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 (WHICH COUNSEL SHALL BE 
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE 
FORM, THAT REGISTRATION  IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 
144A UNDER SAID ACT. NOTWITHSTANDING  THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES.

 

	Principal
    Amount: $75,000.00 	Issue
    Date: November 12th,
    2014

 

12%
CONVERTIBLE  NOTE

 

FOR  VALUE  RECEIVED,
ALKAME  HOWINGS,  INC.,  a  Nevada  corporation ("Borrower" or "Company"), hereby promises
to pay to the order of Eastmore
Capital, LLC, a Delaware limited liability company, or its
registered assigns (the "Holder"), on
November 11th, 2015
(subject to extension as
set forth below, the
"Maturity Date"), the
sum of $75,000.00
as set forth herein, and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%) per
annum (the "Interest
Rate")
from the date of issuance hereof until this Note plus any and all accrued interest is paid in full. Interest shall be
computed on the basis of a 365-day year and the actual number of days elapsed. Any
amount of principal or interest on this Note which is not paid when due shall bear
interest at the rate of twenty-four (24%) per annum from the
due date thereof until the same is
paid ("Default
Interest").
All payments due hereunder shall
be made in lawful money of the United States of
America. All payments shall be made at such address as the Holder shall
hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a
business day, the same shall instead be due on the next succeeding day which is a business day and, in
the case of any interest payment date which is not the date on which this Note is paid in full, the extension  of
the due date thereof  shall not  be taken  into account for purposes of
determining the amount of interest due on such date. As used in this Note, the term "business
day" shall mean any day other than a Saturday, Sunday
or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities
Purchase Agreement entered into by and between the Company and Holder dated on or about the date hereof, pursuant
to which this Note was originally issued (the "Purchase Agreement").
The Holder may, by written notice to the Borrower at least five (5) days before
the Maturity Date (as may have been previously extended), extend the Maturity Date
to up to one (1) year following the date of the original Maturity Date hereunder.

    	 

    	 

    

 

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

 

The
following terms shall apply
to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

1.1.
 Conversion Right.
The Holder shall
have the right, in
its sole and
absolute discretion,
at any
time and from time to
time to convert
all or any part of the outstanding amount due under this Note into fully paid and non-assessable
shares of Common Stock, as
such Common Stock exists on the Issue Date,
or any
shares of capital stock or
other securities of
the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion
Price")
determined as provided herein (a
"Conversion");
 provided,
however, that
in no event shall the Holder be
entitled to convert any portion of this
Note in excess of that
portion of this Note upon conversion of
which the sum of (1) the number of shares
of Common Stock beneficially owned by the Holder
and its affiliates (other than shares of Common Stock
which may be
deemed beneficially owned through the ownership  of 
the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of
the Borrower subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of
this Note with respect to which
the determination of this proviso is
being made, would result in beneficial ownership
by the Holder and its affiliates of more than 4.9%
of the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial
ownership shall be  determined in accordance with
Section l3(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"),
and Regulation l3D-G 
thereunder, except
as  otherwise provided in clause  (1) of
such proviso, provided,
further,
however,
that the limitations on
conversion may be waived by the
Holder upon,
at the
election of the Holder, not
less than 61 days'
prior notice
to the Borrower, and
the provisions of the conversion  limitation
shall continue to apply until such 61 st 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 11:59
p.m., New
York,  New
York time on such conversion date (the "Conversion
Date").
The term "Conversion
Amount"
means, with respect to 
any conversion  of this Note,
 the
sum of (1)  the principal  amount of this
Note to  be converted in such 
conversion,
plus (2) accrued 
and unpaid interest, if
any,
on such principal
amount being converted at the interest rates provided in this Note to the
Conversion  Date, plus (3) at the Holder's option,
Default Interest,  if any, on the
amounts referred to in the immediately preceding clauses
(1) and/or
(2) plus (4) 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 hereunder (the "Conversion
Price")
shall equal the lower of: (i)
the closing sale price of the Common Stock on the

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Principal
Market on the Trading Day immediately preceding the Closing Date, and (ii)
50% of the lowest sale
price for the Common Stock on the Principal Market during
the twenty (20) consecutive Trading
Days immediately preceding the Conversion Date. However,
if Company's
share price at any time loses the bid
(ex: 0.0001 on the ask with zero
market makers on the bid on level 2), then
the Conversion  Price may, in
the Holder's
sole and absolute discretion,  be
reduced to a fixed conversion price of 0.00001 (if lower than
the conversion price otherwise) and shall
not be subject to the limitation of the Conversion Price Floor. If such Common
Stock is not traded on the OTCBB, OTCQB, Nasdaq
or NYSE, then
such sale price shall be the sale price of such security on the principal securities
exchange or trading market where such security
is listed or traded or, if
no sale price of such security
is available in any of the foregoing
manners, the
average of the closing bid prices of any market makers for such
security that are listed in the "pink
sheets" by
the National Quotation Bureau, Inc.
If such sale price cannot
be calculated for such security on such
date in the manner provided above, such
price shall be the fair market value
as mutually determined by the Borrower and the
Holder. If the Borrower's
Common stock is chilled for deposit at DTC, becomes
chilled at any point while this Note remains outstanding or deposit or other additional fees are payable due
to a Yield Sign, Stop Sign or other trading restrictions, or
if the closing sale price at any time falls below 0.001,
then such 50% figure specified in clause
1.2(a)(ii) above shall be reduced to
35%. Additionally, the
Borrower acknowledges that it will take all
reasonable steps necessary or
appropriate, including
providing a board of directors resolution
authorizing the issuance of common stock and an opinion of counsel
confirming the rights of Holder to sell shares of Common Stock issuable or issued
to Holder on conversion of this Note
pursuant to Rule 144 as promulgated by the SEC
("Rule  144"), as
such Rule may be in effect from time to time. If the Borrower  does not promptly provide a board of directors'  resolution
and an opinion from Company counsel, and
so long as the requested sale may be made pursuant to Rule 144, the
Company agrees to accept an opinion of counsel to the Holder which opinion will be issued at the Company 's
expense and the conversion  dollar amount  will  be reduced by $750.00  to cover the cost of  such legal opinion. "Trading
Day" shall
mean any day on which the Common Stock is tradable for any period on the
OTCQB, or
on the principal securities exchange
or other securities market on which the Common Stock is then being
traded. Additionally, if
the Company ceases to be a reporting company pursuant to the 1934
Act or if the Note cannot be converted into free trading shares after 181 days from the issuance date,
an additional 15% discount  will be
attributed to  the  Conversion Price  and the calculation of the Conversion
Price shall not be subject to the limitation of the Conversion Price Floor.

 

b)
 Without  in 
any  way  limiting 
the  Holder's
 right  to 
pursue  other remedies,
including actual
damages and /or
equitable relief, the
parties agree that if delivery of the Common
Stock issuable upon conversion of this Note is not delivered by
the Deadline (as defined below) the
Borrower shall pay to the Holder $1,000.00
per day in cash,
for each
day beyond the Deadline that the Borrower fails to deliver
such Common Stock. Such cash amount shall
be paid to Holder by the
fifth day of the month following the month in
which it has accrued or, at the option of the Holder,
shall be
added to the principal amount of this
Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional
principal amount shall be convertible into
Common Stock in accordance with the terms of this Note. The Borrower agrees that
the right to convert this Note
is a valuable right to the
Holder. The damages resulting from a
failure, attempt to frustrate,
or interference with such conversion
right are difficult if not impossible to quantify. Accordingly the parties
acknowledge that the liquidated
damages provision contained in
this Section are justified.

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1.3.
 Authorized  Shares. 
The Borrower  covenants 
that  the Borrower 
will at all times
while this Note
is outstanding reserve from
its authorized and unissued Common Stock
a sufficient number of shares, free
from preemptive rights, to
provide for the issuance of Common Stock upon the full conversion
of this Note. The Borrower
is required at all times to have
authorized and reserved three (3) times the number
of shares that is actually issuable upon full conversion of this Note (based on the
Conversion Price of the Notes in effect from
time to time)(the "Reserved
Amount").
Initially, the
Company  will  instruct the Transfer Agent
to reserve one  million five hundred eighty
seven thousand three hundred and two (1,587,302)
shares of common stock in the name of the Holder
 for  issuance upon conversion hereof.
The Borrower represents that  upon issuance,
such shares will be
duly and validly issued, fully
paid and non-assessable. In addition,
if the Borrower
shall issue any securities or make any change to its capital structure which would
change the number of shares of
Common Stock into which this Note shall
be convertible at the then current
Conversion·
Price,
the  Borrower
shall  at the same time make proper  provision
so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved,
free from preemptive rights,
for conversion
of this Note in full. The Borrower (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common Stock issuable upon
conversion of  this Note,
and (ii) agrees that its issuance of
this Note shall constitute full authority to its
officers and agents who
are charged with
the duty of executing stock certificates
to execute
and issue the necessary certificates for shares of Common Stock in accordance
with the terms and conditions of this Note.

 

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

 

1.4.
Method of Conversion.

 

a)
 Mechanics of
Conversion. Subject to Section
1.1,
this Note
may be converted by
the Holder in
whole or in
part at any time and from
time to time after the
Issue Date, by submitting
to the Borrower a Notice of Conversion (by facsimile,
e-mail or other reasonable means of
communication dispatched on the Conversion Date prior
to 11:59 p.m.,
New York,
New York time).

 

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

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Note,
the unpaid
and unconverted principal
amount of this
Note represented by
this Note may
be less than the
amount stated on the face hereof.

 

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

 

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

 

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

 

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.

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g)
 Failure  to
Deliver  Common  Stock 
Prior  to Deadline.
Without  in any way
limiting the Holder's
right to pursue other remedies,
including  actual
damages and/or
equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline,
the Borrower shall
pay to the Holder $1,000.00
per day in cash,
for each day beyond the Deadline that the Borrower
fails to deliver such Common Stock to the Holder. Such cash amount  shall be paid
to Holder by the fifth  day of the month  following
the month in which it has accrued or,
at the option of the Holder,
shall be added to the principal amount 
of this Note, 
in which event interest shall accrue 
thereon  in accordance
with the terms of this Note  and such additional principal amount 
shall  be convertible into Common
Stock in accordance with the terms of this Note.
The Borrower 
agrees  that the right to convert is a
valuable right to the Holder.
The damages
 resulting from a failure,
attempt to
frustrate,
or interference 
with such conversion right are difficult if not impossible  to qualify.
Accordingly the parties acknowledge that 
the liquidated damages provision contained in this Section 1.4(g) are justified.

 

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

 

1.5.
 Restricted  Securities.
The shares
of Common  Stock
issuable upon conversion of
this Note may
not be sold or
transferred  unless (i) such shares
are sold pursuant to an effective registration
statement under the Act or (ii)  the Borrower or its transfer agent 
shall have been furnished with an opinion of counsel (which opinion  shall be
in form, substance
and scope customary for opinions  of counsel in
comparable transactions) to the effect that the shares to be sold or
transferred may be sold  or transferred pursuant to an exemption from 
such  registration or (iii) such
shares are sold or transferred pursuant  to
Rule 144 under the Act (or a successor rule) ("Rule

144")
or (iv) such
shares  are transferred 
to an "affiliate"
(as defined
 in Rule 144) of the Borrower who
agrees to sell or otherwise transfer
 the shares only in accordance with this Section
1.5 and who is an Accredited Investor 
(as defined  in the Purchase Agreement).
Any legend set forth on any stock certificate  evidencing
any Conversion
 Shares shall be removed and the Borrower shall issue to the Holder a new certificate
therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion 
of counsel  form, substance and scope  customary
for opinions of counsel  in comparable
transactions,
to the
effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be reasonably acceptable
to the Company, 
or (ii) in the case of the Common Stock issued
or issuable upon conversion of this  Note, such 
security is registered for sale  by the Holder under an effective registration
 statement  filed 
under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number  of securities  as
of a particular date that can then be immediately sold.

 

1.6.
Effect of Certain
Events.

 

a)
 Effect of
Merger,  Consolidation, Etc.
At the option 
of the Holder,
 the
sale,
 conveyance
 or  disposition 
of  all or  substantially all 
of the  assets of  the Borrower,
the effectuation
by the Borrower of a transaction
or series of related transactions in which more than

    	6

    	 

    

 

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

 

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

 

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

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

 

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

 

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

 

1.7.
 
Revocation. If
any Conversion  Shares 
are not received 
by the Deadline,
the Holder 
may  revoke  the 
applicable Conversion  pursuant to which such Conversion Shares were issuable.
 This Note shall
remain convertible after the Maturity  Date
hereof until this Note is repaid or converted 
in full.

 

1.8.
 Prepayment. Notwithstanding
anything  to the
contrary  contained  in
this Note,
subject
 to the
terms of this Section,
at any
time during the period 
beginning on the Issue Date and ending on  the date 
which is six (6) months following the  Issue Date ("Prepayment
Termination Date"),
Borrower shall have  the  right,
exercisable
on  not less than five  (5) 
Trading  Days prior written notice to the
Holder of this Note,
to prepay the
outstanding balance on this Note (principal and accrued interest),
in full,
in accordance with
this Section. Any
notice of prepayment hereunder (an "Optional
Prepayment Notice")
shall be delivered to the Holder  of the Note 
at  its registered

    	8

    	 

    

 

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 ten  (10)  Trading
Days from the date  of
 the
Optional  Prepayment Notice. On the date
fixed for prepayment  (the "Optional
Prepayment Date"),
the Borrower shall make payment of the
Optional Prepayment Amount (as defined below) to or upon the order of the
Holder as specified by the
Holder in writing to the Borrower at least one
(1) business day prior to the Optional
Prepayment Date.  If the Borrower 
exercises its right to prepay the Note,
the Borrower shall make 
payment to the Holder  of an amount in cash (the "Optional
Prepayment Amount")
equal to 150%, multiplied by the sum of: (w)
the then outstanding principal amount of
 this Note plus (x)
accrued  and unpaid  interest 
on the  unpaid  principal amount
 of this Note to the Optional Prepayment
Date plus (y) Default Interest,
 if
any, on
the amounts referred to in clauses (w) and (x) plus
(z) any  amounts owed to the Holder
pursuant to Sections 1.3
and 1.4(g) hereof. 
If the Borrower delivers an Optional Prepayment Notice and fails  to pay the Optional
Prepayment Amount due to the Holder of  the Note 
within two (2) business days following the Optional Prepayment Date,
 the
Borrower shall forever forfeit its right to prepay the Note pursuant to this Section
. After
the Prepayment Termination Date,
the Borrower
shall have no right to prepay
this Note.

 

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:  Liens.
Notwithstanding  section  4(m)
 of  the 
Purchase Agreement,
so long
as the Borrower 
shall  have any
obligation under this Note,
the Borrower 
shall not, without
 promptly providing an Event Disclosure Notice to
the Holder, 
as set
forth in section

4(m)
of the Purchase 
Agreement,
(i) create,
 incur,
assume guarantee,
 endorse,
 contingently
agree to purchase  or otherwise become
 liable upon the obligation  of any person,
 firm,
partnership,
joint venture or corporation,
except by 
the endorsement
of  negotiable instruments for deposit or collection,
or suffer to
exist any liability for borrowed money,
except (a) borrowings
in existence  or committed on the date hereof and of which the Borrower has informed
Holder in
writing  prior to the date hereof,  or
(b) indebtedness to trade creditors  or financial institutions incurred in
the ordinary
course of business,
or (ii) enter into,
create or incur any
liens, claims
or encumbrances of any kind,
on or with respect
 to any of its property or assets 
now owned or hereafter acquired or any interest therein 
or any  income or profits therefrom, securing any 
indebtedness occurring after the date hereof.

    	9

    	 

    

 

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

 

2.6.
 Charter.  So
long as the
Borrower shall have
any obligations under
this Note, the Borrower
shall not amend its charter documents, including without limitation its
certificate of incorporation and  bylaws,
in any
manner that materially and adversely affects any rights of the Holder.

 

ARTICLE
III. EVENTS OF
DEFAULT

 

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

 

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

 

3.2.
 Conversion and
the Shares. The
Borrower fails to
issue shares of
Common Stock to the
Holder (or announces
or threatens in writing that it will not honor its obligation to
do so at any time following the execution hereof or) upon exercise
by the Holder of the conversion rights of the Holder in accordance with the
terms of this Note, fails to transfer or cause
its transfer agent to transfer (issue) (electronically or
in certificated form) any certificate for
shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this
Note, the Borrower directs its transfer agent not to transfer
or delays, impairs, and/or
hinders its transfer agent in transferring (or
issuing) (electronically or in certificated form) any certificate for shares
of Common Stock to be issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this
Note, or
fails to remove (or directs its transfer agent not
to remove or impairs, delays,
and/or
hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in
respect thereof) on any certificate
for any shares of Common Stock issued to the Holder upon conversion of or otherwise
pursuant to this Note as and when
required by this Note
(or makes any written
announcement, statement
or threat that it does not intend
to honor the obligations described in this
paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for
five (5) business days after the
Holder shall have delivered a Notice of Conversion. It is an obligation of
the Borrower to remain current in its obligations to
its transfer agent. It shall be an event of default of this Note, if a conversion
of this Note is delayed, hindered or frustrated due to a balance owed
by the Borrower to its transfer agent. If
at the option of the Holder,
the Holder advances
any funds to the
Borrower's transfer agent in order to process a conversion,

    	10

    	 

    

 

such
advanced funds shall
be paid by
the Borrower to
the Holder within
forty eight (48)
hours of a demand
from the Holder.

 

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

 

3.4.
 Breach of
Representations and Warranties.
Any representation or
warranty of the Borrower
made herein or
in any agreement,
statement or certificate given in writing
pursuant hereto or in connection
herewith (including,
without limitation,
the Purchase
Agreement),
shall be false
or misleading in any material respect when
made and the breach of which has (or with
the passage of time wi II 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 $50,000.00,
and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) days unless otherwise consented
to by the Holder, which consent will not
be unreasonably withheld.

 

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

 

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

 

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

 

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

 

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

 

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

 

3.13.
 Financial  Statement 
Restatement.  The  restatement
 of  any 
financial statements filed by
the Borrower with
the SEC for
any date or
period from two years prior to the

 

    	11

    	 

    

 

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

 

Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1
(solely  with  respect  to failure
to pay the principal hereof or  interest  thereon
when due at the Maturity Date), the
Note shall become immediately due and payable
and the Borrower shall pay to
the Holder, in full satisfaction of its
obligations hereunder, an
amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING
THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND  PAYABLE AND THE BORROWER  SHALL
PAY TO  THE HOLDER, IN FULL SATISFACTION OF
ITS OBLIGATIONS HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT
SUM (AS DEFINED HEREIN); MULTIPLIED
BY (Z) TWO (2). Upon the
occurrence and during the continuation of any
Event of Default specified in Sections
3.1 (solely with respect to failure
to pay the principal hereof
or interest thereon when due on this
Note upon a Trading Market Prepayment Event
pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9,
3.11, 3.12, 3.13,
3.14, and/or
3. 15 exercisable through the delivery of written notice to the Borrower by
such Holders (the "Default Notice"),
and upon the occurrence of an Event of Default specified in the remaining sections of Articles 11I (other than failure to
pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become
immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an
amount equal to the greater of (i) 150% times the sum
of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the date of payment (the "Mandatory Prepayment
Date") plus (y) Default Interest, if
any, on
the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal

    	12

    	 

    

 

amount
of this Note
to the date
of payment plus
the amounts referred
to in clauses
(x),
(y) and
(z) shall collectively be known as the "Default Sum")
or (ii) the "parity
value" of the Default Sum to be prepaid,
where parity value means (a) the highest number
of shares of Common Stock issuable upon conversion of
or otherwise pursuant to such Default
Sum in accordance with
Article I, treating the Trading
Day immediately preceding
the Mandatory Prepayment Date as the "Conversion
Date" for
purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a
breach in respect of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), 
multiplied by (b) the highest Closing Price for the Common
Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the "Default
Amount")
and all other amounts payable hereunder shall immediately become due and payable,
all without
demand, presentment
or notice,
all of which
hereby are expressly waived,
together with all costs,
including,
without limitation,
legal fees and expenses,
of collection,
and the Holder shall be entitled to exercise all
other rights and remedies available at
law or in equity.

 

If
the Borrower fails
to pay the
Default Amount within
five (5) business
days of written
notice that such amount
is due and payable,
then the Holder shall have the
right at any time,
so long as
the Borrower  remains in default (and so long and to the extent that there are
sufficient  authorized shares), to require the Borrower,
upon written
notice, to
immediately issue, in
lieu of the Default Amount, the
number of shares of Common Stock of the Borrower equal to the Default Amount divided
by the Conversion Price then in effect. The Holder
may still convert
any amounts due hereunder,  including
without  limitation the Default Sum,
until such time as this Note has been repaid
in full.

 

ARTICLE
IV. MISCELLANEOUS

 

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

 

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

 

4.3.
 Amendments.
This Note and
any provision hereof
may only be
amended by an instrument
in writing signed
by the
Borrower and the Holder. The term "Note"
and all reference
thereto, as
used throughout this instrument,
shall mean
this instrument (and the other Notes
issued

    	13

    	 

    

 

pursuant
to the Purchase
Agreement) as originally
executed,
or if
later amended or
supplemented, then as so amended
or supplemented.

 

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

 

4.5.
Cost  of  Collection. 
If  default  is 
made  in  the 
payment  of  this 
Note,
 the

Borrower
shall pay the
Holder hereof costs
of collection,
including reasonable
attorneys'
fees.

 

4.6.
Governing Law.
This Note
shall be governed
by and construed
in accordance with the
laws of the
State of New York without regard to
conflicts of laws principles that would
result in the application of the substantive laws of another jurisdiction. Any action brought 
by either party against the
other concerning the transactions contemplated by this Agreement must be brought
only in the civil or state courts of New
York or in the federal courts located
in the State and county  of New  York.
 Both parties and  the individual signing
this Agreement on  behalf of the Borrower agree to submit to the jurisdiction of
such courts.
The prevailing party shall be entitled to recover from the other party its reasonable
attorney's fees and costs.  In the event that any provision of this Note 
is invalid or unenforceable  under any applicable statute or rule of law,
then such provision shall be deemed inoperative
to the extent that it may conflict therewith and  shall be deemed modified
to conform with such statute
or rule of law. Any such provision
which may prove
invalid or unenforceable under any law shall
not affect the validity or unenforceability
of any other provision
of this Note. Nothing contained herein
shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the
Borrower's obligations to Holder,
to realize on any
collateral or any
other security for such obligations,
or to enforce
a judgment or other decision in favor of the Holder. This Note
shall be deemed  an  unconditional
obligation of Borrower for  the 
payment of money and, without limitation to
any other remedies of Holder, may  be enforced
against  Borrower by summary proceeding pursuant
to New York Civil Procedure Law and Rules Section 3213 or any similar rule or
statute in the _jurisdiction
where  enforcement is sought. For purposes
of such  rule or statute, any other document
or agreement to which Holder and Borrower are parties 
or which Borrower delivered to Holder,
which may  be convenient or necessary
 to determine Holder's rights  hereunder
or Borrower's obligations to Holder are
deemed a part  of this Note, whether or not such other 
document or agreement was delivered together herewith or was executed apart
from this Note.

 

4.7.
 Certain
Amounts. Whenever pursuant
to this Note
the Borrower is
required to pay an
amount in excess
of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid
 interest  plus Default Interest on such
interest,
 the
Borrower and the Holder agree that the actual damages  to the Holder from the receipt
of cash payment on this Note may be
difficult to determine and
the amount to be so paid by
the Borrower represents stipulated damages and not
a penalty and is intended to compensate the
Holder in part for loss of the opportunity
to convert this Note and to earn a return
from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in
excess of the price paid for such
shares pursuant to this Note.
The Borrower and the Holder hereby agree that such
amount of stipulated

    	14

    	 

    

 

damages
is not plainly
disproportionate to the
possible Joss to
the Holder from
the receipt of
a cash
payment without the
opportunity to convert this Note
into shares of
Common Stock.

 

4.8.
 Disclosure.  Upon 
receipt  or  delivery 
by  the  Company 
of  any  notice 
in accordance with the
terms of this
Note,
unless the
Company has in good faith determined that the matters relating to such
notice do not constitute material,
non-public information relating
to the Company or any of its Subsidiaries,
the Company sha11 within one
( l) Trading Day after any
such receipt or delivery, publicly
disclose such
material, non-public
information on a Current Report on Form
8-K or otherwise. In the event that the Company
believes that a notice contains material,
non public information relating
to the Company or any of its Subsidiaries,
the Company
so sha11 indicate to such Holder
contemporaneously with delivery
of such notice,
and in the absence of any such indication,
the Holder shall be allowed
to presume that all matters relating
to such notice do not constitute material,
non-public information relating to the Company or its Subsidiaries.

 

4.9.
 Notice of
Corporate Events. Except
as otherwise provided
below, the Holder of
this Note shall
have no rights
as a Holder of Common Stock unless and
only to the
extent that it converts this  Note
into  Common Stock.  The 
Borrower shall provide the  Holder with prior notification
of any meeting of the Borrower's
shareholders (and copies of proxy materials
and other information sent
to shareholders). In the event of any taking by the
Borrower of a record
of its shareholders for
the purpose of determining shareholders who are entitled to receive
payment of any dividend or other
distribution, any
right to subscribe for, purchase or otherwise
acquire (including by way of merger,
consolidation,
reclassification or
recapitalization) any share of any class
or any other securities  or property,
or to receive any 
other  right, or for  the purpose
of determining
shareholders who are
entitled to vote
in connection with any proposed
sale, lease
or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up
of the Borrower,
the Borrower
shall mail a notice to the
Holder,
at least twenty (20) days
prior to the
record date specified therein (or
thirty (30) days prior to
the consummation of the
transaction or event, whichever
is earlier),
of the
date on which any such record is to be taken for the purpose
of such dividend,
distribution,
right or other
event, and
a brief statement regarding the amount and character
of such dividend,
distribution, right or other
event to the extent known at such
time. The Borrower sha11 make a public announcement of any event requiring notification
to the Holder hereunder substantia11y
simultaneously with the notification to the Holder in accordance with the terms of
this
Section 4.9.

 

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

 

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

 

(Remainder
of Page intentionally
left blank)

 

    	15

    	 

    

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

 

 

ALKAME
HOLDINGS, INC.

 

By:
/s/ Robert Eakle

Name:
Robert Eakle

Title:
Chief Executive Officer

    	16

    	 

    

EXHIBIT
A NOTICE OF CONVERSION

 

The
undersigned hereby elects
to convert principal
under the 12%
Convertible Note of
ALKAME HOLDINGS,
 INC.,
 a 
Nevada  corporation  (the Company"),
into shares of common stock (the "Common
Stock"),
of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued
in the name of a person other than the undersigned,
the undersigned
will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. 
No fee will be charged to the holder
for any conversion,
except for such
transfer taxes,
if any.

 

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

 

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

 

Conversion
calculations: _______________

 

Date
to Effect Conversion: _______________

Conversion
Price: _______________

Principal
Amount of Note to
be Converted: 

 

Interest
Accrued on Account
of Conversion at
Issue: _______________

Number
of shares of
Common Stock to
be issued: _______________

 

Signature:
_______________

Name:
_______________

 

Address
for Delivery of Common
Stock Certificates:

_______________

_______________

 

 

 

DWAC
Instructions: _______________

Broker
No: _______________

Account
No: _______________

    	17ALKM

         
		Interest free if  paid in full 

within 3 months

 

$350,000 CONVERTIBLE NOTE

 

FOR VALUE RECEIVED, Alkame Holdings,
Inc., a Nevada corporation (the "Issuer" of this Security) with at least 69,878,939 common shares issued and outstanding,
issues this Security and promises to pay to JMJ Financial, a Nevada sole proprietorship, or its Assignees (the "Investor")
the Principal Sum along with the Interest Rate and any other fees according to the terms herein. This Note will become effective
only upon execution by both parties and delivery of the first payment of Consideration by the Investor (the "Effective Date").

 

The Principal Sum is $350,000 (three
hundred fifty thousand) plus accrued and unpaid interest and any other fees. The Consideration is $315,000 (three hundred fifteen
thousand) payable by wire (there exists a $35,000 original issue discount (the "OID")). The Investor shall pay $75,000
of Consideration upon closing of this Note. The Investor may pay additional Consideration to the Issuer in such amounts and at
such dates as the Investor may choose in its sole discretion. THE PRINCIPAL L SUM DUE TO THE INVESTOR SHALL BE PRORATED BASED ON
THE CONSIDERATION ACTUALLY PAID BY INVESTOR (PLUS AN APPROXIMATE 10% ORIGINAL ISSUE DISCOUNT THAT IS PRORATED BASED ON THE CONSIDERATION
ACTUALLY PAID BY THE INVESTOR AS WELL AS ANY OTHER INTEREST OR FEES) SUCH THAT THE ISSUER IS ONLY REQUIRED TO REPAY THE AMOUNT
FUNDED AND THE ISSUER IS NOT REQUIRE D TO REPAY ANY UNFUNDED PORTION OF THIS NOTE. The Maturity Date is two years from the
Effective Date of each payment (the "Maturity Date") and is the date upon which the Principal Sum of this Note, as well
as any unpaid interest and other fees, shall be due and payable. The Conversion Price is the Lesser of $0.10 or 60% of the lowest
trade price in the 25 trading days previous to the conversion (In the case that conversion shares are not deliverable by DWAC an
additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for clearing
deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply). Unless otherwise
agreed in writing by both parties, at no time will the Investor convert any amount of the Note into common stock that would result
in the Investor owning more than 4.99% of the common stock outstanding.

 

1. Z.E RO Percent Interest for the
First Three Months. The Issuer may repay this Note at any time on or before 90 days from the Effective Date, after which the
Issuer may not make further payments on this Note prior to the Maturity Date without written approval from the Investor. If the
Issuer repays a payment of Consideration on or before 90 days from the Effective Date of that payment, the Interest Rate on that
payment of Consideration shall be ZERO PERCENT (0%). If the Issuer does not repay a payment of Consideration on or before 90 days
from its Effective Date, a one-time Interest charge of 12% shall be applied to the Principal Sum. Any interest payable is in addition
to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the lssuer.

 

2. Conversion. The Investor has
the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid Principal
Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Issuer
as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the
Conversion Price. Conversions may be delivered to the Issuer by method of the Investor’s choice (including but not limited
to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and not require further
payment from the Investor. lf no objection is delivered from the Issuer to the Investor regarding any variable or calculation of
the conversion notice within 24 hours of deli very of the conversion notice, the Issuer shall have been thereafter deemed to have
irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Issuer shall deliver
the shares from any conversion to the Investor (in any name directed by the Investor) within 3 (three) business days of conversion
notice delivery.

 

    	 

    	 

    

 

3. Conversion Delays. If the
Issuer fails to deliver shares in accordance with the timeframe stated in Section 2, the Investor, at any time prior to selling
all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares
and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Issuer
(under the Investor's and the Issuer's expectations that any returned conversion amounts will tack back to the original date of
the Note). In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of
the day of conversion),a penalty of$2,000 per day will be assessed for each day after the third business day (inclusive of the
day of the conversion) until share del i very is made; and such penalty will be added to the Principal Sum of the Note (under the
Investor's and the Issuer's expectations that any penalty amounts will tack back to the original date of the Note).

 

4. Reservation of Shares. At
all times during which this Note is convertible, the Issuer will reserve from its authorized and unissued Common Stock to provide
for the issuance of Common Stock upon the full conversion of this Note. The Issuer will at all times reserve at least 50,000,000
shares of Common Stock for conversion.

 

5. Piggyback Registration Rights.
The Issuer shall include on the next registration statement the Issuer files with SEC (or on the subsequent registration statement
if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in
liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and
payable to the Investor at its election in the form of cash payment or addition to the balance of this Note.

 

6. Terms of Future Financings.
So long as this Note is outstanding, upon any issuance by the Issuer or any of its subsidiaries of any security with any term more
favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided
to the Investor in this Note, then the Issuer shall notify the Investor of such additional or more favorable term and such term,
at tJ1e Investor's option, shall become a part of the transaction documents with the Investor. The types of terms contained in
another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion
discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per
share, and warrant coverage.

 

7. Default. The following are
events of default under this Note:(i) the Issuer shall fail to pay any principal under the Note when due and payable (or payable
by conversion) thereunder; or (ii) the Issuer shall fail to pay any interest or any other amount under the Note when due and payable
(or payable by conversion) thereunder; or (iii) a receiver, trustee or other similar official shall be appointed over the Issuer
or a material part of its assets and such appointment shall remain uncontested for twenty {20) days or shall not be dismissed or
discharged within sixty (60) days; or (iv) the Issuer shall become insolvent or generally fails to pay, or admits in writing its
inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (v) the Issuer shall make a general
assignment for the benefit of creditors; or (vi) the Issuer shall file a petition for relief under any bankruptcy, insolvency or
similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or filed against the Issuer; or (viii)
the Issuer shall lose its status as ''DTC Eligible" or the Issuer's shareholders shall lose the ability to deposit (either
electronically or by physical certificates, or otherwise) shares into the DTC System; or (ix) the Issuer shall become delinquent
in its filing requirements as a fully-reporting issuer registered with the SEC; or (x) the Issuer shall fail to meet all requirements
to satisfy the availability of Rule I 44 to the Investor or its assigns including but not limited to timely fulfillment of its
filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure
of financial statements on its website.

 

8. Remedies. In the event of
any default, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated dan1ages, fees and other
amounts owing in respect thereof through the date of acceleration, shall become, at the Investor's election, immediately due and
payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the greater of (i) the outstanding principal
amount of this Note, plus all accrued and unpaid interest, liquidated damages, fees and other amounts hereon, divided by the Conversion
Price on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a lower Conversion Price, multiplied
by the VWAP on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a higher VWAP, or (ii) 150%
of the outstanding principal amount of this Note, plus I 00% of accrued and unpaid interest, liquidated damages, fees and other
amounts hereon. Commencing five (5) days after the occurrence of any event of default that results in the eventual acceleration
of this Note, the interest rate on this Note

    	2

    	 

    

shall accrue at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described
herein, the Investor need not provide, and the issuer hereby waives, any presentment, demand, protest or other notice of any kind,
and the investor may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Investor at
any time prior to payment hereunder and the Investor shall have all rights as a holder of the note until such time, if any, as
the Investor receives full payment pursuant to this Section 8. No such rescission or annulment shall affect any subsequent event
of default or impair any right consequent thereon. Nothing herein shall limit the Investor's right to pursue any other remedies
available toil at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with
respect to the Issuer's failure to timely deliver certificates representing shares of Common Stock upon conversion of the Note
as required pursuant to the terms hereof.

 

9. No Shorting. The Investor
agrees that so long as this Note from the Issuer to the Investor remains outstanding, the Investor will not enter into or effect
"short sales" of the Common Stock or hedging transaction which establishes a net short position with respect to the Common
Stock of the Issuer. The Issuer acknowledges and agrees that upon delivery of a conversion notice by the Investor, the Investor
immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such
conversion notice would not be considered short sales.

 

10. Assignability. The Issuer
may not assign this Note. This Note will be binding upon the Issuer and its successors and will inure to the benefit of the Investor
and its successors and assigns and may be assigned by the Investor to anyone without the Issuer's approval.

 

11. Governing Law. This Note
will be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without regard to the conflict
of laws principles thereof. 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 Florida or in the federal courts located in Miami-Dade County, in the State
of Florida. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

 

12. Delivery of Process by the Investor
to the Issuer. In the event of any action or proceeding by the Investor against the Issuer, and only by the Investor against
the Issuer, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding
may be made by the Investor via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by
mailing or otherwise delivering a copy of such process to the Issuer at its last known attorney as set forth in its most recent
SEC filing.

 

13. Attorney Fees. If any attorney
is employed by either party with regard to any legal or equitable action, arbitration or other proceeding brought by such party
for enforcement of this Note or because of an alleged dispute, breach, default or misrepresentation in connection with any of the
provisions of this Note, the prevailing party will be entitled to recover from the other party reasonable attorneys' fees and other
costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.

 

14. Opinion of Counsel. In the
event that an opinion of counsel is needed for any matter related to this Note, the Investor has the right to have any such opinion
provided by its counsel. Investor also has the right to have any such opinion provided by Issuer's counsel.

 

15. Notices. Any notice required
or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent by facsimile or email
transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile
or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.

 

    	3

    	 

    

 

 

	
        Issuer:

         

         

        /s/ Robert Eakle

        Robert Eakle

        Alkame Holdings, Inc.

        Chief Executive Officer
	
        Investor:

         

         

        /s/ Authorized Signatory

        JMJ Financial

        Its Principal

	Date: 8/1/14	Date:

 

[Signature Page to $350,000 Convertible
Note]

    	4

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