IDS Industries (IDST) 8-K Entry into a Material Definitive Agreement

NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBY THISCERTIFICATENORTHE SECURITIESINTO WHICHTHESE SECURITIES ARECONVERTIBLEHAVEBEENREGISTEREDUNDERTHESECURITIESACT OF 1933,ASAMENDED,ORAPPLICABLESTATESECURITIESLAWS.THESECURITIESMAY NOT BEOFFEREDFORSALE, SOLD, TRANSFERRED OR ASSIGNED(I)INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHESECURITIESUNDERTHESECURITIESACTOF1933,AS AMENDED, OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSEL SHALLBESELECTEDBYTHEHOLDER),INAGENERALLYACCEPTABLEFORM,THAT REGISTRATION ISNOTREQUIRED UNDERSAID ACTOR(II) UNLESS SOLDPURSUANTTORULE144OR RULE144AUNDERSAIDACT. NOTWITHSTANDINGTHEFOREGOING,THESECURITIESMAY BEPLEDGEDIN CONNECTION WITHABONAFIDEMARGINACCOUNTOROTHERLOAN ORFINANCINGARRANGEMENT SECUREDBYTHESECURITIES.

PrincipalAmount:$15,500.00

IssueDate:April 4, 2013

PurchasePrice:$15,500.00

CONVERTIBLEPROMISSORY NOTE

FOR VALUERECEIVED,IDSSOLARTECHNOLOGIES, INC.,a Nevadacorporation(hereinaftercalledthe“Borrower”), hereby promises topay totheorder ofASHERENTERPRISES, INC.,aDelawarecorporation, orregisteredassigns(the“Holder”) thesumof $15,500.00together withany interestassetforthherein,onJanuary 8,2014(the“Maturity Date”),andtopay interest onthe unpaidprincipal balancehereofat therateofeightpercent(8%)(the“Interest Rate”) perannumfrom thedate hereof(the“IssueDate”)untilthe same becomes dueandpayable, whetheratmaturity oruponacceleration orby prepayment or otherwise. This Note may not beprepaid in whole or in partexceptas otherwiseexplicitlysetforth herein.Anyamountofprincipal orinterest onthisNotewhich isnotpaid whendueshall bear interestat therateof twenty two percent(22%) perannumfrom the due date thereof until thesameispaid(“Default Interest”). Interestshallcommence accruing onthedatethattheNote isfully paidand shallbecomputedonthebasis ofa365-day yearand theactual numberofdayselapsed. All paymentsdue hereunder(to the extent notconverted intocommon stock, $0.001 parvalue per share(the“Common Stock”) inaccordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall bemadeat suchaddressasthe Holder shall hereaftergive totheBorrowerbywritten noticemade inaccordance withthe provisionsofthisNote. Wheneveranyamount expressed tobedueby theterms ofthisNoteis due onanydaywhichisnota businessday,the same shallinstead bedueonthe nextsucceeding daywhichisa businessdayand,inthecase ofany interestpayment datewhich isnotthe dateon which this Note is paid infull, the extensionof the due date thereof shall not be taken intoaccountfor purposes of determining theamount of interest due on such date. As used in this Note, the term“business day” shall meananyday other thana Saturday, Sunday or a day on whichcommercial banks in thecity ofNew York, New York areauthorized orrequiredbylaw orexecutive order toremainclosed. Eachcapitalized term used herein,and not otherwise defined, shall have themeaningascribed thereto in thatcertain Securities Purchase Agreement datedthedatehereof, pursuanttowhichthisNotewas originallyissued(the“Purchase Agreement”).

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ThisNoteisfreefromalltaxes, liens,claimsandencumbranceswithrespecttotheissue thereofandshallnotbesubjecttopreemptiverightsor other similarrightsof shareholdersof theBorrowerand will not imposepersonal liabilityupon theholderthereof.

The followingterms shallapplyto this Note:

ARTICLEI.CONVERSIONRIGHTS

1.1ConversionRight.TheHoldershallhavetherightfromtimetotime,andatany timeduringtheperiodbeginningonthedatewhichisonehundredeighty(180)daysfollowing thedateofthisNoteandending onthelaterof:(i)theMaturityDateand(ii)thedate ofpaymentoftheDefaultAmount(asdefinedinArticleIII)pursuantto Section1.6(a)orArticleIII,eachinrespectoftheremaining outstandingprincipalamountofthisNotetoconvertalloranypartoftheoutstandingandunpaidprincipalamountofthisNoteintofully paidandnon-assessable shares ofCommonStock,as suchCommonStock exists onthe Issue Date, orany sharesof capitalstockorothersecuritiesoftheBorrowerintowhichsuch CommonStockshall hereafterbechangedor reclassifiedattheconversion price(the“Conversion Price”)determined asprovidedherein(a“Conversion”);provided,however,thatinnoeventshallthe Holder beentitledtoconvertanyportionofthisNoteinexcessofthatportionofthisNoteuponconversion of which the sumof(1) the numberof shares ofCommonStock beneficially ownedby the Holderand itsaffiliates(otherthansharesofCommonStockwhichmaybedeemedbeneficially ownedthroughtheownershipof the unconvertedportionof the Notesor the unexercisedor unconverted portion ofanyother securityoftheBorrowersubject to alimitation onconversion orexerciseanalogous tothelimitationscontainedherein)and(2)thenumberofsharesofCommonStock issuable upon theconversion ofthe portion of this Note withrespect to which thedeterminationofthisprovisoisbeingmade,wouldresultinbeneficialownershipby the Holderand itsaffiliates of more than 9.99% ofthe outstanding sharesofCommonStock.For purposesoftheprovisototheimmediatelypreceding sentence,beneficialownershipshallbe determinedinaccordance with Section13(d) of theSecuritiesExchangeActof 1934,asamended(the“ExchangeAct”),andRegulations13D-Gthereunder,exceptasotherwise providedinclause(1)ofsuchproviso,provided,further,however,thatthe limitationsonconversionmay be waivedby theHolderupon,attheelectionofthe Holder, notlessthan61 days’priornoticetotheBorrower,andtheprovisionsoftheconversionlimitationshallcontinue toapply untilsuch61stday(orsuchlaterdate,asdetermined by theHolder,asmay bespecified insuchnotice ofwaiver). The numberofshares of Common Stocktobe issueduponeachconversionofthisNoteshallbedeterminedby dividing theConversionAmount(asdefined below)by theapplicableConversionPricethenineffectonthedatespecifiedinthenoticeofconversion,intheformattachedheretoasExhibitA(the“Notice ofConversion”),deliveredto theBorrowerby theHolderinaccordancewithSection1.4below;providedthatthe NoticeofConversion is submittedbyfacsimile ore-mail(orbyother meansresulting in, orreasonablyexpectedtoresultin,notice) totheBorrower before 6:00p.m.,NewYork,New Yorktime on suchconversiondate(the“ConversionDate”). The term“ConversionAmount” means,withrespecttoanyconversionofthisNote,thesumof(1)theprincipalamountofthisNotetobeconvertedinsuchconversionplus(2)atthe Holder’soption,accruedandunpaidinterest,ifany, onsuchprincipalamountatthe interestratesprovidedinthisNote totheConversionDate,plus(3)atthe Holder’soption,DefaultInterest,ifany,ontheamountsreferredtointhe immediately precedingclauses(1)and/or(2)plus(4)at theHolder’soption,anyamountsowedtotheHolder pursuant toSections 1.3and 1.4(g)hereof.

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1.2ConversionPrice.

(a)CalculationofConversionPrice.Theconversionprice(the“Conversion Price”) shallequalthe VariableConversion Price(asdefinedherein)(subjecttoequitableadjustmentsforstocksplits,stock dividendsorrightsofferingsbytheBorrowerrelatingtotheBorrower’ssecuritiesorthesecuritiesofany subsidiary oftheBorrower, combinations,recapitalization,reclassifications,extraordinary distributionsandsimilarevents). The"VariableConversionPrice"shallmean51%multipliedby theMarketPrice(asdefined herein)(representing adiscountrate of 49%).“MarketPrice” means theaverage of the lowest three(3)TradingPrices(asdefinedbelow)fortheCommonStockduring thethirty(30)Trading Dayperiodending on the latestcomplete Trading Dayprior to theConversion Date.“TradingPrice”means,foranysecurityasofanydate,theclosingbidpriceon theOver-the-CounterBulletinBoard,orapplicabletrading market(the“OTCBB”)asreportedby areliable reporting service(“ReportingService”)designated by theHolder(i.e.Bloomberg)or,iftheOTCBBisnot theprincipaltradingmarketforsuchsecurity,theclosingbidpriceof suchsecurity onthe principalsecuritiesexchangeortradingmarket wheresuchsecurity islistedortradedor,ifnoclosingbidpriceofsuch securityisavailableinanyoftheforegoingmanners,theaverageoftheclosing bid prices ofany market makersfor such security thatare listedin the“pink sheets”by the National QuotationBureau, Inc.If the TradingPricecannot becalculatedfor such security onsuchdateinthemannerprovidedabove,theTradingPriceshallbethefairmarketvalueas mutuallydetermined bytheBorrowerandtheholdersofamajorityininterestoftheNotesbeingconvertedfor which thecalculation of the TradingPrice isrequired inorder to determine theConversionPriceof suchNotes.“TradingDay”shallmeananydayonwhichtheCommonStockistradableforany periodontheOTCBB,orontheprincipalsecuritiesexchangeorother securities market on which theCommonStock isthen beingtraded.

(b)ConversionPriceDuringMajorAnnouncements.Notwithstandinganythingcontainedin Section1.2(a)tothecontrary,intheeventtheBorrower(i)makesa publicannouncementthatitintendstoconsolidateormergewithany othercorporation(otherthana mergerinwhichtheBorroweristhesurvivingorcontinuingcorporationanditscapitalstockis unchanged)orsellortransferallorsubstantiallyalloftheassetsoftheBorroweror(ii)any person,grouporentity(includingtheBorrower) publiclyannouncesatenderoffertopurchase

50%ormoreoftheBorrower’sCommonStock(orany othertakeoverscheme)(thedateoftheannouncementreferredtoinclause(i)or(ii)ishereinafterreferredtoasthe“Announcement Date”),thentheConversionPrice shall,effective uponthe AnnouncementDateandcontinuing throughthe Adjusted Conversion PriceTerminationDate(asdefinedbelow),beequaltothe lower of(x) theConversion Price whichwouldhave beenapplicableforaConversionoccurring onthe AnnouncementDateand(y) theConversionPrice thatwouldotherwise be ineffect.Fromandafter the AdjustedConversion Price TerminationDate,theConversion Price shallbe determinedassetforthinthis Section1.2(a).For purposeshereof,“Adjusted Conversion Price TerminationDate”shallmean,withrespecttoanyproposedtransactionortenderoffer(or takeoverscheme)forwhichapublicannouncementascontemplated bythisSection1.2(b)has beenmade,thedateuponwhichtheBorrower(inthecaseofclause(i)above)ortheperson,grouporentity(inthecaseofclause(ii)above)consummatesorpubliclyannouncesthe terminationorabandonmentof theproposedtransactionortender offer(ortakeoverscheme) whichcaused thisSection 1.2(b)to becomeoperative.

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1.3 AuthorizedShares.TheBorrowercovenantsthatduringtheperiodtheconversionrightexists,theBorrower willreservefromitsauthorizedandunissuedCommonStock a sufficient number of shares,freefrompreemptiverights,toprovidefor the issuance ofCommonStock upon the fullconversion ofthisNoteissued pursuant to thePurchaseAgreement. TheBorrower isrequiredatall timestohaveauthorizedandreservedfive times the numberof sharesthat isactually issuableuponfullconversion oftheNote(based on theConversionPrice of the Notes ineffectfrom time to time)(the“Reserved Amount”). TheReserved Amount shall beincreasedfrom timeto timeinaccordance with theBorrower’s obligations pursuant toSection 4(g) of thePurchaseAgreement. TheBorrowerrepresents thatuponissuance, such shares will bedulyand validly issued,fully paidand non-assessable.Inaddition, iftheBorrower shallissueany securities or makeanychange to itscapital structure which wouldchange the numberof sharesofCommon StockintowhichtheNotesshallbeconvertibleatthe thencurrentConversion Price,theBorrower shallat the same time make proper provisionsothatthereafter there shall be a sufficient numberofshares of Common Stockauthorizedandreserved,freefrom preemptiverights,forconversion of the outstanding Notes. TheBorrower(i)acknowledges that ithas irrevocably instructed itstransferagenttoissuecertificatesfortheCommonStock issuable uponconversion of this Note,and(ii)agrees that its issuance of this Note shallconstitutefullauthority to its officersandagents whoarecharged with the duty ofexecuting stockcertificates toexecuteand issue the necessarycertificatesfor shares ofCommonStock inaccordance with thetermsandconditions ofthis Note.

If,atanytimetheBorrowerdoesnotmaintaintheReservedAmountitwillbeconsideredan Event ofDefault underSection 3.2 oftheNote.

1.4Method ofConversion.

(a)MechanicsofConversion.SubjecttoSection1.1,thisNotemaybeconvertedbytheHolderinwholeorinpartatany timefromtimetotimeaftertheIssueDate,by(A)submittingto theBorrower a Notice ofConversion(byfacsimile,e-mail or otherreasonable meansofcommunication dispatchedontheConversionDate prior to6:00p.m.,New York,New Yorktime)and(B)subject toSection1.4(b),surrenderingthisNoteat the principal office of theBorrower.

(b)SurrenderofNoteUponConversion.Notwithstandinganything tothecontrary setforthherein,uponconversionofthisNoteinaccordancewiththetermshereof,the Holdershallnotberequiredtophysically surrenderthisNotetotheBorrowerunlesstheentire unpaidprincipalamountofthisNoteissoconverted. TheHolderandtheBorrowershall maintainrecords showingtheprincipalamount soconvertedand thedatesofsuchconversions or shallusesuchothermethod,reasonably satisfactorytotheHolderandtheBorrower,soasnottorequirephysical surrenderofthisNoteuponeachsuchconversion.In theevent ofanydisputeor discrepancy,suchrecordsof theBorrowershall,primafacie,becontrollinganddeterminative in theabsenceofmanifesterror. Notwithstandingtheforegoing, ifanyportionofthisNoteisconvertedasaforesaid,theHoldermay nottransferthisNoteunlesstheHolderfirstphysically surrendersthisNotetotheBorrower,whereupontheBorrowerwillforthwithissueanddeliveruponthe orderofthe Holdera newNote oflike tenor,registeredasthe Holder(uponpayment by theHolderofanyapplicabletransfertaxes)mayrequest, representinginthe aggregatetheremainingunpaidprincipalamountofthisNote. TheHolderandanyassignee,byacceptanceof this Note,acknowledgeandagreethat,byreason oftheprovisions ofthis paragraph,followingconversionofaportionofthisNote,theunpaidandunconvertedprincipalamountofthisNoterepresentedbythis Notemaybeless than the amount stated on the facehereof.

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(c)PaymentofTaxes.TheBorrowershallnotberequiredtopayanytax whichmay bepayableinrespectofany transferinvolvedintheissueanddelivery ofsharesofCommonStock or other securities or property onconversionof this Note in aname other than thatof theHolder(or instreetname),andtheBorrower shallnotberequiredtoissueordeliveranysuchsharesorothersecuritiesorproperty unlessanduntilthepersonorpersons(otherthan the Holder or thecustodianinwhose streetname suchsharesare tobe heldfor the Holder’s account)requestingtheissuancethereofshall havepaid to theBorrowertheamount ofany such taxorshall have established to thesatisfaction oftheBorrowerthat such taxhas been paid.

(d)DeliveryofCommonStockUponConversion.UponreceiptbytheBorrowerfromthe Holder ofafacsimile transmissionore-mail(orotherreasonablemeansofcommunication)ofaNoticeofConversionmeeting therequirementsforconversionasprovided inthis Section1.4,theBorrower shallissueanddeliver orcause tobe issuedanddeliveredtoor upontheorder ofthe HoldercertificatesfortheCommonStockissuable uponsuchconversion withinthree(3)businessdaysaftersuchreceipt(the“Deadline”)(and,solely inthecaseofconversionoftheentireunpaidprincipalamounthereof,surrender ofthisNote) inaccordance with theterms hereof andthePurchaseAgreement.

(e)ObligationofBorrowertoDeliverCommonStock.Uponreceiptby theBorrowerofa Noticeof Conversion,the Holdershallbe deemedtobethe holderofrecordof the CommonStockissuableuponsuchconversion,theoutstandingprincipalamountandtheamountofaccruedandunpaidinterestonthisNote shallbereducedtoreflectsuchconversion,and,unlesstheBorrowerdefaultsonitsobligationsunder thisArticleI,allrightswithrespectto theportionofthisNote being soconvertedshallforthwithterminateexcepttherighttoreceive theCommon Stockor othersecurities,cashorotherassets,ashereinprovided,onsuchconversion. If theHolder shallhavegivenaNotice ofConversion asprovidedherein,theBorrower’sobligationtoissueanddeliver thecertificatesforCommon Stockshallbeabsoluteandunconditional,irrespectiveoftheabsenceofanyactionby theHolder toenforcethesame,any waiver orconsent withrespect toanyprovision thereof, therecovery ofany judgmentagainstanypersonoranyactiontoenforcethesame,anyfailureor delayintheenforcementofany otherobligationof theBorrowertotheholderofrecord,oranysetoff,counterclaim,recoupment,limitationortermination,orany breachorallegedbreachby theHolderofany obligation to theBorrower,and irrespective ofany othercircumstancewhich might otherwise limit such obligation of theBorrowerto the Holderinconnection withsuchconversion. TheConversionDatespecifiedintheNoticeofConversionshallbetheConversionDatesolongas the Notice ofConversion isreceivedby theBorrower before 6:00 p.m., New York,New York time, on such date.

(f)DeliveryofCommonStockbyElectronicTransfer.Inlieuof delivering physicalcertificatesrepresenting theCommonStockissuableuponconversion, providedtheBorrower isparticipatingintheDepositoryTrustCompany(“DTC”)Fast AutomatedSecurities Transfer(“FAST”) program, uponrequest of the Holderand itscompliancewiththe provisionscontainedin Section1.1andinthisSection1.4,theBorrower shall use itsbestefforts tocause its transferagent toelectronically transmit theCommonStock issuableuponconversiontotheHolderbycreditingtheaccountofHolder’sPrimeBrokerwith DTCthrough its DepositWithdrawal AgentCommission(“DWAC”)system.

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(g)FailuretoDeliverCommonStockPriortoDeadline.Withoutinany way limitingtheHolder’srighttopursueotherremedies,includingactualdamagesand/orequitablerelief,thepartiesagreethatifdelivery ofthe CommonStockissuable uponconversion ofthisNoteisnotdelivered by theDeadline(otherthanafailureduetothecircumstancesdescribedinSection1.3above,which failureshallbegovernedby suchSection)theBorrower shallpay totheHolder$2,000perday incash,foreachday beyondtheDeadlinethattheBorrowerfailstodeliversuchCommonStock.Suchcashamount shall bepaidtoHolderby thefifthdayofthemonthfollowing themonthinwhichithasaccruedor,attheoptionoftheHolder(bywrittennoticetotheBorrowerby thefirstdayofthemonthfollowingthemonthinwhichit has accrued),shallbeaddedtotheprincipalamountof thisNote,inwhicheventinterestshallaccrue thereoninaccordance withthe termsof thisNoteandsuchadditional principalamount shallbeconvertibleintoCommonStockinaccordancewiththetermsofthisNote.TheBorroweragrees that theright toconvert is avaluable right to theHolder.Thedamagesresultingfromafailure,attempttofrustrate,interference withsuchconversionrightare difficultif not impossible to qualify.Accordingly thepartiesacknowledgethat the liquidateddamages provisioncontained in thisSection 1.4(g)arejustified.

1.5ConcerningtheShares.ThesharesofCommonStockissuableuponconversionofthisNotemaynotbesold ortransferredunless(i)suchsharesaresoldpursuanttoaneffectiveregistrationstatementunder the Actor(ii) theBorrower oritstransferagentshall have beenfurnishedwithanopinionofcounsel(whichopinionshallbe inform,substanceand scopecustomaryforopinionsofcounselincomparabletransactions)totheeffectthatthesharestobesoldortransferredmay besoldortransferredpursuanttoanexemptionfromsuchregistrationor(iii)suchsharesare soldor transferredpursuant toRule144under theAct(or a successorrule)(“Rule144”) or(iv) suchsharesare transferredtoan“affiliate”(asdefinedinRule 144) of theBorrower whoagreestosell orotherwise transfer the sharesonly inaccordance withthisSection1.5and whoisanAccreditedInvestor(asdefinedinthePurchase Agreement). ExceptasotherwiseprovidedinthePurchase Agreement(andsubjecttotheremovalprovisions setforthbelow),until suchtimeasthesharesofCommon Stockissuable uponconversionofthis Notehave beenregisteredunderthe Actorotherwisemay be soldpursuanttoRule144withoutanyrestrictionastothenumberofsecuritiesasofaparticulardatethatcanthenbeimmediately sold,eachcertificateforsharesofCommon Stockissuable uponconversionof thisNote thathas not been soincluded inaneffectiveregistrationstatement or that has not beensold pursuant toaneffectiveregistrationstatementoranexemptionthatpermitsremovalof thelegend, shallbear alegend substantially in the followingform,asappropriate:

“NEITHERTHE ISSUANCEAND SALEOFTHE SECURITIESREPRESENTED BYTHISCERTIFICATENORTHE SECURITIESINTO WHICHTHESE SECURITIESAREEXERCISABLEHAVEBEEN REGISTEREDUNDERTHE SECURITIESACTOF1933,ASAMENDED,ORAPPLICABLESTATESECURITIESLAWS.THESECURITIESMAYNOTBEOFFEREDFORSALE, SOLD,TRANSFERREDORASSIGNED(I)INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHE SECURITIESUNDER THESECURITIESACTOF1933,ASAMENDED,OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSEL SHALLBE SELECTEDBY THEHOLDER),IN AGENERALLYACCEPTABLE FORM,THAT REGISTRATION ISNOTREQUIREDUNDER SAIDACTOR(II)UNLESS SOLDPURSUANTTORULE144ORRULE144AUNDERSAIDACT.NOTWITHSTANDINGTHE FOREGOING,THE SECURITIESMAYBEPLEDGEDINCONNECTIONWITHABONAFIDE MARGINACCOUNTOROTHERLOANORFINANCINGARRANGEMENTSECUREDBYTHE SECURITIES.”

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The legend setforthabove shall beremovedandtheBorrower shallissue tothe Holderanewcertificate thereforefree ofanytransferlegendif(i) theBorrower oritstransferagentshallhavereceivedanopinionofcounsel, inform, substanceandscopecustomaryfor opinionsofcounselincomparable transactions, totheeffect thatapublicsale ortransferof suchCommonStock may bemadewithoutregistration undertheAct,whichopinion shall be acceptedby theCompany sothatthesale ortransfer iseffected or(ii)inthecase oftheCommonStock issuable uponconversion ofthisNote, suchsecurity isregisteredforsalebythe Holderunderaneffectiveregistration statementfiledundertheActorotherwisemaybesoldpursuant toRule 144withoutanyrestrictionastothenumberofsecuritiesasofaparticular datethatcanthenbe immediately sold.Intheevent that theCompany does notaccept the opinion ofcounsel providedby theBuyer withrespect tothetransfer ofSecurities pursuant toanexemptionfromregistration, suchasRule144orRegulationS,atthe Deadline, itwillbeconsideredanEventof Default pursuant toSection 3.2 oftheNote.

1.6EffectofCertain Events.

(a)EffectofMerger,Consolidation,Etc.AttheoptionoftheHolder,the sale,conveyanceordispositionofallorsubstantiallyalloftheassetsoftheBorrower,theeffectuation by theBorrowerof atransactionorseriesofrelatedtransactions inwhichmorethan

50%ofthevoting poweroftheBorrowerisdisposedof,ortheconsolidation,mergerorother businesscombinationoftheBorrowerwithorintoanyotherPerson(asdefinedbelow)orPersonswhentheBorrower isnotthe survivorshalleither:(i) bedeemedtobeanEventof Default(asdefinedinArticleIII) pursuanttowhichtheBorrower shallberequiredtopay tothe Holder upontheconsummationofandasaconditiontosuchtransaction anamountequaltothe Default Amount(as defined in ArticleIII) or(ii) be treated pursuant toSection 1.6(b) hereof.“Person”shall meanany individual,corporation,limitedliabilitycompany,partnership,association, trust orotherentity ororganization.

(b)AdjustmentDuetoMerger,Consolidation,Etc.If,atanytimewhenthisNoteisissuedandoutstandingandpriortoconversionofalloftheNotes,thereshallbeany merger,consolidation,exchange of shares,recapitalization,reorganization,or other similarevent,asaresultof whichsharesofCommon Stockof theBorrower shallbechangedintothe same ora differentnumber ofsharesofanotherclassorclassesof stockor securitiesof theBorroweroranotherentity,orincaseofanysale orconveyance ofallorsubstantiallyalloftheassetsof theBorrowerother thaninconnectionwitha planofcomplete liquidationof theBorrower,thenthe Holder of thisNote shallthereafter have therighttoreceive uponconversion of thisNote,uponthebasisanduponthetermsandconditionsspecifiedhereinandinlieuof the sharesofCommonStock immediately theretofore issuable uponconversion, such stock, securitiesorassetswhichthe Holderwouldhavebeenentitledtoreceiveinsuchtransactionhad this Note beenconverted infull immediately prior to such transaction(withoutregard toany limitationsonconversionsetforthherein),andinany suchcaseappropriateprovisionsshallbe made withrespecttotherightsandinterestsofthe Holderof thisNote totheendthatthe provisions hereof(including, without limitation, provisionsforadjustment of theConversionPriceandof the number of sharesissuable uponconversionof theNote) shallthereafter beapplicable,as nearlyas maybe practicable inrelation toany securities orassets thereafter deliverableupontheconversionhereof.

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TheBorrower shallnotaffectany transaction describedinthisSection 1.6(b)unless(a)itfirstgives,totheextent practicable, thirty(30) daysprior written notice(but inanyeventatleastfifteen(15)dayspriorwrittennotice)oftherecorddate ofthe special meetingofshareholders toapprove, orifthere isnosuchrecord date, theconsummationof,suchmerger,consolidation,exchangeofshares,recapitalization,reorganization orothersimilareventorsaleofassets(duringwhich timetheHolder shallbeentitled toconvert thisNote)and(b) the resulting successor oracquiringentity(if nottheBorrower)assumesby written instrument theobligationsofthisSection 1.6(b). Theabove provisions shall similarlyapply to successiveconsolidations, mergers, sales, transfers or shareexchanges.

(c)AdjustmentDuetoDistribution.IftheBorrowershalldeclareormakeanydistributionofitsassets(orrightstoacquireitsassets)toholdersofCommonStockasa dividend,stockrepurchase,bywayofreturnofcapital or otherwise(includingany dividendor distribution to theBorrower’s shareholders incash or shares(orrights toacquire shares) ofcapital stock of asubsidiary(i.e., aspin-off))(a“Distribution”), then theHolder ofthis Note shallbeentitled,uponanyconversionofthisNoteafterthedateofrecordfordetermining shareholdersentitled tosuch Distribution, toreceivethe amountofsuchassets which wouldhave beenpayabletotheHolderwithrespecttothe sharesofCommonStockissuableuponsuchconversionhadsuchHolder beenthe holder of suchsharesofCommon Stockontherecorddateforthedetermination ofshareholdersentitled to such Distribution.

(d)AdjustmentDuetoDilutiveIssuance.If,atanytimewhenanyNotes areissuedandoutstanding,theBorrowerissuesorsells,orinaccordancewiththisSection1.6(d) hereofisdeemedtohaveissuedorsold,anysharesofCommonStockfornoconsiderationorfor aconsiderationper share(before deductionofreasonableexpensesorcommissionsor underwriting discounts orallowancesinconnectiontherewith)lessthanthe ConversionPriceineffectonthedateofsuchissuance(ordeemedissuance)ofsuchsharesofCommonStock(a“DilutiveIssuance”), thenimmediately upon theDilutiveIssuance, theConversionPricewillbereduced totheamountoftheconsiderationpersharereceivedby theBorrowerinsuchDilutiveIssuance.

TheBorrower shallbedeemedtohave issuedorsoldsharesofCommonStockiftheBorrowerinany mannerissuesorgrantsanywarrants,rightsoroptions(not includingemployeestockoptionplans),whetherornotimmediatelyexercisable,tosubscribefor or topurchaseCommon Stockor othersecuritiesconvertible intoorexchangeableforCommonStock(“ConvertibleSecurities”)(suchwarrants,rightsandoptionstopurchaseCommonStock orConvertibleSecuritiesare hereinafterreferred toas“Options”)andthe price per sharefor whichCommonStockis issuableupontheexerciseofsuchOptionsislessthanthe ConversionPricethenineffect,thentheConversionPriceshallbeequaltosuch pricepershare.For purposes of the preceding sentence, the“priceper sharefor whichCommonStock is issuable upon theexerciseof such Options” is determinedby dividing(i) thetotalamount, ifany,receivedor receivable by theBorrowerasconsiderationfortheissuanceorgrantingofallsuchOptions,plusthe minimumaggregateamountofadditionalconsideration, ifany,payable totheBorrowerupontheexercise ofallsuchOptions,plus,inthecaseof ConvertibleSecurities issuable upontheexercise of suchOptions,the minimumaggregateamountofadditionalconsiderationpayableupontheconversionorexchange thereofatthetime such ConvertibleSecuritiesfirstbecome convertibleorexchangeable, by(ii)themaximumtotalnumberofsharesofCommonStock issuable upon theexercise ofall such Options(assumingfullconversion of ConvertibleSecurities,ifapplicable).NofurtheradjustmenttotheConversionPricewillbe madeupon theactual issuanceofsuchCommonStock upon the exerciseofsuch Options orupon the conversion orexchangeofConvertibleSecurities issuableuponexerciseofsuch Options.

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Additionally,theBorrowershallbedeemedtohaveissuedorsoldshares ofCommonStockiftheBorrowerinany mannerissuesorsellsanyConvertibleSecurities, whether ornotimmediatelyconvertible(otherthanwherethesameareissuableupontheexercise ofOptions),andthe priceper shareforwhich Common Stockisissuable uponsuchconversionorexchangeislessthantheConversionPrice thenineffect,thentheConversionPrice shall beequal tosuch priceper share.For the purposes of thepreceding sentence, the“pricepershareforwhich Common Stockisissuable uponsuchconversionorexchange” is determinedbydividing(i)thetotalamount,ifany,receivedorreceivableby theBorrowerasconsiderationfor the issuance or sale ofallsuch ConvertibleSecurities,plusthe minimumaggregateamountofadditionalconsideration,ifany,payable totheBorrower upontheconversion orexchangethereofat the time suchConvertibleSecuritiesfirst becomeconvertible orexchangeable,by(ii) the maximum total number of shares ofCommonStock issuable upon theconversionorexchangeofallsuch ConvertibleSecurities. NofurtheradjustmenttotheConversion Price willbe made upontheactualissuance ofsuch Common Stockuponconversion or exchangeofsuchConvertibleSecurities.

Itshallonly beconsideredaDilutiveIssuanceifthereissuancesmadeinconjunction with aliketransaction(i.e.convertibledebenture)

(e)PurchaseRights.If,atanytimewhenanyNotesareissuedand outstanding,theBorrowerissuesanyconvertiblesecuritiesorrightstopurchasestock,warrants, securitiesorotherproperty(the“PurchaseRights”) proratatotherecord holdersofanyclassofCommonStock,thenthe Holder of thisNote willbeentitledtoacquire,uponthe termsapplicable tosuch PurchaseRights,theaggregatePurchaseRightswhichsuchHoldercouldhaveacquiredif suchHolderhadheldthe numberof sharesofCommon Stockacquirable uponcompleteconversion of this Note(withoutregard toany limitations onconversioncontained herein)immediately beforethedateonwhicharecordistakenforthegrant,issuanceorsaleof such PurchaseRightsor,if nosuchrecordistaken,the dateasof whichtherecordholdersofCommonStockareto bedeterminedforthegrant,issueorsaleofsuchPurchaseRights.

(f)Notice of Adjustments.Uponthe occurrenceofeachadjustmentorreadjustmentofthe ConversionPriceasaresultoftheeventsdescribedinthisSection1.6, theBorrower,atitsexpense,shallpromptlycomputesuchadjustmentorreadjustmentandprepareandfurnish totheHolderacertificatesettingforthsuchadjustmentorreadjustmentandshowing indetailthefactsuponwhichsuchadjustmentorreadjustmentisbased.TheBorrowershall, uponthewrittenrequestatany timeoftheHolder,furnishtosuchHolderalikecertificate settingforth(i) suchadjustment orreadjustment,(ii) theConversionPriceat the time ineffectand(iii)thenumberofsharesof CommonStockandtheamount,ifany,ofothersecuritiesor property whichat thetimewould be received uponconversion oftheNote.

1.7TradingMarketLimitations.Unlesspermittedbytheapplicablerulesandregulationsoftheprincipalsecuritiesmarketon whichtheCommonStockisthenlistedor traded, in noevent shall theBorrower issue uponconversion ofor otherwise pursuant to this Noteandthe other Notesissuedpursuant tothePurchase Agreementmore thanthe maximum numberofshares ofCommonStockthat theBorrowercanissue pursuant toanyrule ofthe principalUnited StatessecuritiesmarketonwhichtheCommon Stockisthentraded(the“MaximumShareAmount”),whichshallbe9.99%ofthetotalsharesoutstanding onthe Closing Date(asdefinedinthePurchaseAgreement),subjecttoequitableadjustmentfromtime totimeforstocksplits,stockdividends,combinations,capitalreorganizationsand similareventsrelating totheCommonStockoccurringafterthedatehereof.OncetheMaximumShareAmounthas beenissued,iftheBorrower failstoeliminateany prohibitionsunderapplicablelaw ortherules orregulationsofanystockexchange,interdealerquotationsystemorotherself-regulatory organizationwithjurisdictionovertheBorroweroranyofitssecuritiesontheBorrower’sability toissuesharesofCommonStockinexcessof theMaximumShareAmount,inlieuofanyfurtherright toconvert this Note, this will beconsideredan Event of Default underSection 3.3 oftheNote.

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1.8StatusasShareholder.UponsubmissionofaNoticeofConversionbya Holder,(i)thesharescoveredthereby(otherthantheshares,ifany, whichcannotbeissued because their issuancewouldexceedsuchHolder’sallocatedportionof theReservedAmountor MaximumShareAmount)shallbedeemedconvertedintosharesofCommonStockand(ii) the Holder’srightsasaHolderofsuchconverted portionofthis Noteshallceaseandterminate,exceptingonly theright toreceivecertificatesforsuchsharesofCommonStockandtoanyremedies provided herein or otherwiseavailableat law or inequity to such Holder becauseof afailureby theBorrowertocomply with the terms of this Note. Notwithstanding theforegoing, if a Holder hasnotreceivedcertificatesforallsharesofCommon Stockprior tothe tenth(10th) businessdayafter theexpirationoftheDeadlinewithrespecttoaconversionofanyportionof this Noteforanyreason, then(unless the Holder otherwiseelects toretain its statusas a holderofCommonStock bysonotifying theBorrower)theHoldershallregaintherightsofaHolderof this Note withrespect to such unconverted portions of this Noteand theBorrower shall,as soonaspracticable,returnsuchunconvertedNotetothe Holderor,if the Notehasnotbeen surrendered,adjustitsrecordstoreflectthatsuchportionofthisNote hasnotbeenconverted. Inallcases, the Holder shallretainall of itsrightsandremedies(including, without limitation,(i) therighttoreceiveConversionDefault Paymentspursuantto Section1.3totheextentrequired therebyforsuchConversionDefaultandany subsequentConversionDefaultand(ii)therightto have theConversion Price withrespecttosubsequentconversionsdeterminedinaccordance withSection 1.3) fortheBorrower’sfailuretoconvertthis Note.

1.9Prepayment.NotwithstandinganythingtothecontrarycontainedinthisNote,atany timeduringtheperiodbeginningontheIssueDateandendingonthedatewhichisninety(90)daysfollowing theissuedate,theBorrowershallhavetheright,exercisableonnotlessthan three(3)TradingDayspriorwrittennoticetotheHolderoftheNotetoprepay theoutstanding Note(principalandaccruedinterest),infull,inaccordancewiththisSection1.9.Any noticeof prepaymenthereunder(an“Optional PrepaymentNotice”) shallbe deliveredtothe Holder of the Noteat itsregisteredaddressesand shall state:(1)that theBorrowerisexercising itsright to prepay theNote,and(2)thedateofprepayment whichshallbenotmore thanthree(3)Trading Daysfrom the dateof the OptionalPrepayment Notice. On the datefixedfor prepayment(the“OptionalPrepaymentDate”),theBorrowershallmake paymentofthe OptionalPrepayment Amount(asdefinedbelow)toorupontheorderoftheHolderasspecifiedby theHolderin writing totheBorrowerat least one(1)business daypriortothe OptionalPrepayment Date.If theBorrowerexercisesitsrighttoprepay theNote,theBorrowershallmakepaymenttothe Holder ofanamountin cash(the“OptionalPrepaymentAmount”)equalto135%,multipliedby the sum of:(w) the then outstanding principalamount of this Noteplus(x) accruedand unpaid interest on the unpaid principalamount of this Note to the OptionalPrepayment Dateplus(y) DefaultInterest,ifany,ontheamountsreferredtoinclauses(w)and(x)plus(z)anyamounts owedtothe Holder pursuantto Sections1.3and1.4(g) hereof.If theBorrowerdeliversanOptionalPrepaymentNoticeandfailstopay theOptionalPrepaymentAmountduetotheHolder oftheNotewithintwo(2)business daysfollowing theOptionalPrepaymentDate,theBorrower shallforever forfeit itsright to prepaytheNotepursuant to thisSection 1.9.

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NotwithstandinganythingtothecontrarycontainedinthisNote,atanytime during theperiodbeginningonthedatewhichisninety-one(91)daysfollowing theissuedateandending on thedate which is one hundredtwenty(120) daysfollowing the issuedate, theBorrowershallhave theright,exercisableonnotlessthanthree(3)TradingDayspriorwritten notice tothe Holder ofthe Note toprepay the outstanding Note(principalandaccruedinterest), infull, inaccordance with thisSection 1.9. Any OptionalPrepayment Notice shall be deliveredtothe Holderofthe Noteatitsregisteredaddressesandshallstate:(1)thattheBorrowerisexercisingitsrighttoprepay the Note,and(2) thedateofprepaymentwhichshallbenotmore thanthree(3)TradingDaysfromthedateofthe OptionalPrepaymentNotice. OntheOptionalPrepaymentDate,theBorrower shallmake paymentof theSecondOptional Prepayment Amount(asdefinedbelow)toorupontheorderoftheHolderasspecifiedby theHolderin writingto theBorrowerat least one(1) business dayprior to theOptionalPrepayment Date. If theBorrowerexercisesitsrighttoprepay theNote,theBorrowershallmakepaymenttothe Holder ofanamountincash(the“SecondOptional PrepaymentAmount”)equalto145%,multiplied bythesumof:(w)thethenoutstandingprincipalamountofthisNoteplus(x) accrued andunpaidinterestontheunpaidprincipalamountofthisNoteto theOptionalPrepaymentDateplus(y) Default Interest,ifany,ontheamountsreferredtoinclauses(w)and(x)plus(z)anyamountsowedtotheHolderpursuant toSections 1.3and1.4(g)hereof. IftheBorrowerdeliversanOptionalPrepayment Noticeandfailstopay theSecondOptionalPrepaymentAmountdueto theHolderoftheNotewithin two(2)businessdaysfollowing theOptionalPrepaymentDate,theBorrowershallforever forfeit itsright to prepaytheNotepursuant to thisSection 1.9.

Notwithstandinganything tothecontrarycontained inthisNote,atany time duringtheperiodbeginningonthedatewhich isonehundred twenty-one(121)daysfollowing theissuedateandending onthedate whichisonehundredeighty(180)daysfollowing theissue date, theBorrower shallhave theright,exercisable onnotless thanthree(3)TradingDays prior written noticetotheHolder oftheNotetoprepay theoutstanding Note(principalandaccrued interest),infull,inaccordance withthisSection 1.9. Any OptionalPrepayment Noticeshall be deliveredto theHolder ofthe Noteatitsregisteredaddressesandshall state:(1) thattheBorrower isexercising itsright to prepay theNote,and(2)thedateofprepayment whichshall be notmorethanthree(3)Trading Daysfromthedate oftheOptionalPrepayment Notice. Onthe OptionalPrepayment Date,theBorrower shallmake paymentof the ThirdOptional Prepayment Amount(asdefinedbelow)toorupontheorder oftheHolderasspecifiedby theHolderin writing to theBorrowerat least one(1) business dayprior to the OptionalPrepayment Date. If theBorrowerexercises itsright toprepay theNote, theBorrower shallmakepayment tothe Holder ofanamountincash(the“Third Optional Prepayment Amount”)equal to150%,multipliedbythe sumof:(w)thethen outstanding principalamountofthisNoteplus(x) accrued andunpaidinterestontheunpaidprincipalamountofthisNoteto theOptionalPrepayment Dateplus(y)Default Interest, ifany, ontheamountsreferred toinclauses(w)and(x)plus(z)anyamountsowed totheHolder pursuanttoSections 1.3and1.4(g)hereof. IftheBorrower deliversan OptionalPrepayment Noticeandfails to paythe Third OptionalPrepayment Amount due to theHolder oftheNotewithin two(2) businessdaysfollowing theOptionalPrepayment Date,the Borrower shallforeverforfeit itsright to prepay theNotepursuant to thisSection 1.9.

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Aftertheexpirationofonehundredeighty(180)followingthedateoftheNote, theBorrowershall havenoright ofprepayment.

ARTICLEII.CERTAINCOVENANTS

2.1DistributionsonCapitalStock.Solongas theBorrowershallhaveany obligationunderthisNote,theBorrowershallnotwithoutthe Holder’swrittenconsent(a)pay, declareorsetapartforsuchpayment,anydividendorotherdistribution(whetherincash, propertyorothersecurities)on sharesofcapital stock otherthan dividendson sharesofCommonStocksolely intheform ofadditionalsharesofCommonStockor(b)directly orindirectlyor throughany subsidiarymakeany otherpaymentordistributioninrespectofitscapitalstockexceptfordistributions pursuant toanyshareholders’ rights plan whichisapprovedbyamajority oftheBorrower’s disinterested directors.

2.2RestrictiononStockRepurchases.SolongastheBorrowershallhaveany obligationunder thisNote,theBorrower shallnotwithoutthe Holder’swrittenconsentredeem,repurchaseorotherwiseacquire(whetherforcashorinexchangeforpropertyorothersecurities orotherwise)inanyonetransaction orseries of related transactionsanysharesofcapital stockof theBorroweror anywarrants,rights oroptions topurchaseor acquire anysuch shares.

2.3Borrowings.SolongastheBorrowershallhaveanyobligationunderthis Note,theBorrower shallnot,withoutthe Holder’swrittenconsent,create,incur,assumeguarantee,endorse,contingentlyagreetopurchaseorotherwisebecomeliableuponthe obligationofanyperson,firm,partnership,jointventureorcorporation,exceptby theendorsementofnegotiableinstrumentsfordeposit orcollection,orsuffertoexistany liabilityfor borrowedmoney,except(a) borrowings inexistence orcommittedonthe date hereofandof whichtheBorrowerhasinformedHolderinwritingpriortothedatehereof,(b)indebtednessto tradecreditorsorfinancialinstitutionsincurredintheordinarycourseofbusinessor(c) borrowings, theproceedsofwhich shall beused torepay this Note.

2.4SaleofAssets.SolongastheBorrowershallhaveanyobligationunderthis Note,theBorrowershallnot,withouttheHolder’swrittenconsent,sell,leaseorotherwise disposeofanysignificantportionofitsassets outsidetheordinarycourse of business. Anyconsent to the disposition ofanyassets maybeconditioned on a specifieduse of the proceeds of disposition.

2.5AdvancesandLoans.SolongastheBorrowershallhaveanyobligation underthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,lendmoney,givecreditormakeadvancestoany person,firm,jointventureorcorporation, including,without limitation, officers, directors,employees, subsidiariesandaffiliates of theBorrower,except loans,creditsoradvances(a) inexistence orcommittedonthe date hereofandwhichtheBorrowerhasinformedHolder inwritingpriortothe date hereof,(b)made inthe ordinarycourseofbusinessor (c)not inexcess of$100,000.

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ARTICLEIII.EVENTSOFDEFAULT

Ifanyofthefollowingevents ofdefault(each,an“Event ofDefault”)shall occur:

3.1FailuretoPayPrincipalorInterest.TheBorrowerfailstopaytheprincipalhereofor interestthereonwhendue onthisNote,whetheratmaturity,uponaccelerationor otherwise.

3.2ConversionandtheShares.TheBorrowerfailstoissuesharesofCommonStocktotheHolder(orannouncesorthreatensinwritingthatitwillnothonoritsobligationto do so) upon exercisebythe Holder of theconversionrights of the Holderinaccordance with the terms of this Note,failsto transfer orcause its transferagent to transfer(issue)(electronicallyor incertificatedform)anycertificateforsharesof CommonStockissuedtotheHolderuponconversion ofor otherwise pursuant to this Noteasand whenrequired by this Note, theBorrower directsitstransferagentnottotransferor delays,impairs,and/or hindersitstransferagent in transferring(orissuing)(electronically or incertificatedform)anycertificatefor sharesof CommonStock tobeissuedtotheHolderuponconversionoforotherwisepursuanttothis Noteasand whenrequiredby this Note, orfails toremove(or directs its transferagent not toremove or impairs, delays,and/or hinders its transferagentfromremoving)anyrestrictive legend(ortowithdrawanystop transferinstructionsinrespectthereof)onanycertificateforany sharesofCommon Stockissuedtothe Holder uponconversionof or otherwise pursuanttothis Noteasandwhen requiredbythisNote(ormakesanywrittenannouncement,statementorthreat that it does not intend to honor the obligations described in this paragraph)andany suchfailure shallcontinueuncured(orany writtenannouncement,statementorthreatnottohonorits obligations shall not berescindedin writing)for three(3)business daysaftertheHoldershall have delivereda NoticeofConversion. It isanobligationoftheBorrowertoremaincurrent in itsobligationstoitstransferagent.Itshallbeaneventof defaultof thisNote,if aconversionof this Note is delayed, hindered orfrustrated due to a balance owed by theBorrower to its transferagent. Ifat the option of the Holder, the Holderadvancesanyfunds to theBorrower’s transferagentinorderto process aconversion,suchadvancedfunds shallbe paidby theBorrowerto the Holderwithinfortyeight(48)hours ofademandfrom theHolder.

3.3BreachofCovenants.TheBorrowerbreachesanymaterialcovenantorothermaterialtermorconditioncontainedinthisNoteandanycollateraldocumentsincluding butnot limitedtothePurchase Agreementandsuchbreachcontinuesfor a periodof ten(10) daysafter written noticethereofto theBorrower from theHolder.

3.4BreachofRepresentationsandWarranties.Any representationorwarrantyof theBorrowermadehereinorinanyagreement,statementorcertificategiveninwriting pursuant heretoorinconnectionherewith(including, withoutlimitation,thePurchaseAgreement),shall befalseormisleadinginany materialrespect when madeand thebreach ofwhich has(orwith thepassageoftimewill have)amaterialadverseeffect on the rights oftheHolderwithrespect to this NoteorthePurchase Agreement.

3.5ReceiverorTrustee.TheBorroweroranysubsidiaryoftheBorrowershall makeanassignmentforthebenefitofcreditors,orapplyfororconsenttotheappointmentofareceiverortrusteeforitorforasubstantialpartofitspropertyorbusiness,orsuchareceiveror trusteeshall otherwisebeappointed.

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3.6Judgments.Anymoneyjudgment,writorsimilarprocessshallbeenteredorfiledagainsttheBorroweroranysubsidiaryoftheBorroweroranyofitspropertyorotherassetsfor morethan$50,000,andshallremainunvacated,unbondedor unstayedfor aperiodof twenty(20)daysunlessotherwiseconsentedto by theHolder,whichconsentwillnotbeunreasonably withheld.

3.7Bankruptcy.Bankruptcy,insolvency,reorganizationorliquidation proceedingsorotherproceedings,voluntaryorinvoluntary,forreliefunderanybankruptcylaw orany lawfor therelief of debtors shall be institutedby oragainst theBorrower orany subsidiaryoftheBorrower.

3.8DelistingofCommonStock. TheBorrowershallfail tomaintain thelistingof the CommonStockonatleastoneoftheOTCBB oranequivalentreplacementexchange,the NasdaqNationalMarket,the Nasdaq SmallCapMarket,theNew York StockExchange, or the AmericanStock Exchange.

3.9FailuretoComplywiththeExchangeAct.TheBorrowershallfailtocomply withthereportingrequirementsof the Exchange Act;and/or theBorrower shallcease tobe subject to the reportingrequirements oftheExchangeAct.

3.10Liquidation.Anydissolution,liquidation,orwindingupofBorroweroranysubstantial portion ofits business.

3.11Cessation ofOperations.AnycessationofoperationsbyBorrowerorBorroweradmitsitisotherwisegenerally unabletopay itsdebtsassuchdebtsbecomedue,provided, however, thatanydisclosureoftheBorrower’sabilitytocontinue as a “goingconcern” shall not be anadmission that theBorrowercannotpayits debtsas theybecomedue.

3.12MaintenanceofAssets.ThefailurebyBorrowertomaintainany material intellectualpropertyrights, personal,realpropertyorotherassetswhicharenecessarytoconduct its business(whethernow orin thefuture).

3.13Financial StatementRestatement.Therestatementofanyfinancialstatementsfiled by theBorrowerwiththeSECforanydateorperiodfromtwoyearspriortotheIssueDateofthisNoteanduntilthisNoteis nolongeroutstanding, iftheresultofsuchrestatementwould, bycomparisontotheunrestatedfinancialstatement,haveconstituteda materialadverseeffectontherightsoftheHolderwithrespecttothisNote orthePurchase Agreement.

3.14ReverseSplits. TheBorrowereffectuatesareversesplitofits

CommonStock without twenty(20)dayspriorwritten noticeto theHolder.

3.15Replacement ofTransferAgent.In theevent thattheBorrowerproposes toreplace itstransferagent,theBorrowerfailstoprovide,prior totheeffectivedate ofsuchreplacement,afullyexecutedIrrevocableTransferAgentInstructions inaformasinitially deliveredpursuanttothePurchaseAgreement(including butnotlimitedtotheprovisionto irrevocablyreservesharesofCommonStockintheReservedAmount)signed by thesuccessor transferagent toBorrower and theBorrower.

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3.16Cross-Default.Notwithstandinganythingtothecontrarycontainedinthis Noteortheotherrelatedorcompaniondocuments,abreachordefaultby theBorrowerofanycovenantorothertermorconditioncontainedinanyoftheOtherAgreements,afterthepassage of allapplicablenoticeandcureorgraceperiods,shall,at theoption oftheHolder, beconsidered a defaultunder thisNoteandtheOtherAgreements,inwhicheventtheHolder shallbeentitled(butinnoeventrequired)toapplyallrightsandremediesoftheHolderunderthe termsofthis NoteandtheOtherAgreementsbyreason ofadefaultundersaidOtherAgreementor hereunder.“OtherAgreements”means,collectively,allagreementsand instrumentsbetween,amongorby:(1)theBorrower,and, orforthebenefitof,(2)the Holderandanyaffiliate ofthe Holder,including,withoutlimitation,promissory notes;provided,however,theterm“Other Agreements”shallnotincludetherelated orcompaniondocumentstothisNote. Eachof the loantransactionswillbecross-defaultedwith eachother loantransactionandwithallotherexistingandfuturedebtofBorrowerto theHolder.

3.17FailuretoFile Form 8-A12G.TheBorrowerfailstofileaForm8-A12GwiththeSECwithinonehundredtwenty(120)daysfromthedateoftheNote.Upontheoccurrenceand during thecontinuationofanEventofDefaultspecifiedinSection 3.17theNoteshallbecome immediately dueandpayableandtheBorrowershallpay totheHolder,infullsatisfactionofits obligationshereunder, anamountequalto175%timesthesumof(w) the thenoutstanding principalamountofthisNoteplus(x)accruedandunpaidinterestontheunpaidprincipalamountofthisNotetothedateofpayment(the“MandatoryPrepaymentDate”)plus(y)DefaultInterest, ifany,on the amountsreferredto inclauses(w)and/or(x)plus(z) anyamounts owed to theHolderpursuanttoSections1.3and1.4(g)hereof(thethenoutstandingprincipalamountof this Note to the date of paymentplus theamountsreferred to inclauses(x),(y)and(z) shallcollectivelybeknownas the “DefaultSum”).

If theBorrowerfailstopay theDefaultAmountwithinfive(5)business daysofwritten notice thatsuchamount isdueand payable, thentheHoldershallhave therightatany time,solongas theBorrowerremains indefault(andsolongand totheextent thatthereare sufficientauthorized shares),torequire theBorrower, uponwritten notice,toimmediately issue,inlieuof theDefault Amount,the numberofshares of Common Stock oftheBorrowerequaltothe Default Amount dividedbytheConversionPrice then ineffect.

Upontheoccurrenceandduringthecontinuationofany EventofDefault specifiedinSection3.1(solelywithrespecttofailuretopay theprincipalhereoforinterest thereonwhendueattheMaturityDate),theNoteshallbecomeimmediately dueand payableand theBorrowershallpaytotheHolder,infullsatisfactionofitsobligationshereunder,anamountequaltotheDefaultSum(asdefinedherein).UPONTHEOCCURRENCEANDDURING THE CONTINUATIONOFANYEVENTOFDEFAULTSPECIFIEDIN SECTION3.2,THE NOTESHALLBECOMEIMMEDIATELYDUE ANDPAYABLEAND THEBORROWERSHALLPAYTOTHEHOLDER,INFULLSATISFACTIONOFITSOBLIGATIONS HEREUNDER,ANAMOUNTEQUAL TO:(Y) THEDEFAULTSUM(ASDEFINED HEREIN);MULTIPLIEDBY (Z)TWO(2).Upontheoccurrenceandduring thecontinuation ofanyEvent ofDefault specified inSections 3.1(solelywithrespect tofailure to paythe principal

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hereofor interestthereonwhendue onthisNote uponaTradingMarketPrepaymentEvent pursuanttoSection1.7oruponacceleration),3.3,3.4,3.6,3.8,3.9,3.11,3.12,3.13,3.14,and/or

3.15exercisablethroughthedeliveryofwrittennoticetotheBorrowerbysuchHolders(the“DefaultNotice”),anduponthe occurrence ofanEventofDefaultspecifiedtheremaining sectionsofArticlesIII (otherthan failureto pay theprincipalhereoforinterestthereonatthe MaturityDatespecifiedinSection3,1hereof),theNoteshallbecomeimmediately dueand payableandtheBorrowershallpay totheHolder,infullsatisfactionofits obligationshereunder,anamountequaltothegreaterof(i)150%timesthesumof(w)thethenoutstanding principalamountofthisNoteplus(x)accruedandunpaidinterestonthe unpaidprincipalamountofthis Notetothedateof payment(the“MandatoryPrepaymentDate”)plus(y) DefaultInterest, ifany, ontheamountsreferredtoinclauses(w)and/or(x)plus(z)anyamountsowedtotheHolder pursuanttoSections1.3and1.4(g)hereof(thethenoutstandingprincipalamountofthisNoteto thedateofpaymentplustheamountsreferred toinclauses(x),(y)and(z)shallcollectively be knownasthe“DefaultSum”)or(ii)the“parityvalue”oftheDefaultSumtobeprepaid,where parityvaluemeans(a)thehighestnumberofsharesofCommonStockissuable uponconversion oforotherwisepursuanttosuchDefaultSuminaccordance withArticleI,treatingthe Trading Day immediately precedingtheMandatoryPrepaymentDateasthe“ConversionDate”for purposesof determiningthe lowestapplicableConversionPrice,unlessthe DefaultEventarisesasaresultofabreachinrespectofaspecificConversionDate inwhichcase such Conversion DateshallbetheConversionDate),multipliedby(b)thehighestClosingPricefortheCommonStock duringthe periodbeginningon the dateoffirst occurrenceof theEvent ofDefaultandendingonedaypriortotheMandatoryPrepaymentDate(the“DefaultAmount”)andallotheramounts payablehereundershall immediatelybecomedueand payable,all withoutdemand, presentmentornotice,allofwhichherebyareexpresslywaived,togetherwithallcosts, including,withoutlimitation,legalfeesandexpenses,ofcollection,andthe Holdershallbeentitled toexercise all other rightsandremediesavailable at law orinequity.

IftheBorrowerfailstopay theDefaultAmountwithinfive(5)businessdaysofwritten noticethatsuchamountisdueandpayable,thentheHoldershallhavetherightatany time,so longastheBorrowerremainsindefault(andsolongandtotheextentthattherearesufficientauthorizedshares),torequiretheBorrower,uponwrittennotice,toimmediately issue,inlieuof theDefaultAmount,thenumberofsharesofCommonStockoftheBorrowerequaltothe Default Amount divided bytheConversionPricethen ineffect.

ARTICLEIV.MISCELLANEOUS

4.1FailureorIndulgenceNotWaiver.Nofailureordelayonthepartofthe Holderintheexercise ofany power,rightor privilege hereundershalloperateas a waiver thereof, nor shallanysingle or partialexercise ofanysuch power,right or privilege preclude other orfurtherexercise thereof or ofanyotherright, power or privileges. Allrightsandremediesexistinghereunderarecumulativeto,and notexclusiveof,anyrights orremedies otherwise available.

4.2Notices.Allnotices,demands,requests,consents,approvals,andothercommunicationsrequired or permittedhereunder shallbe inwritingand, unlessotherwise specifiedherein, shallbe(i)personallyserved,(ii)depositedinthe mail,registeredorcertified,returnreceiptrequested, postageprepaid,(iii) deliveredbyreputableaircourier service withchargesprepaid,or(iv) transmittedby handdelivery, telegram, orfacsimile,addressedasset forthbelowortosuch otheraddress assuchparty shallhavespecifiedmostrecentlybywritten notice. Any noticeorother communicationrequired orpermitted tobegivenhereunder shallbe deemedeffective(a) upon hand deliveryor deliverybyfacsimile,withaccurate confirmationgeneratedby the transmitting facsimilemachine, attheaddress ornumberdesignatedbelow(if delivered ona businessday duringnormal business hours where suchnotice is to bereceived),or thefirstbusinessday followingsuch delivery (if deliveredother than on abusinessday during normal business hours where such notice is to be received) or (b) on the second business day followingthedateofmailing byexpresscourierservice,fullyprepaid,addressedtosuch address,or upon actualreceipt of suchmailing, whichever shall first occur. The addresses for such communications shall be:

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Ifto theBorrower, to:

IDS SOLARTECHNOLOGIES,INC.

533BirchStreet

LakeElsinore,CA 92530

Attn:BRUCER. KNOBLICH,ChiefExecutiveOfficerfacsimile:

With a copybyfaxonlyto(whichcopyshall notconstitutenotice):[enternameoflawfirm]---Attn:[attorneyname]

[enter address line1][enter city, state,zip]facsimile:[enter faxnumber]

Ifto theHolder:

ASHERENTERPRISES,INC.

1LindenPl.,Suite207

GreatNeck,NY. 11021

Attn:Curt Kramer,Presidentfacsimile: 516-498-9894

With a copybyfaxonlyto(whichcopyshall notconstitutenotice): NaidichWurmanBirnbaum &Maday,LLP

80CuttermillRoad,Suite410

GreatNeck,NY 11021

Attn:BernardS.Feldman, Esq.facsimile: 516-466-3555

4.3Amendments.ThisNoteandanyprovisionhereofmayonlybeamendedbyaninstrumentinwritingsignedby theBorrowerandtheHolder.Theterm“Note”andallreference thereto,asusedthroughoutthisinstrument,shallmeanthisinstrument(andthe other NotesissuedpursuanttothePurchaseAgreement)asoriginallyexecuted,oriflateramendedor supplemented, thenas soamended orsupplemented.

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4.4Assignability. ThisNoteshallbebindingupontheBorrowerandits successorsandassigns,andshallinure tobe the benefitof the Holderanditssuccessorsandassigns.EachtransfereeofthisNote mustbean“accreditedinvestor”(as definedin Rule 501(a)ofthe1933Act).NotwithstandinganythinginthisNotetothecontrary,thisNote may be pledgedascollateral inconnection with abonafide marginaccount or other lendingarrangement.

4.5Cost ofCollection.Ifdefault is madein thepayment ofthis Note,the

Borrowershall paytheHolderhereof costs ofcollection, includingreasonable attorneys’fees.

4.6GoverningLaw.ThisNoteshallbegovernedbyandconstruedinaccordance withthelawsoftheStateofNewYorkwithoutregardtoprinciplesofconflictsoflaws.Anyactionbrought byeitherpartyagainstthe otherconcerningthe transactionscontemplatedby this Note shallbe broughtonly inthe statecourtsof NewYorkor inthefederalcourtslocatedinthe stateandcountyof Nassau. The parties tothis Note herebyirrevocably waiveany objectionto jurisdictionand venueofanyaction instituted hereunderand shall notassertanydefense basedonlackofjurisdictionor venueorbaseduponforumnonconveniens. TheBorrowerandHolder waive trialby jury. The prevailing party shall beentitled torecoverfrom the other party itsreasonableattorney'sfeesandcosts. In theevent thatanyprovision of this Note oranyotheragreementdeliveredinconnection herewithisinvalidor unenforceableunderanyapplicable statute orruleof law,thensuchprovisionshallbe deemedinoperative totheextentthatitmayconflict therewithandshall be deemed modified toconform with such statute orruleof law. Anysuchprovisionwhichmay prove invalidorunenforceable underanylaw shallnotaffectthe validity orenforceabilityofany otherprovision ofanyagreement. Each partyhereby irrevocablywaivespersonalserviceof processandconsentstoprocessbeingservedinany suit,actionorproceeding inconnectionwiththisAgreementorany otherTransactionDocumentby mailing acopy thereof viaregisteredorcertified mail or overnight delivery(withevidence of delivery) to such partyattheaddressineffectfornoticesto itunder thisAgreementandagrees thatsuchservice shallconstitutegoodandsufficientservice of processandnotice thereof. Nothingcontainedhereinshallbedeemedtolimitinanywayanyrighttoserveprocessinany othermannerpermittedbylaw.

4.7CertainAmounts.WheneverpursuanttothisNotetheBorrowerisrequiredto payanamountinexcessoftheoutstandingprincipalamount(ortheportionthereofrequiredto bepaidatthattime)plusaccruedandunpaidinterestplusDefaultInterest onsuch interest,theBorrowerandthe Holderagree thattheactualdamagestothe Holderfromthereceiptofcash paymentonthisNotemaybe difficulttodetermineandtheamounttobe sopaidby theBorrowerrepresentsstipulated damagesand not apenaltyand isintended tocompensate the Holder inpartfor loss ofthe opportunity toconvertthisNoteandtoearnareturnfromthe sale of shares ofCommonStockacquired uponconversion of this Noteat a price inexcess of the price paidfor suchsharespursuant tothisNote. TheBorrowerandtheHolder herebyagree that suchamount of stipulated damages is not plainly disproportionate to the possible loss to the Holderfrom thereceipt of acash payment without the opportunity toconvert this Note into shares ofCommonStock.

4.8PurchaseAgreement.ByitsacceptanceofthisNote,eachpartyagreestobe boundbytheapplicableterms ofthePurchaseAgreement.

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4.9NoticeofCorporateEvents.Exceptasotherwiseprovidedbelow,theHolder ofthisNoteshallhavenorightsasaHolderofCommonStockunlessandonly totheextentthat itconvertsthisNoteintoCommon Stock.TheBorrowershallprovidetheHolderwithprior notificationofanymeetingoftheBorrower’sshareholders(andcopiesofproxy materialsand otherinformationsenttoshareholders). Intheeventofanytakingby theBorrower ofarecord ofitsshareholdersforthepurposeofdetermining shareholderswhoareentitledtoreceive paymentofany dividendorotherdistribution,anyrighttosubscribefor,purchaseorotherwiseacquire(includingbywayofmerger,consolidation,reclassification or recapitalization) any share ofanyclassorany othersecuritiesorproperty,ortoreceiveany otherright,orforthepurposeof determiningshareholderswhoareentitledtovoteinconnectionwithanyproposedsale,leaseorconveyanceofallorsubstantiallyalloftheassetsoftheBorroweroranyproposedliquidation, dissolution or winding up of theBorrower, theBorrower shall mail anotice to the Holder,at leasttwenty(20)dayspriortotherecorddatespecifiedtherein(orthirty(30)dayspriortotheconsummationofthetransactionorevent,whichever isearlier),ofthedateonwhichany such record istobe takenfor the purposeof suchdividend,distribution,right or otherevent,anda briefstatementregardingtheamountandcharacterofsuchdividend,distribution,rightorothereventtotheextentknownatsuchtime.TheBorrower shallmakea publicannouncementofanyeventrequiringnotificationtotheHolderhereundersubstantially simultaneously withthe notification to theHolderinaccordancewith theterms ofthisSection 4.9.

4.10Remedies.TheBorroweracknowledgesthatabreachbyitofits obligationshereunderwillcauseirreparableharmtotheHolder,by vitiatingtheintentand purposeofthetransactioncontemplated hereby. Accordingly,theBorroweracknowledgesthat theremedyatlawforabreachofitsobligationsunderthisNotewill beinadequateandagrees,in the eventofabreach orthreatened breachby theBorroweroftheprovisions ofthis Note, that the Holdershallbeentitled, inadditiontoallotheravailableremediesatlaworinequity,andinadditiontothepenaltiesassessableherein,toaninjunctionorinjunctionsrestraining,preventing orcuringany breachofthisNoteandtoenforcespecifically thetermsandprovisionsthereof, withoutthenecessityof showingeconomiclossandwithoutanybond orothersecuritybeingrequired.

INWITNESSWHEREOF,BorrowerhascausedthisNotetobesignedinitsnameby its dulyauthorized officerthis April 4, 2013.

IDS SOLARTECHNOLOGIES, INC.

By:/s/BRUCER. KNOBLICH

BRUCER. KNOBLICH ChiefExecutiveOfficer

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EXHIBITA

NOTICE OFCONVERSION

Theundersigned herebyelectstoconvert $_____________ principalamount oftheNote(defined below)intothatnumberofsharesofCommonStock tobeissued pursuant totheconversionofthe Note(“CommonStock”)assetforthbelow,ofIDSSOLAR TECHNOLOGIES,INC., aNevadacorporation(the“Borrower”)according totheconditions of theconvertible note oftheBorrower datedasofApril4,2013(the“Note”),asofthe date writtenbelow. Nofee will be charged to theHolder foranyconversion,exceptfortransfertaxes, if any.

BoxCheckedas toapplicableinstructions:

[]TheBorrowershallelectronicallytransmittheCommonStockissuablepursuant tothisNotice of Conversiontotheaccountofthe undersignedoritsnominee with DTCthroughitsDepositWithdrawalAgentCommissionsystem(“DWAC Transfer”).

NameofDTC PrimeBroker: Account Number:

[]TheundersignedherebyrequeststhattheBorrowerissueacertificateorcertificatesfor thenumber ofsharesofCommon Stocksetforthbelow(which numbersarebasedontheHolder’scalculationattachedhereto)inthe name(s) specifiedimmediately belowor,ifadditionalspaceisnecessary,onanattachment hereto:

ASHERENTERPRISES,INC.

1LindenPl.,Suite207

GreatNeck,NY. 11021

Attention:CertificateDelivery

(516)498-9890

DateofConversion:

ApplicableConversionPrice: $ NumberofShares ofCommonStock to beIssued

Pursuant toConversion oftheNotes: Amount ofPrincipalBalanceDue remaining

UndertheNote afterthisconversion:

ASHERENTERPRISES,INC.

By:

Name:Curt KramerTitle:President Date:

1LindenPl.,Suite207

GreatNeck,NY. 11021

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