EXHIBIT 10.3
 
CONVERTIBLE PROMISSORY NOTE
 
Effective Date: July 18, 2014 U.S. $85,500.00

FOR VALUE RECEIVED, SearchCore, Inc., a Nevada corporation (“Borrower”),
promises to pay to Typenex Co-Investment, LLC, a Utah limited liability company,
or its successors or assigns (“Lender”), $85,500.00 and any interest, fees,
charges, and late fees on the date that is eleven (11) months after the Purchase
Price Date (as defined below) (the “Maturity Date”) in accordance with the terms
set forth herein and to pay interest on the Outstanding Balance (as defined
below) at the rate of ten percent (10%) per annum from the Purchase Price Date
until the same is paid in full. This Convertible Promissory Note (this “Note”)
is issued and made effective as of July 18, 2014 (the “Effective Date”). For
purposes hereof, the “Outstanding Balance” of this Note means, as of any date of
determination, the Purchase Price (as defined below), as reduced or increased,
as the case may be, pursuant to the terms hereof for redemption, conversion,
offset, or otherwise, plus any original issue discount (“OID”), the Transaction
Expense Amount (as defined below), accrued but unpaid interest, collection and
enforcements costs (including attorneys’ fees) incurred by Lender, transfer,
stamp, issuance and similar taxes and fees related to Conversions (as defined
below), and any other fees or charges (including without limitation late
charges) incurred under this Note. This Note is issued pursuant to that certain
Securities Purchase Agreement dated July 18, 2014, as the same may be amended
from time to time (the “Purchase Agreement”), by and between Borrower and
Lender. All interest calculations hereunder shall be computed on the basis of a
360-day year comprised of twelve (12) thirty (30) day months, shall compound
daily and shall be payable in accordance with the terms of this Note. Certain
capitalized terms used herein but not otherwise defined shall have the meaning
ascribed thereto in the Purchase Agreement. Certain other capitalized terms used
herein are defined in Attachment 1 attached hereto and incorporated herein by
this reference.
 
This Note carries an OID of $7,500.00. In addition, Borrower agrees to pay
$3,000.00 to Lender to cover Lender’s legal fees, accounting costs, due
diligence, monitoring and other transaction costs incurred in connection with
the purchase and sale of this Note (the “Transaction Expense Amount”), all of
which amount is included in the initial principal balance of this Note. The
purchase price for this Note and the Warrant (as defined in the Purchase
Agreement) shall be $75,000.00 (the “Purchase Price”), computed as follows:
$85,500.00 original principal balance, less the OID, less the Transaction
Expense Amount. The Purchase Price shall be payable by Lender by wire transfer
of immediately available funds. For purposes hereof, the term “Purchase Price
Date” means the date the Purchase Price is delivered by Lender to Borrower
 
1. Payment; Prepayment. Provided there is an Outstanding Balance, on each
Installment Date (as defined below), Borrower shall pay to Lender an amount
equal to the Installment Amount (as defined below) due on such Installment Date
in accordance with Section 8. All payments owing hereunder shall be in lawful
money of the United States of America or Conversion Shares (as defined below),
as provided for herein, and delivered to Lender at the address furnished to
Borrower for that purpose. All payments shall be applied first to (a) costs of
collection, if any, then to (b) fees and charges, if any, then to (c) accrued
and unpaid interest, and thereafter, to (d) principal. Notwithstanding the
foregoing, so long as Borrower has not received a Lender Conversion Notice (as
defined below) or an Installment Notice (as defined below) from Lender where the
applicable Conversion Shares have not yet been delivered and so long as no Event
of Default has occurred since the Effective Date (whether declared by Lender or
undeclared), then Borrower shall have the right, exercisable on not less than
five (5) Trading Days prior written notice to Lender to prepay the Outstanding
Balance of this Note, in full, in accordance with this Section 1. Any notice of
prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to
Lender at its registered address and shall state: (y) that Borrower is
exercising its right to prepay this Note, and (z) the date of prepayment, which
shall be not less than five (5) Trading Days from the date of the Optional
Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment
Date”), Borrower shall make payment of the Optional Prepayment Amount (as
defined below) to or upon the order of Lender as may be specified by Lender in
writing to Borrower. If Borrower exercises its right to prepay this Note,
Borrower shall make payment to Lender of an amount in cash (the “Optional
Prepayment Amount”) equal to 125% multiplied by the then Outstanding Balance of
this Note. In the event Borrower delivers the Optional Prepayment Amount to
Lender prior to the Optional Prepayment Date or without delivering an Optional
Prepayment Notice to Lender as set forth herein without Lender’s prior written
consent, the Optional Prepayment Amount shall not be deemed to have been paid to
Lender until the Optional Prepayment Date. Moreover, in such event the Optional
Prepayment Liquidated Damages Amount will automatically be added to the
Outstanding Balance of this Note on the day Borrower delivers the Optional
Prepayment Amount to Lender. In the event Borrower delivers the Optional
Prepayment Amount without an Optional Prepayment Notice, then the Optional
Prepayment Date will be deemed to be the date that is five (5) Trading Days from
the date that the Optional Prepayment Amount was delivered to Lender. In
addition, if Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to Lender within two (2) Trading Days
following the Optional Prepayment Date, Borrower shall forever forfeit its right
to prepay this Note.
 
 
1

--------------------------------------------------------------------------------

 
 
2. Security. This Note is unsecured.
 
3. Lender Optional Conversion.
 
3.1. Lender Conversion Price. Subject to adjustment as set forth in this Note,
the conversion price for each Lender Conversion (as defined below) shall be
$0.075 (the “Lender Conversion Price”).
 
3.2. Lender Conversions. Lender has the right at any time beginning six (6)
months after the Purchase Price Date until the Outstanding Balance has been paid
in full, including without limitation (i) until any Optional Prepayment Date
(even if Lender has received an Optional Prepayment Notice) or at any time
thereafter with respect to any amount that is not prepaid, and (ii) during or
after any Fundamental Default Measuring Period, at its election, to convert
(each instance of conversion is referred to herein as a “Lender Conversion”) all
or any part of the Outstanding Balance into shares (“Lender Conversion Shares”)
of fully paid and non-assessable common stock, $0.001 par value per share
(“Common Stock”), of Borrower as per the following conversion formula: the
number of Lender Conversion Shares equals the amount being converted (the
“Conversion Amount”) divided by the Lender Conversion Price. Conversion notices
in the form attached hereto as Exhibit A (each, a “Lender Conversion Notice”)
may be effectively delivered to Borrower by any method of Lender’s choice
(including but not limited to facsimile, email, mail, overnight courier, or
personal delivery), and all Lender Conversions shall be cashless and not require
further payment from Lender. Borrower shall deliver the Lender Conversion Shares
from any Lender Conversion to Lender in accordance with Section 9 below within
three (3) Trading Days of Lender’s delivery of the Lender Conversion Notice to
Borrower.
 
3.3. Application to Installments. Notwithstanding anything to the contrary
herein, including without limitation Section 8 hereof, Lender may, in its sole
discretion, apply all or any portion of any Lender Conversion toward any
Installment Conversion (as defined below), even if such Installment Conversion
is pending, as determined in Lender’s sole discretion, by delivering written
notice of such election (which notice may be included as part of the applicable
Lender Conversion Notice) to Borrower at any date on or prior to the applicable
Installment Date. In such event, Borrower may not elect to allocate such portion
of the Installment Amount being paid pursuant to this Section 3.3 in the manner
prescribed in Section 8.3; rather, Borrower must reduce the applicable
Installment Amount by the Conversion Amount described in this Section 3.3.
 
 
2

--------------------------------------------------------------------------------

 
 
4. Defaults and Remedies.
 
4.1. Defaults. The following are events of default under this Note (each, an
“Event of Default”): (i) Borrower shall fail to pay any principal within five
(5) days of the date when it is due and payable (or payable by Conversion)
hereunder; or (ii) Borrower shall fail to deliver any Lender Conversion Shares
in accordance with the terms hereof; or (iii) Borrower shall fail to deliver any
Installment Conversion Shares (as defined below) or True-Up Shares (as defined
below) in accordance with the terms hereof; or (iv) Borrower shall fail to pay
any interest, fees, charges, or any other amount within five (5) days of the
date when it is due and payable (or payable by Conversion) hereunder; or (v) a
receiver, trustee or other similar official shall be appointed over Borrower or
a material part of its assets and such appointment shall remain uncontested for
twenty (20) days or shall not be dismissed or discharged within sixty (60) days;
or (vi) Borrower shall become insolvent or generally fails to pay, or admits in
writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any; or (vii) Borrower shall make a general
assignment for the benefit of creditors; or (viii) Borrower shall file a
petition for relief under any bankruptcy, insolvency or similar law (domestic or
foreign); or (ix) an involuntary proceeding shall be commenced or filed against
Borrower; or (x) Borrower shall become delinquent in its filing requirements as
a fully-reporting issuer registered with the SEC, provided that Borrower shall
have a period of five (5) days from the date any filing is due to cure such
delinquency; or (xi) Borrower shall default or otherwise fail to observe or
perform any covenant, obligation, condition or agreement of Borrower contained
herein or in any other Transaction Document, other than those specifically set
forth in this Section 4.1, provided that Borrower shall have a period of five
(5) days from the date performance is otherwise required to cure any such breach
(other than its covenants, obligations, agreements and conditions specifically
set forth in this Section 4.1); or (xii) Borrower shall fail to timely file all
required quarterly and annual reports and any other filings that are necessary
to enable Lender to sell Conversion Shares or True-Up Shares pursuant to Rule
144; or (xiii) any representation, warranty or other statement made or furnished
by or on behalf of Borrower to Lender herein, in any Transaction Document, or
otherwise in connection with the issuance of this Note shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; or (xiv) the occurrence of a Fundamental Transaction without Lender’s
prior written consent; or (xv) Borrower shall fail to maintain the Share Reserve
as required under the Purchase Agreement, provided that Borrower shall have a
period of five (5) days from the date Lender delivers written notice to Borrower
to cure any such breach; or (xvi) Borrower effectuates a reverse split of its
Common Stock without twenty (20) Trading Days prior written notice to Borrower;
or (xvii) any money judgment or writ shall be entered or filed against Borrower
or any subsidiary of Borrower or any of its property or other assets for more
than $250,000, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) calendar days unless otherwise consented to by Lender; or (xviii)
Borrower’s Common Stock is not DTC Eligible, provided that if Borrower’s Common
Stock is not DTC Eligible, it shall have a period of five (5) days from the
first date its Common Stock is no longer DTC Eligible to cause its Common Stock
to once again become DTC Eligible before such failure shall constitute an Event
of Default hereunder.
 
 
3

--------------------------------------------------------------------------------

 
 
4.2. Remedies. Upon the occurrence of any Event of Default, Borrower shall
within one (1) Trading Day deliver written notice thereof via facsimile, email
or reputable overnight courier (with next day delivery specified) (an “Event of
Default Notice”) to Lender. At any time and from time to time after the earlier
of Lender’s receipt of an Event of Default Notice and Lender becoming aware of
the occurrence of any Event of Default, Lender may accelerate this Note by
written notice to Borrower, with the Outstanding Balance becoming immediately
due and payable in cash at the Mandatory Default Amount (as defined hereafter).
Notwithstanding the foregoing, at any time following the occurrence of any Event
of Default, Lender may, at its option, elect to increase the Outstanding Balance
by applying the Default Effect (as defined below) (subject to the limitation set
forth below) via written notice to Borrower without accelerating the Outstanding
Balance, in which event the Outstanding Balance shall be increased as of the
date of the occurrence of the applicable Event of Default pursuant to the
Default Effect, but the Outstanding Balance shall not be immediately due and
payable unless so declared by Lender (for the avoidance of doubt, if Lender
elects to apply the Default Effect pursuant to this sentence, it shall reserve
the right to declare the Outstanding Balance immediately due and payable at any
time and no such election by Lender shall be deemed to be a waiver of its right
to declare the Outstanding Balance immediately due and payable as set forth
herein unless otherwise agreed to by Lender in writing). For purposes hereof,
the “Default Effect” is calculated by multiplying the Outstanding Balance as of
the date the applicable Event of Default occurred by (i) 15% for each occurrence
of any Major Default, or (ii) 5% for each occurrence of any Minor Default, and
then adding the resulting product to the Outstanding Balance as of the date the
applicable Event of Default occurred, with the sum of the foregoing then
becoming the Outstanding Balance under this Note as of the date the applicable
Event of Default occurred; provided that the Default Effect may only be applied
three times hereunder with respect to Major Defaults and three times hereunder
with respect to Minor Defaults; and provided further that the Default Effect
shall not apply to any Event of Default pursuant to Section 4.1(ii) hereof.
Notwithstanding the foregoing, upon the occurrence of any Event of Default
described in clauses (v), (vi), (vii), (viii) or (ix) of Section 4.1, the
Outstanding Balance as of the date of acceleration shall become immediately and
automatically due and payable in cash at the Mandatory Default Amount, without
any written notice required by Lender. The “Mandatory Default Amount” means the
greater of (i) the Outstanding Balance divided by the Installment Conversion
Price (as defined below) on the date the Mandatory Default Amount is demanded,
multiplied by the volume weighted average price (the “VWAP”) on the date the
Mandatory Default Amount is demanded, or (ii) the Default Effect. At any time
following the occurrence of any Event of Default, upon written notice given by
Lender to Borrower, interest shall accrue on the Outstanding Balance beginning
on the date the applicable Event of Default occurred at an interest rate equal
to the lesser of 22% per annum or the maximum rate permitted under applicable
law (“Default Interest”); provided, however, that no Default Interest shall
accrue during the Fundamental Default Measuring Period (as defined below).
Additionally, following the occurrence of any Event of Default, Borrower may, at
its option, pay any Lender Conversion in cash instead of Lender Conversion
Shares by paying to Lender on or before the applicable Delivery Date (as defined
below) a cash amount equal to the number of Lender Conversion Shares set forth
in the applicable Lender Conversion Notice multiplied by the highest intra-day
trading price of the Common Stock that occurs during the period beginning on the
date the applicable Event of Default occurred and ending on the date of the
applicable Lender Conversion Notice. In connection with acceleration described
herein, Lender need not provide, and Borrower hereby waives, any presentment,
demand, protest or other notice of any kind, and Lender may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Lender at any time prior to
payment hereunder and Lender shall have all rights as a holder of the Note until
such time, if any, as Lender receives full payment pursuant to this Section 4.2.
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 other remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to Borrower’s failure to timely deliver Conversion Shares upon
Conversion of the Notes as required pursuant to the terms hereof.
 
4.3. Fundamental Default Remedies. Notwithstanding anything to the contrary
herein, in addition to all other remedies set forth herein, the Fundamental
Liquidated Damages Amount shall be added to the Outstanding Balance upon
Lender’s delivery to Borrower of a notice (which notice Lender may deliver to
Borrower at any time following the occurrence of a Fundamental Default) setting
forth its election to declare a Fundamental Default and the Fundamental
Liquidated Damages Amount that will be added to the Outstanding Balance.
 
 
4

--------------------------------------------------------------------------------

 
 
4.4. Certain Additional Rights. Notwithstanding anything to the contrary herein,
in the event Borrower fails to make any payment or otherwise to deliver any
Conversion Shares as and when required under this Note, then (i) the Lender
Conversion Price for all Lender Conversions occurring after the date of such
failure to pay shall equal the lower of the Lender Conversion Price applicable
to any Lender Conversion and the Market Price as of any applicable date of
Conversion, and (ii) the true-up provisions of Section 11 below shall apply to
all Lender Conversions that occur after the date of such failure to pay,
provided that all references to the “Installment Notice” in Section 11 shall be
replaced with references to a “Lender Conversion Notice” for purposes of this
Section 4.4, all references to “Installment Conversion Shares” in Section 11
shall be replaced with references to “Lender Conversion Shares” for purposes of
this Section 4.4, and all references to the “Installment Conversion Price” in
Section 11 shall be replaced with references to the “Lender Conversion Price”
for purposes of this Section 4.4.
 
4.5. Cross Default. A breach or default by Borrower of any covenant or other
term or condition contained in any Other Agreements (as defined below) shall, at
the option of Lender, be considered an Event of Default under this Note, in
which event Lender shall be entitled (but in no event required) to apply all
rights and remedies of Lender under the terms of this Note. “Other Agreements”
means, collectively, (a) all existing and future agreements and instruments
between, among or by Borrower (or an affiliate), on the one hand, and Lender (or
an affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects Borrower’s ongoing business operations. For the avoidance
of doubt, all existing and future loan transactions between Borrower and Lender
and their respective affiliates will be cross-defaulted with each other loan
transaction and with all other existing and future debt of Borrower to Lender.
 
5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is
an unconditional, valid, binding and enforceable obligation of Borrower not
subject to offset, deduction or counterclaim of any kind. Borrower hereby waives
any rights of offset it now has or may have hereafter against Lender, its
successors and assigns, and agrees to make the payments or conversions called
for herein in accordance with the terms of this Note.
 
6. Waiver. No waiver of any provision of this Note shall be effective unless it
is in the form of a writing signed by the party granting the waiver. No waiver
of any provision or consent to any prohibited action shall constitute a waiver
of any other provision or consent to any other prohibited action, whether or not
similar. No waiver or consent shall constitute a continuing waiver or consent or
commit a party to provide a waiver or consent in the future except to the extent
specifically set forth in writing.
 
 
5

--------------------------------------------------------------------------------

 
 
7. Rights Upon Issuance of Securities.
 
7.1. Subsequent Equity Sales. Except with respect to Excluded Securities, if
Borrower or any subsidiary thereof, as applicable, at any time this Note is
outstanding, shall sell or issue any Common Stock to Lender or any third party
for a price that is less than the then effective Lender Conversion Price, then
such Lender Conversion Price shall be automatically reduced and only reduced to
equal such lower issuance price. Except with respect to Excluded Securities, if
Borrower or any subsidiary thereof, as applicable, at any time this Note is
outstanding, shall sell or grant any option to any party to purchase, or sell or
grant any right to reprice, or issue any Common Stock, preferred shares
convertible into Common Stock, or debt, warrants, options or other instruments
or securities to Lender or any third party which are convertible into or
exercisable for shares of Common Stock (together herein referred to as “Equity
Securities”), including without limitation any Deemed Issuance (as defined
herein), at an effective price per share less than the then effective Lender
Conversion Price (such issuance, together with any sale of Common Stock, is
referred to herein as a “Dilutive Issuance”), then, the Lender Conversion Price
shall be automatically reduced and only reduced to equal such lower effective
price per share. If the holder of any Equity Securities so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options, or rights per share which are issued in connection with such
Dilutive Issuance, be entitled to receive shares of Common Stock at an effective
price per share that is less than the Lender Conversion Price, such issuance
shall be deemed to have occurred for less than the Lender Conversion Price on
the date of such Dilutive Issuance, and the then effective Lender Conversion
Price shall be reduced and only reduced to equal such lower effective price per
share. Such adjustments described above to the Lender Conversion Price shall be
permanent (subject to additional adjustments under this section), and shall be
made whenever such Common Stock or Equity Securities are issued. Borrower shall
notify Lender, in writing, no later than the Trading Day following the issuance
of any Common Stock or Equity Securities subject to this Section 7.1, indicating
therein the applicable issuance price, or applicable reset price, exchange
price, conversion price, or other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not Borrower
provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the
occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the
Lender Conversion Price shall be lowered to equal the applicable effective price
per share regardless of whether Borrower or Lender accurately refers to such
lower effective price per share in any Installment Notice or Lender Conversion
Notice.
 
7.2. Adjustment of Lender Conversion Price upon Subdivision or Combination of
Common Stock. Without limiting any provision hereof, if Borrower at any time on
or after the Effective Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Lender Conversion Price in
effect immediately prior to such subdivision will be proportionately reduced.
Without limiting any provision hereof, if Borrower at any time on or after the
Effective Date combines (by combination, reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Lender Conversion Price in effect immediately prior to such
combination will be proportionately increased. Any adjustment pursuant to this
Section 7.2 shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
Section 7.2 occurs during the period that a Lender Conversion Price is
calculated hereunder, then the calculation of such Lender Conversion Price shall
be adjusted appropriately to reflect such event.
 
7.3. Other Events. In the event that Borrower (or any subsidiary) shall take any
action to which the provisions hereof are not strictly applicable, or, if
applicable, would not operate to protect Lender from dilution or if any event
occurs of the type contemplated by the provisions of this Section 7 but not
expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then Borrower’s board of directors shall in good faith
determine and implement an appropriate adjustment in the Lender Conversion Price
so as to protect the rights of Lender, provided that no such adjustment pursuant
to this Section 7.3 will increase the Lender Conversion Price as otherwise
determined pursuant to this Section 7, provided further that if Lender does not
accept such adjustments as appropriately protecting its interests hereunder
against such dilution, then Borrower’s board of directors and Lender shall
agree, in good faith, upon an independent investment bank of nationally
recognized standing to make such appropriate adjustments, whose determination
shall be final and binding and whose fees and expenses shall be borne by
Borrower.
 
 
6

--------------------------------------------------------------------------------

 
 
8. Borrower Installments.
 
8.1. Installment Conversion Price. Subject to the adjustments set forth herein,
the conversion price for each Installment Conversion (the “Installment
Conversion Price”) shall be the lesser of (i) the Lender Conversion Price, and
(ii) 55% (the “Conversion Factor”) of the average of the three (3) lowest
Closing Bid Prices in the twenty (20) Trading Days immediately preceding the
applicable Conversion (the “Market Price”), provided that if at any time the
average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading
Days immediately preceding any date of measurement is below $0.02, then in such
event the then-current Conversion Factor shall be reduced to 50% for all future
Conversions (subject to other reductions set forth in this section).
Additionally, if at any time after the Effective Date, the Conversion Shares are
not DTC Eligible, then the then-current Conversion Factor will automatically be
reduced by 5% for all future Conversions. Finally, in addition to the Default
Effects, if any Major Default occurs after the Effective Date, the Conversion
Factor shall automatically be reduced for all future Conversions by an
additional 5% for each of the first three (3) Major Defaults that occur after
the Effective Date (for the avoidance of doubt, each occurrence of any Major
Default shall be deemed to be a separate occurrence for purposes of the
foregoing reductions in Conversion Factor, even if the same Major Default occurs
three (3) separate times). For example, the first time the Conversion Shares are
not DTC Eligible, the Conversion Factor for future Conversions thereafter will
be reduced from 55% to 50% for purposes of this example. If, thereafter, there
are three (3) separate occurrences of a Major Default pursuant to Section
4.1(iii), then for purposes of this example the Conversion Factor would be
reduced by 5% for the first such occurrence, and so on for each of the second
and third occurrences of such Major Default.
 
8.2. Installment Conversions. Beginning on the date that is six (6) months after
the Purchase Price Date and on the same day of each month thereafter until the
Maturity Date (each, an “Installment Date”), Borrower shall pay to Lender the
applicable Installment Amount due on such date, subject to the provisions of
this Section 8. Payments of each Installment Amount may be made (a) in cash, or
(b) by converting such Installment Amount into shares of Common Stock
(“Installment Conversion Shares”, and together with the Lender Conversion
Shares, the “Conversion Shares”) in accordance with this Section 8 (each an
“Installment Conversion”, and together with Lender Conversions, a “Conversion”)
per the following formula: the number of Installment Conversion Shares equals
the portion of the applicable Installment Amount being converted divided by the
Installment Conversion Price, or (c) by any combination of the foregoing, so
long as the cash is delivered to Lender on the applicable Installment Date and
the Installment Conversion Shares are delivered to Lender on or before the
applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be
entitled to elect an Installment Conversion with respect to any portion of any
applicable Installment Amount and shall be required to pay the entire amount of
such Installment Amount in cash if on the applicable Installment Notice Due Date
(defined below) there is an Equity Conditions Failure (as defined below), and
such failure is not waived in writing by Lender. Moreover, in the event Borrower
desires to pay all or any portion of any Installment Amount in cash, it must
notify Lender in writing of such election and the portion of the applicable
Installment Amount it elects to pay in cash not more than twenty-five (25) or
less than fifteen (15) Trading Days prior to the applicable Installment Date. If
Borrower fails to so notify Lender, it shall not be permitted to elect to pay
any portion of such Installment Amount in cash unless otherwise agreed to by
Lender in writing or proposed by Lender in an Installment Notice delivered by
Lender to Borrower. Notwithstanding that failure to repay this Note in full by
the Maturity Date is an Event of Default, the Installment Dates shall continue
after the Maturity Date pursuant to this Section 8 until the Outstanding Balance
is repaid in full, provided that Lender shall, in Lender’s sole discretion,
determine the Installment Amount for each Installment Date after the Maturity
Date.
 
 
7

--------------------------------------------------------------------------------

 
 
8.3. Allocation of Installment Amounts. Subject to Section 8.2 regarding an
Equity Conditions Failure, for each Installment Date (each, an “Installment
Notice Due Date”), Borrower may elect to allocate the payment of the applicable
Installment Amount between cash and via an Installment Conversion, by email or
fax delivery of a notice to Lender substantially in the form attached hereto as
Exhibit B (each, an “Installment Notice”), provided, that to be effective, each
applicable Installment Notice must be received by Lender not more than
twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable
Installment Notice Due Date. If Lender has not received an Installment Notice
within such time period, then Lender may prepare the Installment Notice and
deliver the same to Borrower by fax or email. Following its receipt of such
Installment Notice, Borrower may either ratify Lender’s proposed allocation in
the applicable Installment Notice or elect to change the allocation by written
notice to Lender by email or fax on or before 12:00 p.m. New York time on the
applicable Installment Date, so long as the sum of the cash payments and the
amount of Installment Conversions equal the applicable Installment Amount,
provided that Lender must approve any increase to the portion of the Installment
Amount payable in cash. If Borrower fails to notify Lender of its election to
change the allocation prior to the deadline set forth in the previous sentence
(and seek approval to increase the amount payable in cash), it shall be deemed
to have ratified and accepted the allocation set forth in the applicable
Installment Notice prepared by Lender. If neither Borrower nor Lender prepare
and deliver to the other party an Installment Notice as outlined above, then
Borrower shall be deemed to have elected that the entire Installment Amount be
converted via an Installment Conversion. Borrower acknowledges and agrees that
regardless of which party prepares the applicable Installment Notice, the
amounts and calculations set forth thereon are subject to correction or
adjustment because of error, mistake, or any adjustment resulting from an Event
of Default or other adjustment permitted under the Transaction Documents (an
“Adjustment”). Furthermore, no error or mistake in the preparation of such
notices, or failure to apply any Adjustment that could have been applied prior
to the preparation of an Installment Notice may be deemed a waiver of Lender’s
right to enforce the terms of any Note, even if such error, mistake, or failure
to include an Adjustment arises from Lender’s own calculation. Borrower shall
deliver the Installment Conversion Shares from any Installment Conversion to
Lender in accordance with Section 9 below on or before each applicable
Installment Date.
 
9. Method of Conversion Share Delivery. On or before the close of business on
the third (3rd) Trading Day following the Installment Date or the third (3rd)
Trading Day following the date of delivery of a Lender Conversion Notice, as
applicable (the “Delivery Date”), Borrower shall deliver or cause to be
delivered to Lender or its broker (as designated in the Lender Conversion
Notice), via reputable overnight courier, a certificate or certificates
representing the aggregate number of Conversion Shares to which Lender shall be
entitled, registered in the name of Lender or its designee. For the avoidance of
doubt, Borrower has not met its obligation to deliver Conversion Shares by the
Delivery Date unless Lender or its broker, as applicable, has actually received
the certificate representing the applicable Conversion Shares no later than the
close of business on the relevant Delivery Date pursuant to the terms set forth
above.
 
10. Conversion Delays. If Borrower fails to deliver Conversion Shares or True-Up
Shares in accordance with the timeframes stated in Sections 3, 8, 9, or 11, as
applicable, Lender, at any time prior to selling all of those Conversion Shares
or True-Up Shares, as applicable, may rescind in whole or in part that
particular Conversion attributable to the unsold Conversion Shares or True-Up
Shares, with a corresponding increase to the Outstanding Balance (any returned
Conversion Amount will tack back to the Purchase Price Date for purposes of
determining the holding period under Rule 144). In addition, for each Lender
Conversion, in the event that Lender Conversion Shares are not delivered by the
fourth Trading Day (inclusive of the day of the Lender Conversion), a late fee
equal to the greater of $500.00 per day and 2% of the applicable Lender
Conversion Share Value rounded to the nearest multiple of $100.00 (but in any
event the cumulative amount of such late fees for each Lender Conversion shall
not exceed 200% of the applicable Lender Conversion Share Value) will be
assessed for each day after the third Trading Day (inclusive of the day of the
Lender Conversion) until Lender Conversion Share delivery is made; and such late
fee will be added to the Outstanding Balance (such fees, the “Conversion Delay
Late Fees”). For illustration purposes only, if Lender delivers a Lender
Conversion Notice to Borrower pursuant to which Borrower is required to deliver
100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender
Conversion Shares have a Lender Conversion Share Value of $20,000.00 (assuming a
Closing Sale Price on the Delivery Date of $0.20 per share of Common Stock),
then in such event a Conversion Delay Late Fee in the amount of $500.00 per day
(the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is
$400.00) would be added to the Outstanding Balance of the Note until such Lender
Conversion Shares are delivered to Lender. For purposes of this example, if the
Lender Conversion Shares are delivered to Lender twenty (20) days after the
applicable Delivery Date, the total Conversion Delay Late Fees that would be
added to the Outstanding Balance would be $10,000.00 (20 days multiplied by
$500.00 per day). If the Lender Conversion Shares are delivered to Lender one
hundred (100) days after the applicable Delivery Date, the total Conversion
Delay Late Fees that would be added to the Outstanding Balance would be
$40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the
Lender Conversion Share Value).
 
 
8

--------------------------------------------------------------------------------

 
 
11. True-Up. On the date that is twenty-three (23) Trading Days (a “True-Up
Date”) from each date Borrower delivers Free Trading (as defined below)
Installment Conversion Shares to Lender, there shall be a true-up where Borrower
shall deliver to Lender additional Installment Conversion Shares (“True-Up
Shares”) if the Installment Conversion Price as of the True-Up Date is less than
the Installment Conversion Price used in the applicable Installment Notice. In
such event, Borrower shall deliver to Lender within three (3) Trading Days of
the True-Up Date (the “True-Up Share Delivery Date”) a number of True-Up Shares
equal to the difference between the number of Installment Conversion Shares that
would have been delivered to Lender on the True-Up Date based on the Installment
Conversion Price as of the True-Up Date and the number of Installment Conversion
Shares originally delivered to Lender pursuant to the applicable Installment
Notice. For the avoidance of doubt, if the Installment Conversion Price as of
the True-Up Date is higher than the Installment Conversion Price set forth in
the applicable Installment Notice, then Borrower shall have no obligation to
deliver True-Up Shares to Lender, nor shall Lender have any obligation to return
any excess Installment Conversion Shares to Borrower under any circumstance. For
the convenience of Borrower only, Lender may, in its sole discretion, deliver to
Borrower a notice (pursuant to a form of notice substantially in the form
attached hereto as Exhibit C) informing Borrower of the number of True-Up Shares
it is obligated to deliver to Lender as of any given True-Up Date, provided that
if Lender does not deliver any such notice Borrower shall not be relieved of its
obligation to deliver True-Up Shares pursuant to this Section 11.
Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up
Shares on or before any applicable True-Up Share Delivery Date, then in such
event the Outstanding Balance of this Note will automatically increase (under
Lender’s and Borrower’s expectations that any such increase will tack back to
the Purchase Price Date for purposes of determining the holding period under
Rule 144) by a sum equal to the number of True-Up Shares deliverable as of the
applicable True-Up Date multiplied by the Market Price for the Common Stock as
of the applicable True-Up Date.
 
12. Ownership Limitation. Notwithstanding anything to the contrary contained in
this Note or the other Transaction Documents, if at any time Lender shall or
would be issued shares of Common Stock under any of the Transaction Documents,
but such issuance would cause Lender (together with its affiliates) to
beneficially own a number of shares exceeding 4.99% of the number of shares of
Common Stock outstanding on such date (including for such purpose the shares of
Common Stock issuable upon such issuance) (the “Maximum Percentage”), then
Borrower must not issue to Lender shares of the Common Stock which would exceed
the Maximum Percentage. For purposes of this section, beneficial ownership of
Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The
shares of Common Stock issuable to Lender that would cause the Maximum
Percentage to be exceeded are referred to herein as the “Ownership Limitation
Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive
benefit of Lender. From time to time, Lender may notify Borrower in writing of
the number of the Ownership Limitation Shares that may be issued to Lender
without causing Lender to exceed the Maximum Percentage. Upon receipt of such
notice, Borrower shall be unconditionally obligated to immediately issue such
designated shares to Lender, with a corresponding reduction in the number of the
Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%”
above shall be replaced with “9.99%” at such time as the Market Capitalization
of the Common Stock is less than $10,000,000.00. Notwithstanding any other
provision contained herein, if the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such increase to “9.99%” shall remain at
9.99% until increased, decreased or waived by Lender as set forth below. By
written notice to Borrower, Lender may increase, decrease or waive the Maximum
Percentage as to itself but any such waiver will not be effective until the 61st
day after delivery thereof. The foregoing 61-day notice requirement is
enforceable, unconditional and non-waivable and shall apply to all affiliates
and assigns of Lender.
 
13. Payment of Collection Costs. If this Note is placed in the hands of an
attorney for collection or enforcement prior to commencing arbitration or legal
proceedings, or is collected or enforced through any arbitration or legal
proceeding, or Lender otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note, then Borrower shall pay the
costs incurred by Lender for such collection, enforcement or action including,
without limitation, attorneys’ fees and disbursements. Borrower also agrees to
pay for any costs, fees or charges of its transfer agent that are charged to
Lender pursuant to any Conversion or issuance of shares pursuant to this Note.
 
 
9

--------------------------------------------------------------------------------

 
 
14. Opinion of Counsel. In the event that an opinion of counsel is needed for
any matter related to this Note, Lender has the right to have any such opinion
provided by its counsel. Lender also has the right to have any such opinion
provided by Borrower’s counsel.
 
15. Governing Law. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State of
Utah, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Utah or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of Utah.
The provisions set forth in the Purchase Agreement to determine the proper venue
for any disputes are incorporated herein by this reference.
 
16. Resolution of Disputes.
 
16.1. Arbitration of Disputes. By its acceptance of this Note, each party agrees
to be bound by the Arbitration Provisions set forth as an Exhibit to the
Purchase Agreement.
 
16.2. Calculation of Disputes. Notwithstanding the Arbitration Provisions, in
the case of a dispute as to any arithmetic calculation hereunder, including
without limitation calculating the Outstanding Balance, Lender Conversion Price,
Lender Conversion Shares to be delivered, Installment Conversion Price,
Installment Conversion Shares to be delivered, the Market Price, or the VWAP
(collectively, “Calculations”), Borrower or Lender (as the case may be) shall
submit the disputed determinations or arithmetic calculations (as the case may
be) via facsimile or email with confirmation of receipt (a) within two (2)
Trading Days after receipt of the applicable notice giving rise to such dispute
to Borrower or Lender (as the case may be) or (b) if no notice gave rise to such
dispute, at any time after Lender learned of the circumstances giving rise to
such dispute. If Lender and Borrower are unable to agree upon such determination
or calculation within two (2) Trading Days of such disputed determination or
arithmetic calculation (as the case may be) being submitted to Borrower or
Lender (as the case may be), then Borrower shall, within two (2) Trading Days,
submit via facsimile the disputed Calculation to an independent, reputable
investment bank or accounting firm selected by Lender. Borrower shall cause the
investment bank or accounting firm to perform the determinations or calculations
(as the case may be) and notify Borrower and Lender of the results no later than
ten (10) Trading Days from the time it receives such disputed determinations or
calculations (as the case may be). Such investment bank’s or accounting firm’s
determination or calculation with respect to the disputes set forth in this
Section 16.2 (as the case may be) shall be binding upon all parties absent
demonstrable error. The investment banker’s or accounting firm’s fee for
performing such Calculation shall be paid by the incorrect party, or if both
parties are incorrect, by the party whose Calculation is furthest from the
correct Calculation as determined by the investment banker or accounting firm.
In the event Borrower is the losing party, no extension of the Delivery Date
shall be granted and Borrower shall incur all effects for failing to deliver the
applicable Conversion Shares in a timely manner as set forth in this Note.
 
17. Cancellation. After repayment or conversion of the entire Outstanding
Balance (including without limitation delivery of True-Up Shares pursuant to the
payment of the final Installment Amount, if applicable), this Note shall be
deemed paid in full, shall automatically be deemed canceled, and shall not be
reissued.
 
18. Amendments. The prior written consent of both parties hereto shall be
required for any change or amendment to this Note.
 
19. Assignments. Borrower may not assign this Note without the prior written
consent of Lender. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by Lender
without the consent of Borrower.
 
20. Time of the Essence. Time is expressly made of the essence with respect to
each and every provision of this Note and the documents and instruments entered
into in connection herewith.
 
 
10

--------------------------------------------------------------------------------

 
 
21. Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with the
subsection of the Purchase Agreement titled “Notices.”
 
22. Liquidated Damages. Lender and Borrower agree that in the event Borrower
fails to comply with any of the terms or provisions of this Note, Lender’s
damages would be uncertain and difficult (if not impossible) to accurately
estimate because of the parties’ inability to predict future interest rates,
future share prices, future trading volumes and other relevant factors.
Accordingly, Lender and Borrower agree that any fees, balance adjustments,
default interest or other charges assessed under this Note are not penalties but
instead are intended by the parties to be, and shall be deemed, liquidated
damages (under Lender’s and Borrower’s expectations that any such liquidated
damages will tack back to the Closing Date for purposes of determining the
holding period under Rule 144).
 
[Remainder of page intentionally left blank; signature page follows]
 
 
11

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the
Effective Date.
 

  BORROWER:          
SearchCore, Inc.
         
 
By:
/s/ James Pakulis     Name: James Pakulis     Title: President and Chief
Executive Officer  

 
ACKNOWLEDGED, ACCEPTED AND AGREED:
 
LENDER:
 
Typenex Co-Investment, LLC

By: Red Cliffs Investments, Inc., its Manager
 

By: /s/ John M. Fife     John M. Fife, President  

 
[Signature Page to Convertible Promissory Note]
 
12

--------------------------------------------------------------------------------

 
 
ATTACHMENT 1
DEFINITIONS

For purposes of this Note, the following terms shall have the following
meanings:
 
A1. “Adjusted Outstanding Balance” means the Outstanding Balance of this Note as
of the date the applicable Fundamental Default occurred less any Conversion
Delay Late Fees included in such Outstanding Balance.
 
A2. “Approved Stock Plan” means any stock option plan which has been approved by
the board of directors of Borrower, pursuant to which Borrower’s securities may
be issued to any employee, officer or director for services provided to
Borrower.
 
A3. “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on its principal market, as reported by Bloomberg, or, if its
principal market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the case may be)
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its
principal market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in “OTC Pink” by OTC Markets Group, Inc. (formerly
Pink Sheets LLC), and any successor thereto. If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as
the case may be) of such security on such date shall be the fair market value as
mutually determined by Lender and Borrower. If Lender and Borrower are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved in accordance with the procedures in Section 16.2. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period.
 
A4. “Deemed Issuance” means an issuance of Common Stock that shall be deemed to
have occurred on the latest possible permitted date pursuant to the terms hereof
or any applicable Warrant in the event Borrower fails to deliver Conversion
Shares as and when required pursuant to Sections 3 or 8 of the Note or Warrant
Shares (as defined in the Purchase Agreement) as and when required pursuant to
the Warrant. For the avoidance of doubt, if Borrower has elected or is deemed
under Section 8.3 to have elected to pay an Installment Amount in Installment
Conversion Shares and fails to deliver such Installment Conversion Shares, such
failure shall be considered a Deemed Issuance hereunder even if an Equity
Conditions Failure exists at that time or other relevant date of determination.
 
A5. “DTC” means the Depository Trust Company.
 
A6. “DTC Eligible” means, with respect to the Common Stock, that such Common
Stock is eligible to be deposited in certificate form at the DTC, cleared and
converted into electronic shares by the DTC and held in the name of the clearing
firm servicing Lender’s brokerage firm for the benefit of Lender.
 
 
13

--------------------------------------------------------------------------------

 
 
A7. “Equity Conditions Failure” means that any of the following conditions has
not been satisfied during any applicable Equity Conditions Measuring Period (as
defined below): (i) with respect to the applicable date of determination all of
the Conversion Shares are freely tradable under Rule 144 or without the need for
registration under any applicable federal or state securities laws (in each
case, disregarding any limitation on conversion of this Note); (ii) on each day
during the period beginning one month prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), the Common Stock is listed or
designated for quotation (as applicable) on any of The New York Stock Exchange,
NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq
Capital Market, the OTC Bulletin Board, the OTCQX or the OTCQB (each, an
“Eligible Market”) and shall not have been suspended from trading on any such
Eligible Market (other than suspensions of not more than two (2) Trading Days
and occurring prior to the applicable date of determination due to business
announcements by Borrower); (iii) on each day during the Equity Conditions
Measuring Period, Borrower shall have delivered all shares of Common Stock
issuable upon conversion of this Note on a timely basis as set forth in
Section 9 hereof and all other shares of capital stock required to be delivered
by Borrower on a timely basis as set forth in the other Transaction Documents;
(iv) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 12
hereof (Lender acknowledges that Borrower shall be entitled to assume that this
condition has been met for all purposes hereunder absent written notice from
Lender); (v) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (vi) on each day during the Equity
Conditions Measuring Period, no public announcement of a pending, proposed or
intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (vii) Borrower shall have no knowledge of
any fact that would reasonably be expected to cause any of the Conversion Shares
to not be freely tradable without the need for registration under any applicable
state securities laws (in each case, disregarding any limitation on conversion
of this Note); (viii) on each day during the Equity Conditions Measuring Period,
Borrower otherwise shall have been in material compliance with each, and shall
not have breached any, term, provision, covenant, representation or warranty of
any Transaction Document; (ix) without limiting clause (viii) above, on each day
during the Equity Conditions Measuring Period, there shall not have occurred an
Event of Default or an event that with the passage of time or giving of notice
would constitute an Event of Default; (x) on each Installment Notice Due Date
and each Installment Date, the average and median daily dollar volume of the
Common Stock on its principal market for the previous twenty (20) Trading Days
shall be greater than $2,000.00; (xi) the ten (10) day average VWAP of the
Common Stock is greater than $0.02, and (xii) the Common Stock shall be DTC
Eligible as of each applicable Installment Notice Due Date, Installment Date or
other date of determination.
 
A8. “Excluded Securities” means any shares of Common Stock, options, or
convertible securities issued or issuable in connection with any Approved Stock
Plan; provided that the option term, exercise price or similar provisions of any
issuances pursuant to such Approved Stock Plan are not amended, modified or
changed on or after the Purchase Price Date.
 
A9. “Free Trading” means that (a) the shares or certificate(s) representing the
applicable shares of Common Stock have been cleared and approved for public
resale by the compliance departments of Lender’s brokerage firm and the clearing
firm servicing such brokerage, and (b) such shares are held in the name of the
clearing firm servicing Lender’s brokerage firm and have been deposited into
such clearing firm’s account for the benefit of Lender.
 
A10. “Fundamental Default” means that Borrower either fails to pay the entire
Outstanding Balance to Lender on or before the Maturity Date or fails to pay the
Mandatory Default Amount within three (3) Trading Days of the date Lender
delivers any notice of acceleration to Borrower pursuant to Section 4.2 of this
Note.
 
A11. “Fundamental Default Conversion Value” means the Adjusted Outstanding
Balance multiplied by the highest Fundamental Default Ratio that occurs during
the Fundamental Default Measuring Period.
 
 
14

--------------------------------------------------------------------------------

 
 
A12. “Fundamental Default Measuring Period” means a number of months equal to
the Outstanding Balance as of the date the Fundamental Default occurred divided
by the Installment Amount, with such number being rounded up to the next whole
month; provided, however, that if Borrower repays the entire Outstanding Balance
prior to the conclusion of the Fundamental Default Measuring Period, the
Fundamental Measuring Period shall end on the date of repayment. For
illustration purposes only, if the Outstanding Balance were equal to $125,000 as
of the date a Fundamental Default occurred and if the Installment Amount were
$28,500, then the Fundamental Default Measuring Period would equal five (5)
months calculated as follows: $125,000/$28,500 equals 4.386, rounded up to five
(5).
 
A13. “Fundamental Default Ratio” means a ratio that will be calculated on each
Trading Day during the Fundamental Default Measuring Period by dividing the
Closing Sale Price for the Common Stock on a given Trading Day by the Lender
Conversion Price (as adjusted pursuant to the terms hereof) in effect for such
Trading Day.
 
A14. “Fundamental Liquidated Damages Amount” means the greater of (i) (a) the
quotient of the Outstanding Balance on the date the Fundamental Default occurred
divided by the then-current Conversion Factor, minus (b) the Outstanding Balance
on the date the Fundamental Default occurred, or (ii) the Fundamental Default
Conversion Value.
 
A15. “Fundamental Transaction” means that (y) (i) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
consolidate or merge with or into (whether or not Borrower or any of its
subsidiaries is the surviving corporation) any other person or entity, or
(ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one
or more related transactions, sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of its respective properties or
assets to any other person or entity, or (iii) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
allow any other person or entity to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
voting stock of Borrower (not including any shares of voting stock of Borrower
held by the person or persons making or party to, or associated or affiliated
with the persons or entities making or party to, such purchase, tender or
exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with any
other person or entity whereby such other person or entity acquires more than
50% of the outstanding shares of voting stock of Borrower (not including any
shares of voting stock of Borrower held by the other persons or entities making
or party to, or associated or affiliated with the other persons or entities
making or party to, such stock or share purchase agreement or other business
combination), or (v) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, reorganize, recapitalize or
reclassify the Common Stock, other than an increase in the number of authorized
shares of Borrower’s Common Stock, or (z) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the
rules and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
voting stock of Borrower.
 
A16.  “Installment Amount” means the greater of (i) $14,250.00 ($85,500.00 ÷ 6),
plus the sum of any accrued and unpaid interest as of the applicable Installment
Date and accrued, and unpaid late charges, if any, under this Note as of the
applicable Installment Date, and any other amounts accruing or owing to Lender
under this Note as of such Installment Date, and (ii) the then Outstanding
Balance divided by the number of Installment Dates remaining prior to the
Maturity Date.
 
A17. “Lender Conversion Share Value” means the product of the number of Lender
Conversion Shares deliverable pursuant to any Lender Conversion multiplied by
the Closing Sale Price of the Common Stock on the Delivery Date for such Lender
Conversion.
 
A18. “Major Default” means any Event of Default occurring under Sections 4.1(i),
(iii), (iv), (x), (xii), or (xv) of this Note.
 
 
15

--------------------------------------------------------------------------------

 
 
A19. “Market Capitalization of the Common Stock” shall mean the product equal to
(a) the average VWAP of the Common Stock for the immediately preceding fifteen
(15) Trading Days, multiplied by (b) the aggregate number of outstanding shares
of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form
10-K.
 
A20. “Minor Default” means any Event of Default that is not a Major Default or a
Fundamental Default.
 
A21. “Optional Prepayment Liquidated Damages Amount” means an amount equal to
the difference between (a) the product of (i) the number of shares of Common
Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2)
the Lender Conversion Price as of the date Borrower delivered the applicable
Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Sale Price
of the Common Stock on the date Borrower delivered the applicable Optional
Prepayment Amount to Lender, and (b) the applicable Optional Prepayment Amount
paid by Borrower to Lender. For illustration purposes only, if the applicable
Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of
the date the Optional Prepayment Amount was paid to Lender was equal to $0.75
per share of Common Stock, and the Closing Sale Price of a share of Common Stock
as of such date was equal to $1.00, then the Optional Prepayment Liquidated
Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67
(calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00)
minus (b) $50,000.00.
 
A22. “Trading Day” shall mean any day on which the Common Stock is traded or
tradable for any period on the Common Stock’s principal market, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
 
 
16

--------------------------------------------------------------------------------

 
 
EXHIBIT A
 
Typenex Co-Investment, LLC
303 East Wacker Drive, Suite 1200
Chicago, Illinois 60601
 

SearchCore, Inc.  Date: __________________

Attn: James Pakulis
500 North Northeast Loop 223
Tyler, Texas 75708
 
LENDER CONVERSION NOTICE
 
The above-captioned Lender hereby gives notice to SearchCore, Inc., a Nevada
corporation (the “Borrower”), pursuant to that certain Convertible Promissory
Note made by Borrower in favor of Lender on July 18, 2014 (the “Note”), that
Lender elects to convert the portion of the Note balance set forth below into
fully paid and non-assessable shares of Common Stock of Borrower as of the date
of conversion specified below. Said conversion shall be based on the Lender
Conversion Price set forth below. In the event of a conflict between this Lender
Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form
of Lender Conversion Notice to conform to the Note. Capitalized terms used in
this notice without definition shall have the meanings given to them in the
Note.
 
 
A.
Date of Conversion: ____________
 

 
B.
Lender Conversion #: ____________
 

 
C.
Conversion Amount: ____________
 

 
D.
Lender Conversion Price: _______________

 
E.
Lender Conversion Shares: _______________ (C divided by D)

 
F.
Remaining Outstanding Balance of Note: ____________*

 
* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement), the terms of which shall control in the event of any dispute between
the terms of this Lender Conversion Notice and such Transaction Documents.
 
$_________________ of the Conversion Amount converted hereunder shall be
deducted from the Installment Amount(s) relating to the following Installment
Date(s): __________________________________________.

So that DTC processing can begin, please deliver, via reputable overnight
courier, a certificate representing DTC Eligible Lender Conversion Shares to:
 

  Name: _____________________________________   Address:
_____________________________________     _____________________________________

 
To the extent the Lender Conversion Shares are not DTC Eligible, please deliver,
via reputable overnight courier, a certificate representing the non-DTC Eligible
Lender Conversion Shares to the party at the address set forth above.

 
17

--------------------------------------------------------------------------------

 
 
Sincerely,

Lender:

Typenex Co-Investment, LLC

By: Red Cliffs Investments, Inc., its Manager
 
By: _________________________
John M. Fife, President

 
18

--------------------------------------------------------------------------------

 
 
EXHIBIT B
 
SearchCore, Inc.
500 North Northeast Loop 223
Tyler, Texas 75708
 

Typenex Co-Investment, LLC Date: _____________

Attn: John Fife
303 E. Wacker Dr., Suite 1200
Chicago, IL 60601
 
INSTALLMENT NOTICE
 
The above-captioned Borrower hereby gives notice to Typenex Co-Investment, LLC,
a Utah limited liability company (the “Lender”), pursuant to that certain
Convertible Promissory Note made by Borrower in favor of Lender on July 18, 2014
(the “Note”), of certain Borrower elections and certifications related to
payment of the Installment Amount of $_________________ due on ___________, 201_
(the “Installment Date”). In the event of a conflict between this Installment
Notice and the Note, the Note shall govern, or, in the alternative, at the
election of Lender in its sole discretion, Lender may provide a new form of
Installment Notice to conform to the Note. Capitalized terms used in this notice
without definition shall have the meanings given to them in the Note.
 
INSTALLMENT CONVERSION AND CERTIFICATIONS
AS OF THE INSTALLMENT DATE

A.  
INSTALLMENT CONVERSION

 
 
A.
Installment Date: ____________, 201__

 
B.
Installment Amount: ____________
 

 
C.
Portion of Installment Amount Borrower elected to pay in cash: ____________

 
D.
Portion of Installment Amount to be converted into Common Stock: ____________ (B
minus C)

 
E.
Installment Conversion Price: _______________ (lower of (i) Lender Conversion
Price in effect and (ii) Market Price as of Installment Date)

 
F.
Installment Conversion Shares: _______________ (D divided by E)

 
G.
Remaining Outstanding Balance of Note: ____________ *

 
* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement), the terms of which shall control in the event of any dispute between
the terms of this Installment Notice and such Transaction Documents.

B.  
EQUITY CONDITIONS CERTIFICATION

 
1.  
Market Capitalization of the Common Stock:________________

 
(Check One)
 
2.  
_________ Borrower herby certifies that no Equity Conditions Failure exists as
of the Installment Date.

 
3.  
_________ Borrower hereby gives notice that an Equity Conditions Failure has
occurred and requests a waiver from Lender with respect thereto. The Equity
Conditions Failure is as follows:

 
 
19

--------------------------------------------------------------------------------

 
 
 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 
Sincerely,
 
Borrower:
 
SearchCore, Inc.
 
By: ______________________________
 
Name: ____________________________
 
Title: _____________________________
 
 
20

--------------------------------------------------------------------------------

 
 
EXHIBIT C

Typenex Co-Investment, LLC
303 East Wacker Drive, Suite 1200
Chicago, Illinois 60601
 

SearchCore, Inc. Date: __________________

Attn: _________________
500 North Northeast Loop 223
Tyler, Texas 75708
 
TRUE-UP NOTICE
 
The above-captioned Lender hereby gives notice to SearchCore, Inc., a Nevada
corporation (the “Borrower”), pursuant to that certain Convertible Promissory
Note made by Borrower in favor of Lender on July 18, 2014 (the “Note”), of
True-Up Conversion Shares related to _____________, 201_ (the “Installment
Date”). In the event of a conflict between this True-Up Notice and the Note, the
Note shall govern, or, in the alternative, at the election of Lender in its sole
discretion, Lender may provide a new form of True-Up Notice to conform to the
Note. Capitalized terms used in this notice without definition shall have the
meanings given to them in the Note.
 
TRUE-UP CONVERSION SHARES AND CERTIFICATIONS
AS OF THE TRUE-UP DATE

1.  
TRUE-UP CONVERSION SHARES

 
A.  
Installment Date: ____________, 201_

 
B.  
True-Up Date: ____________, 201_

 
C.  
Portion of Installment Amount converted into Common Stock: _____________

 
D.  
True-Up Conversion Price: _______________ (lower of (i) Lender Conversion Price
in effect and (ii) Market Price as of True-Up Date)

 
E.  
True-Up Conversion Shares: _______________ (C divided by D)

 
F.  
Installment Conversion Shares delivered: ________________

 
G.  
True-Up Conversion Shares to be delivered: ________________ (only applicable if
E minus F is greater than zero)

 
2.  
EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower)

 
A.  
Market Capitalization of the Common Stock:________________

 
(Check One)
 
B.  
_________ Borrower herby certifies that no Equity Conditions Failure exists as
of the applicable True-Up Date.

 
C.  
_________ Borrower hereby gives notice that an Equity Conditions Failure has
occurred and requests a waiver from Lender with respect thereto. The Equity
Conditions Failure is as follows:

 
 
21

--------------------------------------------------------------------------------

 
 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 
Sincerely,

Lender:                      

Typenex Co-Investment, LLC

By: Red Cliffs Investments, Inc., its Manager
 
By: ____________________________
John M. Fife, President
 
ACKNOWLEDGED AND CERTIFIED BY:
 
Borrower:
 
SearchCore, Inc.
 
By: ________________________________
 
Name: ______________________________
 
Title: _______________________________
 
 
22

--------------------------------------------------------------------------------