| IDS Industries, Inc. | $100,000 PROMISSORY NOTE | Finkis Capital, LLC |
| January 22,2014 | $100,000 PROMISSORYNOTE |
FOR VALUERECEIVED,IDSIndustries, Inc.,aNevadacorporation(the"Borrower")withat least38,723,370commonshares issuedandoutstanding(as of January9,2014), promisesto paytoFiniks Capital, LLCoritsAssignees (the"Lender") the Principal Sum alongwiththeInterestRate and any other feesaccording totheterms herein.ThisNote will becomeeffective onlyupon execution bybothparties anddelivery ofthe first paymentof Consideration by the Lender(the"EffectiveDate").
The PrincipalSumis$100,000(one hundredthousand)plusaccruedandunpaidinterestandanyotherfees.TheConsiderationis$90,000(ninety thousand) payable by wire(thereexists a$10,000original issuediscount(the"OID").The Lendershall pay$20,000ofConsideration uponclosingofthisNote.The Lendermaypayadditional Consideration totheBorrowerin such amountsand at suchdates asLender may choose inits sole discretion.THEPRINCIPAL SUMDUE TOLENDERSHALL BEPRORATED BASED ON THECONSIDERATION ACTUALLY PAID BYLENDER(PLUSAN APPROXIMATE 10% ORIGINALISSUE DISCOUNT THATIS PRORATEDBASEDONTHECONSIDERATION ACTUALLY PAID BY THELENDERASWELLAS ANY OTHERINTEREST ORFEES) SUCHTHAT THE BORROWERISONLYREQUIRED TO REPAY THE AMOUNT FUNDED ANDTHEBORROWER IS NOT REQUIRED TOREPAY ANY UNFUNDEDPORTION OF THISNOTE.The MaturityDateisone
hundred andeightydaysfrom theEffectiveDateofeachpayment (the"MaturityDate")andis thedateupon whichthe PrincipalSumofthisNote, as wellasany unpaid interestandotherfees,shall be dueand payable.The Conversion Priceis51% ofthe averageofthethree (3) lowestbid sidepriceintheten(10) trading days previous tothe conversion,witha maximum conversion price offour($0.04) cents (In the casethat conversion shares are notdeliverable by DWACan additional 10%discountwillapply,
however,whilewe wouldliketoseeyoubecomeDWACeligible,sinceyouarenotcurrently,wewillnotapplythispenalty;andifthe shares are ineligible fordepositintotheDTC system andonly eligible for Xclearing depositan additional 5%discountshall apply;as we understand,you currently are DTC Eligible andifyou wereto lose thateligibility,thispenalty willapply).Unless otherwiseagreedinwriting by both parties,at notime will theLenderconvertany amountof theNote into common stock that wouldresult intheLenderowning more than4.99% of thecommonstock outstanding.
1. ZEROPercentInterestfor theFirstThreeMonths.TheBorrower may repaythisNoteatanytimeonorbefore90days fromthe Effective Date,afterwhichthe Borrower maynotmakefurther paymentsonthis Note prior totheMaturity Date without written approvalfromLender.If the Borrower repaysthe Noteonorbefore90 daysfrom theEffective Date, theInterestRate shallbe ZERO PERCENT (0%).IfBorrower doesnot repaytheNote onorbefore90days fromtheEffectiveDate,a one-time Interest chargeof 10% shallbe appliedto the Principal Sum.Any interest payableis in additionto the OID,and thatOID(orproratedOID,if applicable) remains payableregardlessoftime andmannerof payment by Borrower.
2. Conversion.TheLenderhastheright,atanytimeaftertheEffectiveDate,atitselection,toconvert all orpart of theoutstanding andunpaid PrincipalSum andaccruedinterest(and any otherfees) into shares of fully paid andnon-assessable shares ofcommon stock oftheBorrowerasperthis conversion formula:Numberof shares receivableuponconversion equals the dollarconversion amountdivided by the Conversion Price.Conversions maybe deliveredto Borrower by method of Lender's choice(including butnotlimited to email,facsimile,mail,overnight courier,or personaldelivery),and allconversions shallbecashless and notrequire further paymentfromthe Lender.If no objectionisdeliveredfrom Borrower to Lenderregardingany variable orcalculation of theconversion notice within 24 hoursofdelivery ofthe conversion notice,the Borrower shall have been thereafter deemedtohave irrevocably confirmed andirrevocably ratified such notice ofconversion andwaived any objectionthereto. TheBorrower shall deliver thesharesfrom anyconversiontoLender(in anyname directed byLender)within 3(three) business days of conversion notice delivery.
3. ConversionDelays.If Borrowerfailstodeliversharesinaccordancewiththetimeframestatedin Section2,Lender,at any time prior tosellingall of those shares, mayrescind any portion,in wholeorin part,of that particular conversion attributable to the unsoldsharesand have therescinded conversion amountreturnedto the PrincipalSum with therescindedconversion sharesreturnedtothe Borrower (under Lender's and Borrower's expectations that anyreturnedconversion amountswill tack back tothe original dateof the Note). In addition,for eachconversion, in theevent that shares arenot delivered by thefourth business day (inclusiveof theday ofconversion), a penalty of$2,000 per daywill be assessed foreach day afterthethirdbusinessday (inclusive oftheday of theconversion) until sharedelivery ismade; and such penalty will be added to the Principal Sum of the Note (under Lender's and Borrower's expectations that any penalty amounts will tack back to the original date of the Note).
4. ReservationofShares.At alltimesduringwhichthisNoteisconvertible,theBorrowerwillreserve fromitsauthorizedandunissuedCommonStockto provide for theissuanceofCommonStockupon thefullconversionofthisNote.TheBorrower willat alltimesreserveatleast5,000,000sharesof Common Stock for conversion.
5. PiggybackRegistrationRights.TheBorrowershall includeonthenextregistration statementthe Borrowerfiles withSEC(oronthesubsequentregistrationstatementif such registrationstatementis withdrawn) all sharesissuableupon conversion ofthisNote.Failureto doso will result inliquidated damages of25%of theoutstanding principal balance ofthis Note,but notless than $25,000,being immediately dueandpayableto theLenderat its electionintheformofcash paymentoradditionto the balanceof thisNote.
6. ThisSectionLeftIntentionallyBlank.
7. Default.ThefollowingareeventsofdefaultunderthisNote:(i)theBorrowershallfailtopayany principalundertheNotewhendueandpayable(orpayablebyconversion) thereunder; or (ii)the Borrowershallfail to payany interestorany otheramount under theNote whendue andpayable(or payablebyconversion) thereunder;or (iii) a receiver, trustee orothersimilar officialshallbeappointed overthe Borrower or a materialpart ofits assetsandsuch appointmentshallremain uncontested for twenty(20) days orshall notbedismissed ordischargedwithin sixty(60)days;or(iv) theBorrower shall become insolvent or generally fails to pay,or admits inwriting its inability to pay, its debts as they becomedue,subject to applicable grace periods,if any; or (v) the Borrower shall make a general assignment for the benefit of creditors;or (vi) the Borrower shall file a petition for relief under any bankruptcy,
Interest freeifpaidinfullwithin3months
IDST insolvencyorsimilarlaw(domesticorforeign);or(vii)aninvoluntaryproceedingshallbe commencedorfiledagainst theBorrower;or (viii)the Borrower shall lose its status as"OTC Eligible"or the borrower's shareholdersshall lose theabilitytodeposit (eitherelectronically orbyphysicalcertificates,or otherwise)sharesintothe OTCSystem; or(ix) theBorrowershallbecomedelinquentinits filing requirementsas afully-reporting issuerregistered with theSEC.
8. Remedies.Intheeventofanydefault,theoutstandingprincipalamountofthisNote,plusaccruedbut unpaidinterest,liquidateddamages, fees and other amounts owingin respectthereofthrough thedate ofacceleration, shallbecome, at theLender's election,immediately due andpayablein cash at the Mandatory Default Amount. TheMandatory Default Amount means the greaterof (i)theoutstanding principal amountof this Note,plus all accruedand unpaid interest,liquidateddamages,feesandother amounts hereon,dividedby theConversion Priceon the date theMandatoryDefault Amount is either demandedor paid infull,whichever has alowerConversion Price,multipliedby theVWAP on the datetheMandatory Default Amount is either demanded orpaid in full,whichever has ahigher VWAP,or(ii) 150% of theoutstanding principal amountof this Note,plus 100% of accruedand unpaidinterest,liquidated damages,fees andother amounts hereon.Commencing five(5)daysafter the occurrence of anyevent of default thatresultsin the eventual accelerationofthis Note,theinterest rate on thisNote shallaccrueat aninterestrateequal to at least18% per annumor the maximum rate permittedunder applicablelaw.In connectionwith such acceleration described herein, the Lender neednot provide,andthe Borrowerhereby waives,any presentment,demand, protest orothernoticeof anykind, and the Lendermay immediatelyand withoutexpirationof anygraceperiod enforce anyand all ofitsrightsandremedieshereunder and all other remedies availableto it under applicable law.Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and the Lender shall have all rights as aholder of thenote until such time,if any,as the Lenderreceives full payment pursuant to this Section8.No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon.Nothing herein shall limit Lender's right to pursue any otherremedies availabletoitat law orin equity including, withoutlimitation,a decree of specific performance and/orinjunctiverelief withrespect to the Borrower's failure to timelydeliver certificatesrepresenting shares of Common Stock upon conversion of the Note as required pursuant to the terms hereof.
9. NoShorting.Lender agreesthat solongasthisNotefromBorrowertoLenderremainsoutstanding, Lender willnot enterintoor effect"short sales"ofthe CommonStock or hedging transactionwhich establishes anetshortpositionwith respecttothe CommonStockof Borrower.Borrower acknowledges and agrees thatupondelivery of aconversion notice byLender,Lender immediately owns the shares of CommonStockdescribedintheconversion noticeand any saleofthose sharesissuableunder such conversion noticewouldnotbe consideredshort sales.
10. Assignability.TheBorrower maynotassignthisNote.ThisNotewillbebinding upontheBorrower anditssuccessorsandwillinuretothebenefitoftheLender andits successorsand assigns andmaybe assignedby the Lenderto anyone ofitschoosing withoutBorrower's approval.
11. GoverningLaw.This Notewillbegovernedby,andconstruedandenforcedinaccordancewith,the lawsoftheStateof California,without regardtothe conflictof laws principles thereof. Anyactionbrought byeither partyagainst the otherconcerning thetransactions contemplated bythis Agreement shallbe broughtonlyinthe statecourtsofCaliforniaorinthefederal courtslocated in OrangeCounty,inthe State of California.Both partiesandtheindividualssigningthis Agreement agreeto submitto the jurisdiction of suchcourts.
12. DeliveryofProcessbyLendertoBorrower.IntheeventofanyactionorproceedingbyLender againstBorrower, and onlybyLenderagainstBorrower, service ofcopies ofsummonsand/orcomplaint and/or anyother process which maybe servedin anysuchactionorproceeding maybe madebyLender viaU.S.Mail,overnightdelivery servicesuchas FedEx or UPS,email,fax,orprocess server,or by mailing orotherwisedelivering a copyofsuchprocessto theBorroweratitslastknown attorney asset forthin its mostrecent SECfiling.
13. AttorneyFees.In theeventanyattorneyisemployedbyeitherpartytothisNotewithregard toany legal orequitable action,arbitration orother proceeding brought bysuch partyfor theenforcementofthis Note or because ofan alleged dispute,breach, default or misrepresentationin connection with any ofthe provisionsofthisNote,the prevailing partyinsuch proceeding will beentitledto recover from the other partyreasonableattorneys' feesandother costsand expenses incurred,inaddition to anyotherrelief to which theprevailing party may be entitled.
14. OpinionofCounsel.Intheevent that anopinionofcounselisneededfor anymatterrelatedtothisNote,Lenderhas therighttohaveany suchopinionprovided byitscounsel. Lender alsohas theright to haveanysuchopinion providedby Borrower'scounsel.
15. Notices.Anynoticerequiredorpermittedhereunder(including ConversionNotices) mustbein writingandeitherpersonallyserved,sent by facsimileoremail transmission,orsentby overnight courier. Notices willbe deemed effectively delivered at thetime of transmission if by facsimileoremail,and if by overnight courierthe businessday aftersuch notice is deposited withthe courier servicefor delivery.
| Borrower: Lender |
| /s/ Stephen Scott Plantinga |
| Stephen Scott Plantinga – CEO |
| IDS Industries, Inc. |
| |
| /s/ James P. Hodgins |
| James P. Hodgins – Managing Member |
| Finiks Capital, LLC |
