FOR VALUE RECEIVED, The QUANTUM GROUP, INC., a Nevada corporation (“Quantum” or
the “Borrower”) promises to pay to the order of PAULSON INVESTMENT COMPANY, INC., an Oregon
corporation (“Lender”) the principal sum of Two Hundred and Fifty Thousand and no/100ths Dollars
($250,000.00) (the “Obligation”). No interest shall accrue during the term of this Note, except as otherwise
provided herein. In lieu of interest hereon, Borrower hereby promises to pay to Lender the principal sum of
Three Hundred and Thirty Three Thousand Three Hundred Thirty Three and no/100ths Dollars ($333,333.00)
as payment in full (the “Principal Payment” or “Principal”). The difference between the Obligation and the
Principal Payment shall be shall be treated as “original issue discount” and be reported as interest income over the
term of this Note.
October 23, 2007
Maturity Date . The Principal Payment shall be due and payable on October 23, 2009.
2. Prepayment . Borrower shall prepay any or all amounts due under this Note at the closing of any public or
private financing for which the Company receives gross proceeds of at least $10,000,000.
3. Method of Payment . Any payment hereunder shall be made by certified or bank cashier’s check unless
Lender has provided Borrower with appropriate wire instructions, in which event, the payment shall be made by
wire transfer of “same day” funds.
4. Default . In the event of an occurrence of any event of default specified below, the Principal Payment shall
become immediately due and payable without notice, except as specified below:
(a) Borrower files a petition to take advantage of any insolvency act; makes an assignment for the benefit of
its creditors; commences a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself of a whole or any substantial part of its property; files a petition or answer seeking
reorganization or arrangement or similar reli