VIRTUAL PIGGY, INC. 3.5% SECURED CONVERTIBLE PROMISSORY NOTE DUE 2018

FOR VALUE RECEIVED, the undersigned, VIRTUAL PIGGY, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of [____________________] or any future holder of this promissory note (the “Payee”), at the principal office of the Payee set forth herein, or at such other place as the holder may designate in writing to the Company, the principal sum of [___________] Dollars (U.S. $[_________]), or such other amount as may be outstanding hereunder (the “Principal Amount”), together with all accrued but unpaid interest, in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts and in immediately available funds, as provided in this promissory note (the “Note”).

This Note is one of a duly authorized issue of 3.5% Secured Convertible Promissory Notes due 2018 of the Company, in aggregate principal amount of up to Ten Million Dollars ($10,000,000) (the “Promissory Notes”) issued pursuant to the Securities Purchase Agreement of even date herewith (the “Purchase Agreement”; capitalized terms used herein without definition shall have the meanings assigned in the Purchase Agreement).  The Promissory Notes rank equally and ratably without priority over one another.  No payment, including any prepayment, shall be made hereunder unless payment, including any prepayment, is offered with respect to the other Promissory Notes in an amount which bears the same ratio to the then unpaid principal amount of such Promissory Notes as the payment made hereon bears to the then unpaid principal amount under this Note.

1.             Principal and Interest Payments.

(a)          Principal.  The Company shall repay in full the entire principal balance then outstanding under this Note plus all accrued and unpaid interest on the first to occur (the “Maturity Date”) of: (i) June 30, 2018; (ii) such time as there occurs a Sale Transaction (as defined below) or (iii) the acceleration of the obligations as contemplated by this Note.

“Sale Transaction” shall mean (i) the sale or other disposition of all or substantially all of the Company’s assets, or (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions.

(b)          Interest.  Interest on the outstanding principal balance of this Note shall accrue at a rate of three and one-half percent (3.5%) per annum, compounded quarterly.  Interest on the outstanding principal balance of this Note shall be computed on the basis of the actual number of days elapsed and a year of three hundred sixty (360) days and shall be payable on the Maturity Date, upon earlier prepayment of this Note or in the form of shares of Series C Preferred Stock, par value $0.0001 per share, of the Company (the “Series C Preferred Stock”) upon conversion of this Note as set forth in Section 8 below.  Furthermore, upon the occurrence of an Event of Default, then to the extent permitted by law, the Company will pay interest to the Payee, payable on demand, on the outstanding principal balance of this Note from the date of the Event of Default until payment in full at the rate of fifteen percent (15%) per annum, compounded quarterly.

(c)          Prepayment.  The Company may prepay the outstanding principal amount of this Note, in whole or in part, prior to the Maturity Date (a “Prepayment”) without the written consent of the Payee, at any time upon ten (10) days prior written notice of the date on which the Company intends to make such Prepayment (a “Prepayment Notice”).  Any partial Prepayment shall be applied first to accrued but unpaid interest and second to unpaid principal.  Nothing in this Section 1(c) shall limit the right of the Payee to convert the principal and accrued interest under this Note into Series C Preferred Stock at any time after receipt of the Prepayment Notice and prior to the time at which such Prepayment is made. The Company shall prepay the outstanding principal amount of this Note, in whole, upon the occurrence of a Sale Transaction.

2.             Non-Business Days.  Whenever any payment to be made shall be due on a non-Business Day, such payment may be due on the next succeeding Business Day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

3.             Security. This Note is secured, pursuant to the terms of an Amended and Restated Security Agreement between the Company, William F. Miller III as collateral agent, the holders of the Promissory Notes of even date herewith, and the holders of the Prior Secured Notes (as such term is defined in the Purchase Agreement) (the “Security Agreement”), by a security interest in the Collateral (as such term is defined in the Security Agreement).  This Note is subject to the provisions of the Security Agreement.

4.             Subordination of Future Debt; Payment of Dividends. Except as provided in the Transaction Documents, any debt incurred after the date hereof to any creditor shall be subordinated to the indebtedness evidenced by this Note.  The Company shall not declare or pay any dividend or distribution with respect to any preferred stock or common stock of the Company other than (i) a pro rata dividend with respect to the common stock payable solely in shares of common stock or (ii) dividend accruals (but not payments or distributions) on Company preferred stock pursuant to the terns thereof.

5.             Representations and Warranties of the Company.  The Company represents and warrants to the Payee as follows:

(a)          The Company has been duly incorporated and is validly existing and in good standing under the laws of the state of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted.

(b)          This Note has been duly authorized, validly executed and delivered on behalf of the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors' rights generally, and the Company has full power and authority to execute and deliver this Note and to perform its obligations hereunder.

6.             Events of Default.  The occurrence of any of the following events shall be an “Event of Default” under this Note:

(a)          the Company shall fail to pay the principal or any accrued interest hereunder or any other Note after the date such payment shall become due and payable hereunder or thereunder; or

(b)          if default shall be made in the performance or observance of any representation, warranty, covenant, or agreement contained in this Note, in the Amended and Restated Security Agreement or in the Purchase Agreement, or in any other agreement between the Company and the Payee relating to indebtedness of the Company to the Payee or any of its affiliates for borrowed money and such default shall have continued for a period of five (5) days after Company’s receipt of written notice of such default (unless such default is on account of failure to give a required notice, in which event such 5 day cure period shall commence with the date of such default); or

(c)          the Company shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (the “Bankruptcy Code”) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under the Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or domestic), or (vi) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

(d)          a proceeding or case shall be commenced in respect of the Company or any of its subsidiaries without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of thirty (30) consecutive days or any order for relief shall be entered in an involuntary case under the Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or domestic) against the Company or any of its subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Company or any of its subsidiaries and shall continue undismissed, or unstayed and in effect for a period of ninety (90) consecutive days.

7.             Remedies Upon an Event of Default.  If an Event of Default shall have occurred and shall be continuing, the Payee of this Note may at any time at its option, (a) declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable; provided, however, that upon the occurrence of an Event of Default described in (i) Sections 6(c) and (d), without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Company, the outstanding principal balance and accrued interest hereunder shall be automatically due and payable, and (ii) Sections 6(a) and (b) the Payee may exercise or otherwise enforce any one or more of the Payee’s rights, powers, privileges, remedies and interests under this Note or applicable law.  No course of delay on the part of the Payee shall operate as a waiver thereof or otherwise prejudice the right of the Payee.  No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

8.             Conversion.

(a)           General.  The holder of this Note shall have the right at any time, at such holder’s option, to convert all or any lesser portion of the Principal Amount plus accrued and unpaid interest thereon into such number of fully paid and non-assessable shares of Series C Preferred Stock as is determined by dividing (i) the portion of the Principal Amount to be converted plus accrued and unpaid interest thereon by (ii) the Conversion Rate (as defined below) then in effect for this Note. The initial conversion rate shall be $90.00, such rate to be subject to adjustment in accordance with the provisions of this Section 8. Such conversion rate in effect from time to time, as adjusted pursuant to this Section 8, is referred to herein as a “Conversion Rate.”  All of the remaining provisions of this Section 8 shall apply separately to each Conversion Rate in effect from time to time with respect to this Note.

(b)        Mechanics of Conversion.

(i)          Such right of conversion shall be exercised by the Payee by delivering to the Company a conversion notice in the form attached hereto as Exhibit A (the “Conversion Notice”), appropriately completed and duly signed, and by surrender not later than two (2) Business Days thereafter of this Note.  The Conversion Notice shall also contain a statement of the name or names (with addresses and tax identification or social security numbers) in which the certificate or certificates for Series C Preferred Stock shall be issued, if other than the name in which this Note is registered. Promptly after the receipt of the Conversion Notice, the Company shall issue and deliver, or cause to be delivered, to the Payee or such Payee’s nominee, a certificate or certificates for the number of shares of Series C Preferred Stock issuable upon such conversion. Such conversion shall be deemed to have been effected as of the close of business on the date of receipt by the Company of the Conversion Notice (the “Conversion Date”), and the person or persons entitled to receive the shares of Series C Preferred Stock issuable upon conversion shall be treated for all purposes as the holder or holders of record of such shares of Series C Preferred Stock as of the close of business on the Conversion Date.  If the Payee has not converted the entire principal and interest amount of this Note pursuant to the Conversion Notice, then the Company shall execute and deliver to the Payee a new Note instrument identical in terms to this Note, but with a principal amount reflecting the unconverted portion of this Note.  The new Note instrument shall be delivered subject to the same timing terms as the certificates for the Series C Preferred Stock.

(ii)        The Company shall effect such issuance of Series C Preferred Stock within three (3) Business Days following the Conversion Date and shall transmit the certificates by messenger or reputable overnight delivery service to reach the address designated by such holder within three (3) Business Days after the receipt by the Company of such Conversion Notice.  Provided that the holder complies with all of the provisions of this Note relating to the conversion hereof, if certificates evidencing the Series C Preferred Stock are not received by the holder (through no fault or negligence of the holder) within five (5) Business Days following the Conversion Date, then the holder will be entitled to revoke and withdraw its Conversion Notice, in whole or in part, at any time prior to its receipt of those certificates.

(d)        Fractional Shares.  The Company shall not be required to issue a fractional share of Series C Preferred Stock upon conversion of this Note. As to any fraction of a share which the holder of this Note would otherwise be entitled to acquire upon such conversion, the Company shall round down such fractional share to the nearest whole share of Series C Preferred Stock.

 (e)        Stock Dividends, Subdivisions and Combinations.  If at any time while this Note is outstanding, the Company shall:

(i)           cause the holders of its Series C Preferred Stock to be entitled to receive a dividend payable in, or other distribution of, additional shares of Series C Preferred Stock,

(ii)          subdivide its outstanding shares of Series C Preferred Stock into a larger number of shares of Series C Preferred Stock, or

(iii)         combine its outstanding shares of Series C Preferred Stock into a smaller number of shares of Series C Preferred Stock,

then in each such case the Conversion Rate shall be multiplied by a fraction of which the numerator shall be the number of shares of Series C Preferred Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Series C Preferred Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this Section 8(e) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this Section 8(e) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Rate is calculated hereunder, then the calculation of such Conversion Rate shall be adjusted appropriately to reflect such event.

(f)            Certain Other Distributions. If at any time while this Note is outstanding the Company shall take a record of the holders of its Series C Preferred Stock for the purpose of entitling them to receive any special dividend or other special distribution of:

(i)           cash,

(ii)          any evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (other than cash or additional shares of Series C Preferred Stock as provided in Section 8(e) hereof), or

(iii)         any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (in each case set forth in subparagraphs 8(f)(i), 8(f)(ii) and 8(f)(iii) hereof, the “Distributed Property”),

then upon any conversion of this Note that occurs after such record date, the holder of this Note shall be entitled to receive, in addition to the shares of Series C Preferred Stock issuable upon conversion of the Note (the “Conversion Shares”), the Distributed Property that such holder would have been entitled to receive in respect of such number of Conversion Shares had the holder been the record holder of such Conversion Shares as of such record date. Such distribution shall be made whenever any such conversion is made, but shall, for avoidance of doubt, not include ordinary course dividend accruals on the Series C Preferred Stock. In the event that the Distributed Property consists of property other than cash, then the fair value of such Distributed Property shall be as determined in good faith by the Board and set forth in reasonable detail in a written valuation report (the “Valuation Report”) prepared by the Board. The Company shall give written notice of such determination and a copy of the Valuation Report to the holder of this Note, and if the holder objects to such determination within twenty (20) Business Days following the date such notice is given, the Company shall submit such valuation to an investment banking firm of recognized national standing selected by the holder of this Note and acceptable to the Company in its reasonable discretion, whose opinion shall be binding upon the Company and the holder of this Note. A reclassification of the Series C Preferred Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Series C Preferred Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Series C Preferred Stock of such shares of such other class of stock within the meaning of this Section 8(f) and, if the outstanding shares of Series C Preferred Stock shall be changed into a larger or smaller number of shares of Series C Preferred Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Series C Preferred Stock within the meaning of Section 8(e).

(g)        Series C Preferred Stock Reserved. The Company shall at all times reserve and keep available out of its authorized but unissued Series C Preferred Stock, solely for issuance upon the conversion of the Promissory Notes, such number of shares of Series C Preferred Stock as shall from time to time be issuable upon the conversion of all the Promissory Notes at the time outstanding.

9.          Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of the number of shares of Series C Preferred Stock into which this Note is convertible and the current Conversion Rate provided for in Section 8:

(a)        When Adjustments to Be Made. The adjustments required by Section 8 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment to the Conversion Rate that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Series C Preferred Stock, as provided for in Section 8(e)) up to, but not beyond the Conversion Date if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Series C Preferred Stock into which this Note is convertible immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by Section 8 and not previously made, would result in a minimum adjustment or on the Conversion Date. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

(b)        Fractional Interests. In computing adjustments under Section 8, fractional interests in Series C Preferred Stock shall be rounded down to the nearest whole share of Series C Preferred Stock.

(c)        When Adjustment Not Required. If the Company undertakes a transaction contemplated under Section 8(f) and as a result takes a record of the holders of its Series C Preferred Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other benefits contemplated under Section 8(f) and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights or other benefits contemplated under Section 8(f), then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(d)        Escrow of Stock. If after any property becomes distributable pursuant to Section 8 by reason of the taking of any record of the holders of Series C Preferred Stock, but prior to the occurrence of the event for which such record is taken, a holder of this Note converts this Note during such period, the holder of this Note shall continue to be entitled to receive any shares of Series C Preferred Stock issuable upon conversion under Section 8 by reason of such adjustment (as if this Note were not yet converted) and such shares or other property shall be held in escrow for the holder of this Note by the Company to be issued to holder of this Note upon and to the extent that the event actually takes place. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled by the Company and escrowed property returned to the Company.

10.        Replacement.  Upon receipt of a duly executed, notarized and unsecured written statement from the Payee with respect to the loss, theft or destruction of this Note (or any replacement hereof), and, if requested by the Company, an indemnity bond customary in the industry, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

11.        Parties in Interest, Transferability.  This Note shall be binding upon the Company and its successors and permitted assigns and the terms hereof shall inure to the benefit of the Payee and its successors and assigns. This Note may be transferred or sold, subject to the provisions of Section 19 of this Note, or pledged, hypothecated or otherwise granted as security by the Payee.

12.        Amendments.  This Note may not be modified or amended in any manner except in writing executed by the Company and the Payee.

13.        Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The Company will give written notice to the Payee at least twenty (20) days prior to the date on which dissolution, liquidation or winding-up will take place and in no event shall such notice be provided to the Payee prior to such information being made known to the public.  Notices to the Payee shall be made to the address set forth in the Purchase Agreement.  Notices to the Company shall be made to the following:

14.        Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the choice of law provisions.  This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.

15.        Headings.  Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.

16.        Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a Payee’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note.  Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Payee and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Payee and that the remedy at law for any such breach may be inadequate.  Therefore the Company agrees that, in the event of any such breach or threatened breach, the Payee shall be entitled, in addition to all other available rights and remedies, at law or in equity, to such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

17.        Failure or Indulgence Not Waiver.  No failure or delay on the part of the Payee in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

18.        Enforcement Expenses.  The Company agrees to pay all costs and expenses of enforcement of this Note, including, without limitation, reasonable attorneys' fees and expenses.

19.        Compliance with Securities Laws.  The Payee of this Note acknowledges that this Note is being acquired solely for the Payee’s own account and not as a nominee for any other party, and for investment, and that the Payee shall not offer, sell or otherwise dispose of this Note other than in compliance with the laws of the United States of America and as guided by the rules of the Securities and Exchange Commission.  This Note and any Note issued in substitution or replacement therefore shall be stamped or imprinted with legends, as applicable, in substantially the following form:

20.           Severability.  The provisions of this Note are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall not in any manner affect such provision in any other jurisdiction or any other provision of this Note in any jurisdiction.

21.           Consent to Jurisdiction.  Each of the Company and the Payee (i) hereby irrevocably submits to the jurisdiction of the United States District Court sitting in the District of Delaware and the courts of the State of Delaware for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each of the Company and the Payee consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address set forth in Section 13 hereof and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 21 shall affect or limit any right to serve process in any other manner permitted by law.

22.           Company Waivers.

(a)          Except as otherwise specifically provided herein, the Company and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Company liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

(b)          No delay or omission on the part of the Payee in exercising its rights under this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Payee, nor shall any waiver by the Payee of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

IN WITNESS WHEREOF, the Company has executed and delivered this Promissory Note as of the date first written above.