Document:

Exhibit 10.2 WSR Industrial Office Promissory Note - Jackson Life (2013-12) (1)

PPM Loan No. 1306602

FIXED RATE PROMISSORY NOTE 

Date: November 26, 2013

The following terms or provisions are used in this Note and are incorporated by reference herein.

Maker:  WHITESTONE INDUSTRIAL-OFFICE LLC, a Texas limited liability company.

Maker’s Mailing Address:   2600 South Gessner, Suite 500, Houston, Texas 77063.

Noteholder: JACKSON NATIONAL LIFE INSURANCE COMPANY, a Michigan corporation, its successors or assigns.

Place for Payment:  c/o Holliday, Fenoglio, Fowler, L.P., P.O. Box 840637, Dallas, TX  75284-0637, or at such other place as from time to time may be designated in writing by Noteholder.

Principal Amount:  Thirty-Seven Million Dollars ($37,000,000.00).

Interest Rate:  three and seventy-six one hundredths percent (3.76%) per annum.

Prepaid Interest Period:  the period commencing on the date of this Note through and including November 30, 2013.

First Monthly Payment Date:  January 1, 2014.

Lockout Period Expiration Date:  November 30, 2015.

Maturity Date:  December 1, 2020.

Monthly Payment:  equal monthly payments of One Hundred Ninety Thousand Four Hundred Twenty-Nine and 99/100 Dollars ($190,429.99) each (consisting of principal and interest based upon an amortization schedule of 25 years).

1.Promise to Pay.  FOR VALUE RECEIVED, the Maker hereby promises to pay to the order of Noteholder, the Principal Amount (the “Loan”), with interest on the outstanding principal balance thereof from the date hereof until the Maturity Date at the Interest Rate or the Default Rate (as applicable), both principal and interest being payable as hereinafter provided in lawful money of the United States of America at the Place for Payment.  Interest shall be calculated and paid on the basis of a 30-day month and 360-day year, unless otherwise noted herein.

2.Payments. A payment of interest only, based on a 365-day year, on the outstanding principal balance of this Note shall be due and payable in advance on the date hereof in an amount equal to interest accrued during the Prepaid Interest Period.  Maker agrees to pay Noteholder the Monthly Payments commencing on the First Monthly Payment Date and continuing thereafter on the same day of each succeeding month through and including the Maturity Date, on which date all unpaid principal and interest, together with any other sums due under the terms of this Note, shall be due and payable.

3.Treatment of Payments.  All payments of principal, interest, late charges (as described below), and prepayment premium (as described below), if any, due under this Note shall be paid to Noteholder by wire transfer pursuant to Noteholder's written wire transfer instructions or by check of immediately available funds delivered to the Place for Payment set forth in the Terms section above, and in such other manner, as Noteholder may from time to time designate in writing.  If such payment is received by 2:00 p.m., Eastern time, such payment will be credited to Maker’s account as of the date on which received.  If such payment is received after 2:00 p.m., Eastern time, such payment will be credited to Maker’s account on the business day next following the date on which received.  Each installment payment under this Note shall be applied first to the payment of any cost or expense for which Maker is liable hereunder or under the other Loan Documents, including any unpaid late charge, then to accrued interest and the remainder to the reduction of unpaid principal.  Time is of the essence as to all payments hereunder.

4.Late Charges.  If any monthly installment of principal and/or interest is not paid in full on or before the tenth day of the month in which such payment is due, then a charge for late payment (“Late Charge”) in the amount of five percent (5%) of the amount of such installment shall be immediately assessed and shall be immediately due and payable by Maker.  The parties hereby recognize that the Late Charge is a reasonable approximation of an actual loss difficult to estimate.  Noteholder’s failure to collect such Late Charge shall not constitute a waiver of Noteholder’s right to require such payment of such Late Charge for past or future defaults.  The Late Charge shall be in addition to all other rights and remedies available to Noteholder upon the occurrence of an Event of Default, as hereinafter defined.

5.Default Interest.  Upon the occurrence of (a) an Event of Default or (b) the Maturity Date, interest shall accrue hereunder at an annual rate (the “Default Rate”) equal to the lesser of (i) eighteen percent (18%) and (ii) the maximum rate allowed by law.  The Default Rate shall accrue on the entire outstanding balance hereof, including, without limitation, delinquent interest and any and all costs and expenses incurred by Noteholder in connection therewith.

6.Security; Definitions.

(a)This Note is made pursuant to a Loan Agreement of even date herewith between Noteholder and Maker (the “Loan Agreement”) and secured by, among other things, the Security Instrument of even date herewith in favor of Noteholder granting a first lien on certain real property described therein, and granting a security interest in certain personal property, fixtures and equipment described therein.

(b)Capitalized terms not otherwise defined in the preamble or in other provisions of this Note shall have the meanings ascribed to such terms in the Loan Agreement.

(c)The terms and provisions of the Loan Agreement are incorporated herein by reference (as if such terms and provisions were set forth in this Note). 

7.Event of Default.  Upon the occurrence of an Event of Default, Noteholder shall have the option of declaring the indebtedness evidenced hereby to be immediately due and payable (the “Loan Acceleration”).  After the Loan Acceleration, Noteholder shall have the option of applying any payments received to principal or interest or any other costs due pursuant to the terms of this Note or the other Loan Documents.  Interest at the Default Rate shall continue to accrue on any judgment Noteholder may obtain against Maker on this Note or the Security Instrument until Noteholder acquires record title to the Project or the judgment and interest and costs have been paid in full.  Noteholder may include any applicable 

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prepayment premium, attorney's fees and costs of suit in any complaint, judgment or assessment of damages filed or entered pursuant to this Note and/or the Security Instrument.

8.Prepayment. Interest accruing during the calendar month of any prepayment shall be calculated and paid on the basis of a 365-day year (and shall include the day such prepayment is received by Lender.  No prepayment of the principal balance of this Note shall be allowed until after the Lockout Period Expiration Date.

After the Lockout Period Expiration Date, prepayment is permitted in full but not in part, upon fifteen (15) days' written notice, with payment to Noteholder of a prepayment premium ("Premium") equal to the greater of (i) one percent (1%) of the outstanding principal balance at the time of prepayment or (ii) the present value on the date of prepayment of all future principal and interest payments beginning with the next payment due on the month following the pay-off date, including any balloon payments assuming payment in accordance with the repayment terms of this Note, less the current outstanding principal balance of the Loan.  The interest rate used in calculating the present value shall be the Treasury Rate, as defined herein, plus twenty-five (25) basis points, divided by twelve (12).  No Premium shall apply to a payment in full on or after September 1, 2020.

If more than two years remain from the payoff date to the Maturity Date, the term “Treasury Rate,” as used herein, shall be the straight line interpolation of the current annual yield (or, if none, the most recent previous yield) of the two Key U.S. Treasury Securities (as hereinafter defined), which are closest to the Maturity Date (both before and after).  The “Key U.S. Treasury Securities” are the 2, 5, 10 and 30 year U.S. Treasury Securities as published by Bloomberg at 4 p.m. central time three (3) days prior to the payoff date.  By way of example and not limitation, if 7 and 1⁄2 years remain until the Maturity Date at the time of prepayment, the straight line interpolation of the Treasury Rate would be the average of the then annual current yield (or, if none, the most recent previous yield) of the 5-year and the 10-year U.S. Treasury Securities.  If less than two years remain from the payoff date to the Maturity Date, the term “Treasury Rate” as used herein, shall mean the current annual yield (or, if none, the most recent previous yield), of the 1-year U.S. Treasury Note as published by Bloomberg at 4 p.m. Central time three (3) days prior to the payoff date.

If any of the Key U.S. Treasury Securities are no longer in use or if for any reason Bloomberg ceases to publish such information, the Treasury Rate shall be based on the annual yields reported in another publication of comparable reliability and institutional acceptance or other relevant replacement of U.S. Treasury Securities as selected by Noteholder in its sole discretion.

No involuntary partial prepayment shall suspend or reduce any required monthly payments.  If the Loan has been accelerated after an Event of Default and Maker wishes to pay the Loan in full, the payment tendered must include either (i) the applicable prepayment premium, if the payment is tendered after the Lockout Period Expiration Date, or (ii) the greater of such prepayment premium or 10% of the outstanding principal balance of this Note on the date of such Event of Default, if the payment is tendered on or before the Lockout Period Expiration Date.  Notwithstanding the foregoing, no Premium shall apply to any prepayment, in full or in part, which is made in connection with any condemnation or  casualty where Lender applies proceeds to pay down the Loan.

9.Limitation on Personal Liability. The provisions of Section 9.18 of the Loan Agreement are hereby incorporated by reference. 

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10.Non-Usurious Loan. It is the intent of Noteholder and Maker in this Note and the other Loan Documents now or hereafter securing this Note to contract in strict compliance with applicable usury law.  In furtherance thereof, Noteholder and Maker stipulate and agree that none of the terms and provisions contained in this Note, or in any other instrument executed in connection herewith, including, the Loan Documents, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, or interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law.  Neither Maker nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of this Note shall ever be required to pay interest on this Note at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this paragraph shall control over all other provisions of this Note, the Loan Documents and any other instruments now or hereafter executed in connection herewith which may be in apparent conflict herewith.  Noteholder expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of this Note is accelerated.  If the maturity of this Note is accelerated for any reason or if the principal of this Note is paid prior to the Maturity Date, and as a result thereof the interest received for the actual period of existence of this Note exceeds the applicable maximum lawful rate, Noteholder shall, at its option, either refund the amount of such excess or credit the amount of such excess against the principal balance of this Note then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest.  In the event that Noteholder collects monies which are deemed to constitute interest which would increase the effective interest rate on this Note to a rate in excess of that permitted to be charged by applicable law, all such sums deemed to constitute interest in excess of the lawful rate shall, upon such determination, at the option of Noteholder, be either immediately returned or credited against the principal balance of this Note then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable.  By execution of this Note Maker acknowledges that it believes this Note and all interest and fees paid in connection with the loan represented by this Note, to be non-usurious.  Maker agrees that if, at any time, Maker should believe that this Note or the loan represented by this Note is in fact usurious, Maker will give Noteholder notice of such condition and Maker agrees that Noteholder shall have ninety (90) days in which to make appropriate refund or other adjustment in order to correct such condition if in fact such condition exists.  The term “applicable law” as used in this Note shall mean the laws of the State of Texas or the laws of the United States, whichever allows the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future.

11.Noteholder’s Attorney Fees.  Should the indebtedness represented by this Note or any part thereof be collected at law or in equity or through any bankruptcy, receivership, probate or other court proceedings or if this Note is placed in the hands of attorneys for collection after an Event of Default, or if the lien or priority of the lien represented by the Security Instrument or the other Loan Documents is the subject of any court proceeding, Maker and all endorsers, guarantors and sureties of this Note jointly and severally agree to pay to Noteholder in addition to the principal and interest due and payable hereon reasonable attorneys’ and collection fees including those incurred by Noteholder for any appeal.

12.Maker’s Waivers.  Maker and all endorsers, guarantors and sureties of this Note and all other persons liable or to become liable on this Note severally waive presentment for payment, demand, notice of demand and of dishonor and nonpayment of this Note, notice of intention to accelerate the maturity of this Note, notice of acceleration, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party, and agree to all renewals, extensions, modifications, partial payments, releases or substitutions of security, in whole or in part, with or without notice, before or after maturity.

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13.Payment of Taxes and Fees.  Maker agrees to pay the cost of any revenue, tax or other documentary fee or stamps now or hereafter required by law to be affixed to this Note or the Security Instrument.

14.Governing Law.  This Note and the rights, duties and liabilities of the parties hereunder and/or arising from or relating in any way to the indebtedness evidenced by this Note or the transaction of which such indebtedness is a part shall be governed and construed for all purposes by the law of the State of Texas.

15.Replacement or Bifurcation of Note. If this Note is lost or destroyed, the Maker shall, at the Noteholder's request, execute and return to the Noteholder a replacement promissory note identical to this Note, provided the Noteholder delivers to the Maker an affidavit to the foregoing effect.  Upon delivery of the executed replacement Note, the Noteholder shall indemnify the Maker from and against its actual damages suffered as a result of the existence of two Notes evidencing the same obligation.  No replacement of this Note under this Section shall result in a novation of the Maker's obligations under this Note.  In addition, the Noteholder may at its sole and absolute discretion require that the Maker execute and deliver two separate promissory notes, which shall replace this Note as evidence of the Maker's obligations.  The two replacement notes shall, taken together, evidence the exact obligations set forth in this Note.  The replacement notes shall be independently transferable.  If this Note is so replaced, the Noteholder shall return this Note to the Maker marked to evidence its cancellation.  Noteholder shall pay all costs incurred by it with respect to documenting such replacement notes.  Maker acknowledges the need to act promptly upon its receipt of the documentation evidencing any request by Noteholder that the Note be replaced pursuant to this Section and agrees that Maker will meet the reasonable deadlines of Noteholder provided that Maker has received the applicable documents at least ten (10) business days prior to such deadline.  Furthermore, Maker agrees to reasonably cooperate with Noteholder to effectuate the obtainment of such title policy endorsements, or new title evidence and other assurances and documents as Noteholder shall reasonably require. 

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IN WITNESS WHEREOF, Maker has caused this Note to be duly executed as of the day and year first above written.

WHITESTONE INDUSTRIAL-OFFICE LLC,
a Texas limited liability company

By: WHITESTONE REIT OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership, its Sole Member

By: WHITESTONE REIT, a Maryland real 
estate investment trust, its General Partner

By:  /s/ John J. Dee                             
      John J. Dee, Corporate Secretary 
      and Chief Operating Officer

6NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS DOCUMENT 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 AND
REASONABLY APPROVED BY THE ISSUER), 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. 

 

CONVERTIBLE
PROMISSORY NOTE

 

November 22, 2013

 

$350,000.00

 

FOR VALUE
RECEIVED, Cardinal Resources, LLC, a Pennsylvania limited liability company (“Cardinal”), hereby promises
to pay to the order of ____________________________________, a _______________________ having a business address at _____________________________________________________________,
or its successors or assigns ( the “Holder”), the principal amount of Three Hundred Fifty Thousand
and 00/100 United States Dollars (US$350,000.00) on or prior to the one year anniversary of the date hereof (the “Maturity
Date”), and to pay interest on the unpaid principal balance hereof at the rate of seven percent (7%) per annum (the
“Applicable Rate”) commencing as of the date the proceeds hereunder are funded to Cardinal (the “Funding
Date”), in accordance with the terms hereof. This Convertible Promissory Note (this note, and all modifications, extensions,
future advances, supplements, and renewals thereof, and any substitutions therefor, hereinafter referred to as the “Note”)
shall be payable in accordance with the terms set forth below. This Note is the “Note” referenced in that certain
Subscription Agreement executed on the date hereof by and between Cardinal and the Holder (the “Subscription Agreement”).
This Note is subject to the terms and conditions contained in the Subscription Agreement. It is anticipated that this Note will
be assumed by JHDG at the Closing Date pursuant to the Assignment and Assumption Agreement (as such terms are defined in the Subscription
Agreement), and that all of the obligations of Cardinal herein will be assumed by JHDG effective on the Closing Date. The Principal
Amount of this Note will be held in escrow pending the Closing Date pursuant to the terms of the Subscription Agreement. If the
Closing Date does not occur by October 15, 2013, then the Principal Amount shall be returned to Holder by the escrow agent pursuant
to the terms of the Subscription Agreement, and this Note will be deemed void. As a result, following the Closing Date, the term
the “Company” as used herein shall refer to JHDG and its subsidiaries, including Cardinal, unless specifically
stated otherwise.

 

    	 

    	 

    

 

1. Payments
of Principal and Interest.

 

(a) Payment
of Principal. The principal amount of this Note shall be paid to the Holder on or prior to the Maturity Date.

 

(b) Payment
of Interest. Interest on the unpaid principal balance of this Note shall accrue at the Applicable Rate commencing on the Funding
Date. Interest shall be computed on the basis of a 360-day year and paid for the actual number of days elapsed. Accrued and unpaid
interest under this Note shall be paid in full on the Maturity Date. Any accrued but unpaid interest shall, at the option of the
Holder, be included, from time to time, in the Conversion Amount (as defined herein).

 

(c) General
Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States
of America by certified bank check or wire transfer to such account as the Holder may designate by written notice to the Company
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 Business Day. For purposes of this Note,
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of
California are authorized or required by law or executive order to remain closed. 

 

(d) Prepayment.
This Note may not be pre-paid without the consent of the Holder. 

 

2. Conversion
of Note. At any time and from time to time after the Closing Date and up to the Maturity Date, this Note may be, at the sole
option of the Holder, convertible in accordance with the terms and conditions set forth in this Section.

 

(a) Voluntary
Conversion. At any time while this Note is outstanding on or after the Closing Date (as defined in the Subscription Agreement),
the Holder may convert all or any portion of the outstanding principal and accrued and unpaid interest (such total amount, the
“Conversion Amount”) into Common Stock of JHDG (the “Conversion Shares”) at a price equal
to $0.25 per share (the “Conversion Price”). The Holder shall submit a conversion notice (in the form attached
hereto as Exhibit “A”, the “Conversion Notice”) indicating the amount of the Note being
converted, the number of Conversion Shares issuable upon such conversion, and where the Conversion Shares should be delivered.

 

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(b) The
Holder’s Conversion Limitations. The Holder shall not have the right to convert any portion of this Note to the extent
that after giving effect to the conversion set forth on the Conversion Notice submitted by the Holder, the Holder (together with
the Holder’s affiliates (as defined herein) and any Persons acting as a group together with the Holder or any of the Holder’s
affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined herein). To ensure compliance
with this restriction, prior to delivery of any Conversion Notice, the Holder shall have the right to request that the Company
provide to the Holder a written statement of the percentage ownership of the Company’s Common Stock that would by beneficially
owned by the Holder and its affiliates in the Company if the Holder converted such portion of this Note then intended to be converted
by Holder. The Company shall, within five (5) business days of such request, provide Holder with the requested information in
a written statement, and the Holder shall be entitled to rely on such written statement from the Company in issuing its Conversion
Notice and ensuring that its ownership of the Company’s Common Stock is not in excess of the Beneficial Ownership Limitation.
The restriction described in this Section may be waived by Holder, in whole or in part, upon sixty-one (61) days’ prior
notice from the Holder to the Company to increase such percentage. For purposes of this Note, the “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of this Note. The limitations contained in this Section shall apply to a successor
holder of this Note. For purposes of this Note, “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof.

 

(c) Mechanics
of Conversion. The conversion of this Note shall be conducted in the following manner: 

 

(1)
Holder’s Delivery Requirements. To convert this Note into shares of Common Stock on
any date set forth in the Conversion Notice by the Holder (the “Conversion Date”), the Holder shall:
(A) transmit by facsimile or electronic mail (or otherwise deliver) a copy of the fully executed Conversion Notice to the Company
(or, under certain circumstances as set forth below, by delivery of the Conversion Notice to the Company’s transfer agent);
and (B) upon receipt by the Holder of the Conversion Shares, surrender the original Note to a nationally recognized overnight
courier for delivery to the Company. 

 

(2)
Company’s Response. Upon receipt by the Company of a copy of a Conversion Notice, the
Company shall as soon as practicable, but in no event later than two (2) Business Days after receipt of such Conversion Notice,
send, via facsimile or electronic mail (or otherwise deliver) a confirmation of receipt of such Conversion Notice (the “Conversion
Confirmation”) to the Holder indicating that the Company will process such Conversion Notice in accordance with the
terms herein. Within five (5) Business Days after the date of the Conversion Confirmation (or the date of the Conversion Notice,
if the Company fails to issue the Conversion Confirmation), provided that the Company’s transfer agent is participating
in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program,
the Company shall cause the transfer agent to electronically transmit the applicable Conversion Shares to which the Holder shall
be entitled by crediting the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission
(“DWAC”) system, and provide proof satisfactory to the Holder of such delivery. In the event that the Company’s
transfer agent is not participating in the DTC FAST program and is not otherwise DWAC eligible, within five (5) Business Days
after the date of the Conversion Confirmation (or the date of the Conversion Notice, if the Company fails to issue the Conversion
Confirmation), the Company shall instruct and cause the Company’s transfer agent to issue and surrender to a nationally
recognized overnight courier for delivery to the address specified in the Conversion Notice, a certificate, registered in the
name of the Holder, for the number of Conversion Shares to which the Holder shall be entitled. If less than the full principal
and accrued but unpaid interest amount of this Note is submitted for conversion, then the Company shall within five (5) Business
Days after receipt of the original Note, at its own expense, issue and deliver to the Holder a new Note for the outstanding principal
and interest amount not so converted; provided that such new Note shall be substantially in the same form as this Note.

 

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(3)
Record Holder. The Person(s) entitled to receive the shares of Common Stock issuable upon
a conversion of this Note shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of the Conversion
Date.

 

(4)
Failure to Deliver Certificates. If in the case of any Conversion Notice, the certificate
or certificates are not delivered to or as directed by the Holder by the date required hereby, the Holder shall be entitled to
elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such
Conversion Notice, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and
the Holder shall promptly return to the Company the Common Stock certificates representing the principal amount of this Note unsuccessfully
tendered for conversion to the Company. 

 

(5)
Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion
of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes, or any other issuance
or transfer fees of any nature or kind that may be payable in respect of the issue or delivery of such certificates, any such
taxes or fees, if payable, to be paid by the Company.

 

(d) Adjustments
to Conversion Price.

 

(1)
Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on outstanding
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event
of a reclassification of shares of Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock (excluding any treasury shares
of the Company) outstanding immediately before such event, and the denominator of which 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. 

 

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(2)
Fundamental Transaction. If, at any time while this Note is outstanding: (i) the Company
effects any merger or consolidation with or into another Person, (ii) the Company effects any sale of all or substantially all
of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares
for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this Note, the Holder
shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior
to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one (1) share of Common Stock (the “Alternate Consideration”). For purposes
of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue
to the Holder a new note consistent with the foregoing provisions and evidencing the Holder’s right to convert such note
into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the provisions of this Section and insuring that this Note
(or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

(3)
Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any
provision of this Note, the Company shall promptly deliver to Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.

 

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(4)
Notice to Allow Conversion by Holder. If: (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company
shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be
delivered to the Holder at its last address as it shall appear upon the Company’s records, at least thirty (30) calendar
days prior to the applicable record or effective date hereinafter specified, a notice stating: (x) the date on which a record
is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights
or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to convert this Note during the 10-day period commencing on the date of such notice through
the effective date of the event triggering such notice. 

 

(e) Reservation
of Common Stock. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Note, such number of shares of Common Stock as shall from time to time be
sufficient to effect such conversion, based upon the Conversion Price.

 

3. Voting
Rights. The Holder shall have no voting rights under this Note, except as required by applicable law, including, but not limited
to, the Nevada Corporations Law, and as expressly provided in this Note.

 

4. Short
Sales. Holder represents and agrees, as applicable: (i) Holder has not prior to the date hereof, entered into or effected
any Short Sales; and (ii) so long as the Note remains outstanding, Holder will not enter into or effect any Short Sales. The Company
acknowledges and agrees that upon submission of a Conversion Notice as set forth herein, Holder immediately owns the Common Stock
described in the Conversion Notice and any sale of that Common Stock issuable under such Conversion Notice would not be considered
Short Sales. For purposes herein, “Short Sales” shall mean entering into any short sale or other hedging transaction
which establishes a net short position with respect to the Company’s Common Stock.

 

    	6

    	 

    

 

5. Defaults
and Remedies.

 

(a) Events
of Default. The occurrence of any of the following events shall constitute an “Event of Default” hereunder:
(i) Cardinal shall fail to repay the Principal Amount upon a failure of the Closing Date to occur before October 15, 2013 in accordance
with the terms of the Subscription Agreement; (ii) the Company shall fail to pay any installment of interest, principal or other
sums due under this Note within ten (10) business days of when any such payment shall be due and payable; (ii) the Company makes
an assignment for the benefit of creditors; (iii) any order or decree is rendered by a court which appoints or requires the appointment
of a receiver, liquidator or trustee for the Company, and the order or decree is not vacated within sixty (60) days from the date
of entry thereof; (iv) any order or decree is rendered by a court adjudicating the Company insolvent, and the order or decree
is not vacated within sixty (60) days from the date of entry thereof; (v) the Company files a petition in bankruptcy under the
provisions of any bankruptcy law or any insolvency act; (vi) the Company admits, in writing, its inability to pay its debts as
they become due (provided, however, that receipt by the Company of an audit letter from its accountants questioning the viability
of the Company as a going concern shall not, in and of itself, be construed as an admission by the Company of its inability to
pay its debts as they become due); (vii) a proceeding or petition in bankruptcy is filed against the Company and such proceeding
or petition is not dismissed within ninety (90) days from the date it is filed; (viii) the Company files a petition or answer
seeking reorganization or arrangement under the bankruptcy laws or any law or statute of the United States or any other foreign
country or state; or (ix) the Company shall fail to perform, comply with or abide by any of the stipulations, agreements, conditions
and/or covenants contained in this Note on the part of the Company to be performed complied with or abided by, and such failure
is not cured within thirty (30) days after written notice of such failure is delivered by Holder to the Company.

 

(b) Remedies.
Upon the occurrence of one or more Events of Default, the Holder, at its option and without further notice, demand or presentment
for payment to the Company or others, may declare the then outstanding principal balance of this Note, together with all other
sums due under the Note, immediately due and payable, together with all accrued and unpaid interest thereon and thereafter all
such sums shall bear interest at the Default Rate, together with all reasonable attorneys’ fees, paralegals’ fees
and costs and expenses incurred by the Holder in collecting or enforcing payment thereof (whether such reasonable fees, costs
or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or
otherwise), and all other sums due by the Company hereunder, all without any relief whatsoever from any valuation or appraisement
laws and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided
to the Holder at law, in equity, or under this Note.

 

    	7

    	 

    

 

6. Lost
or Stolen Note. Upon notice to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of
loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to
the Company and customary for similar circumstances in commercial lender/borrower circumstances, and, in the case of mutilation,
upon surrender and cancellation of the Note, the Company shall execute and deliver a new Note of like tenor and date and in substantially
the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously
requests the Company to convert such remaining principal amount and interest into Common Stock.

 

7. Cancellation.
After all principal, accrued interest and all other sums at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be re-issued.

 

8. Governing
Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the laws of the State of California, without giving effect to
provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction
of the state and federal courts sitting in the State of California for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper,
provided, however, nothing contained herein shall limit the Holder’s ability to bring suit or enforce this Note in any other
jurisdiction. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in
any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address
indicated in the preamble hereto 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 manner permitted by law.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

9. Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies of the Holder as provided herein shall
be cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion of the Holder, and may
be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event
be construed as a waiver or release thereof.

 

10. Specific
Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general
provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed
against any person as the drafter hereof.

 

    	8

    	 

    

 

11. Failure
or Indulgence Not Waiver. Holder shall not be deemed, by any act of omission or commission, to have waived any of its rights
or remedies hereunder, unless such waiver is in writing and signed by Holder, and then only to the extent specifically set forth
in the writing. A waiver on one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to
a subsequent event.

 

12. Notice.
Notice shall be given to each party at the address indicated in the preamble hereto or at such other address as provided to the
other party in writing.

 

13. Usury
Savings Clause. Notwithstanding any provision in this Note, the total liability for payments of interest and payments in the
nature of interest, including, without limitation, all charges, fees, exactions, or other sums which may at any time be deemed
to be interest, shall not exceed the limit imposed by the usury laws of the jurisdiction governing this Note or any other applicable
law. In the event the total liability of payments of interest and payments in the nature of interest, including, without limitation,
all charges, fees, exactions or other sums which may at any time be deemed to be interest, shall, for any reason whatsoever, result
in an effective rate of interest, which for any month or other interest payment period exceeds the limit imposed by the usury
laws of the jurisdiction governing this Note, all sums in excess of those lawfully collectible as interest for the period in question
shall, without further agreement or notice by, between, or to any party hereto, be applied to the reduction of the outstanding
principal balance of this Note immediately upon receipt of such sums by the Holder hereof, with the same force and effect as though
the Company had specifically designated such excess sums to be so applied to the reduction of such outstanding principal balance
and the Holder hereof had agreed to accept such sums as a penalty-free payment of principal; provided, however, that the Holder
of this Note may, at any time and from time to time, elect, by notice in writing to the Company, to waive, reduce, or limit the
collection of any sums in excess of those lawfully collectible as interest rather than accept such sums as a prepayment of the
outstanding principal balance. It is the intention of the parties that the Company does not intend or expect to pay nor does the
Holder intend or expect to charge or collect any interest under this Note greater than the highest non-usurious rate of interest
which may be charged under applicable law.

 

14. Binding
Effect. This Note shall be binding upon Cardinal and the successors and assigns of Cardinal and shall inure to the benefit
of Holder and the successors and assigns of Holder.

 

15. Severability.
In the event any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal, or unenforceable,
in whole or in part, in any respect, or in the event that any one or more of the provisions of this Note operates or would prospectively
operate to invalidate this Note, then and in any of those events, only such provision or provisions shall be deemed null and void
and shall not affect any other provision of this Note. The remaining provisions of this Note shall remain operative and in full
force and effect and shall in no way be affected, prejudiced, or disturbed thereby.

 

    	9

    	 

    

 

16. Participations.
Holder may from time to time sell or assign, in whole or in part, or grant participations in this Note and/or the obligations
evidenced hereby, subject, however, to first obtaining the Company’s written consent. The holder of any such sale, assignment
or participation, if the applicable agreement between Holder and such holder so provides, shall be: (a) entitled to all of the
rights, obligations and benefits of Holder (to the extent of such holder’s interest or participation); and (b) deemed to
hold and may exercise the rights of setoff or banker’s lien with respect to any and all obligations of such holder to the
Company (to the extent of such holder’s interest or participation), in each case as fully as though the Company was directly
indebted to such holder.

 

17. Amendments.
The provisions of this Note may be changed only by a written agreement executed by Cardinal and Holder.

 

[Signature pages
follows] 

 

    	10

    	 

    

 

IN WITNESS
WHEREOF, Cardinal has caused this Note to be executed on and as of the date set forth above.

 

	 	CARDINAL
    RESOURCES, LLC 
	 	 
	 	By:	/s/
    Kevin Jones
	 	Name:	Kevin
    Jones
	 	Title:	Managing
    Member

 

[ signature
page to Promissory Note ] 

 

     

	

    	 

    

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

The undersigned
hereby elects to convert principal and/or interest under the Convertible Promissory Note (the “Note”) of JH
Designs, Inc., a corporation incorporated under the laws of the State of Nevada (the “Company”), into shares
of common stock, par value $.001 per share (the “Common Shares”), of Cardinal in accordance with the conditions
of the Note, as of the date written below.

 

Based solely
on information provided by the Company to Holder, the undersigned represents and warrants to the Company that its ownership of
the Common Shares does not exceed the amounts determined in accordance with Section 13(d) of the Exchange Act of 1934, as amended,
specified under Section 2(b) of the Note.

 

Conversion calculations

 

	Effective
    Date of Conversion: 	
	Principal
    Amount and/or Interest to be Converted: 	 
	Number
    of Common Shares to be Issued: 	

 

[ HOLDER
]

 

	 	By:	
	 	Name:	
	 	Title:	
	 	Address:

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