

d.                 
Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue
to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any,
have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the
Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will
not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure
to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section
3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware
of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

    	2

    	 

    

 

e.                  
Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the Securities.

 

f.                  
Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered
to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the
cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may
be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities
under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that
term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations
of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each
case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral
in connection with a bona fide margin account or other lending arrangement. 

 

g.                 
Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the
1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“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.”

    	3

    	 

    

 

The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with 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 Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. 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, within 2 business
days, it will be considered an Event of Default under the Note.

 

h.                 
Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed
and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in
accordance with its terms.

 

i.                   
Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature
pages hereto. 

 

3.                 
Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:

 

a.                  
Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted.

 

b.                 
Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this
Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance
and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized
by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative,
and such authorized representative is the true and official representative with authority to sign this Agreement and the other
documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution
and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.

c.                  
Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note
in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and 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.

 

d.                 
Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

e.                  
No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default
(or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset
of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect). All
consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements
of the National Quotations Bureau (the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted
by the OTCQB in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and
its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 

    	4

    	 

    

 

f.                  
Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such,
that could have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to
the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard
to whether it would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.

 

g.                 
Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting
solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of
its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice
or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to
the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of
the Company and its representatives.

 

h.                 
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.

 

i.                   
Title to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.

    	5

    	 

    

j.                   
Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended
on the basis of being a "bad actor" as that term is established in the September 19, 2013 Small Entity Compliance
Guide published by the Securities and Exchange Commission.

 

k.                 
Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an Event of default under the Note.

 

4.                 
COVENANTS.

 

a.                  
Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith
(“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses,
transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any
consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of
restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise
the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice
by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation with respect to this transaction is
to reimburse Buyer’ expenses shall be $2,500 in legal fees (and similar amounts for the Second Note) which shall be deduced
from each Note when funded.

 

b.                 
Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain
and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any
equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq
SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will
comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial
Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the
Buyer copies of any notices it receives from the OTCQB and any other exchanges or quotation systems on which the Common Stock
is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

 

c.                  
Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i)
assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith
and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE
or AMEX.

    	6

    	 

    

 

d.                 
No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.

 

e.                  
Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other
remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.

 

5.                 
Governing Law; Miscellaneous.

 

a.                  
Governing Law. This Agreement 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 Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement 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 Buyer 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 Agreement 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 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.

 

b.                 
Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.

    	7

    	 

    

 

c.                  
Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.

 

d.                 
Severability. In the event that any provision of this Agreement 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 provision hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other provision hereof.

 

e.                  
Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither
the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

f.                  
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 Company, to:

Alkame
Holdings, Inc.

3651
Lindell Road, Suite D #356

Las
Vegas, NV 89103

Attn:
Robert Eakle, CEO

 

If
to the Buyer:

LG
CAPITAL FUNDING, LLC

1218
Union Street, Suite #2

Brooklyn,
NY 11225

Attn:
Joseph Lerman, Manager

 

    	8

    	 

    

 

Each
party shall provide notice to the other party of any change in address.

 

g.                 
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the
prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that
purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined
under the 1934 Act, without the consent of the Company.

 

h.                 
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i.                   
Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement
shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The
Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses
as they are incurred.

 

j.                   
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

k.                 
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.

 

l.                   
Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer 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 Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the Buyer 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 Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.

    	9

    	 

    

 

IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.

 

ALKAME
HOLDINGS, INC.

 

By::
/s/ Robert Eakle

 

Name: Robert
Eakle

 

Title Robert
Eakle, CEO

 

 

LG CAPITAL
FUNDING, LLC.

 

By: /s/
Joseph Lerman

Name: Joseph
Lerman

Title: Manager

 

 

AGGREGATE
SUBSCRIPTION AMOUNT:

 

Aggregate
Principal Amount of Note:$105,000.00

 

Aggregate
Purchase Price:

 

Note
1: $52,500.00 less $2,500.00 in legal fees

Note
2: $52,500.00 less $2,500.00 in legal fees

 

    	10

    	 

    

 

EXHIBIT
A

144
NOTE - $52,500

    	11

    	 

    

 

EXHIBIT
B 

BACK
END NOTE 1 

$52,500

 

    	12

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