Exhibit 10.55

 

MEMORANDUM

 

TO: Magna Group. I..LC     FROM: Star Financial Corporation     DATE: February
4.2014     RE: Disbursement of Funds

 

Pursuant to that certain Assignment Agreement between the parties listed above
dated February 4, 2014. a disbursement of funds will take place in the amount
and manner described below:

 

Please disburse to:   Amount to disburse: $10338.36 Form of distribution Wire
Name Star Financial Corporation Address   Bank Name: CitiBank Bank Address 700
North Milwaukee Ave. Bank Phone # 847-984-0120 ABA Routing # 271070801 Account #
080076600

 

 

$300 to be Withheld for Legal and Administrative Fees

 

TOTAL: $10,638.36

 

 

 

 

By: Fay Passley                                               Dated February 4,
2014 Star Financial Corporation   Name: Fay Passley   Title: President  

 

 

1

 

ASSIGNMENT AGREEMENT

 

THIS ASSIGNMENT AGREEMENT (the “Agreement”) is made effective as of the 4th day
of February, 2014, by and among Star Financial Corporation (the “Assignor”);
Magna Group, LLC (the “Assignee”) and EPAZZ, Inc. (the “Company”).

 

WHEREAS, Assignee wish to assume, all of the Assignors’ right, title, and
interest in and to that Promissory Note, dated as of June 12, 2013 made by the
Company in the original principal amount of $10,000 in favor of Assignor (the
“Note”) ; and

 

WHEREAS, the Assignor desires to assign to the Assignee all of the Assignors’
right, title, and interest in and to the Note, based on the terms and conditions
set out herein.

 

WHEREAS, after the funding of this Agreement the Assignee and the Company will
enter into a restated convertible promissory note attached as Exhibit A to this
Agreement, which the Assignor will not be a party to and will have no
involvement in.

 

NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the parties hereto, the parties hereto agree as follows:

 

1.Assignment. Subject to and in accordance with the terms and conditions set
forth in this Agreement, the Assignor hereby grants, sells, assigns, and conveys
to the Assignee, without recourse, all of the Assignor’s right, title and
interest in and to the Note. Within two (2) business days of receipt of the
consideration (as set forth below), Assignor shall mail to the Company, at the
address provided to it by the Company the original Note. Upon receipt of the
original Note, the Company shall issue new notes to the Assignee

 

2.Consideration. In consideration for the assignment of the Note, Assignee shall
pay to the Assignor within approximately 24 hours from receipt of the first
certificate of the Company, from the first notice of conversion to the Company
and as further defined in Sections 14 and 15 hereunder, in lawful money of the
United States of America, to the account provided by the Assignor in a
Memorandum to Magna Group, LLC. $500 will be withheld from the Assignor and will
be designated for legal fees associated with this transaction.

 

3.Representations of Assignor. Assignor hereby represents and covenants to
Assignee that:

 

a.Assignor has all requisite authority to execute and deliver this Agreement and
any other document contemplated by this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby;

 

 

 

 

2

 

 

b.The outstanding principal amount of the Note, as of February 4, 2014 is
$10,000 and the accrued and unpaid interest is $638.

 

c.Assignor’s interest in and to the Note are free and clear of all liens,
encumbrances, obligations or defects which are of record prior to the date of
this Agreement.

 

d.Assignor is an "accredited investor" within the meaning of Regulation D, Rule
501(a), promulgated by the Securities and Exchange Commission under the
Securities Act.

 

e.Neither Assignor nor any of its officers and directors are now, or have been
in the last 90-days, officers or directors of the Company, or beneficial holders
of 10% or more of its stock

 

4.Representations of Assignee. The Assignee hereby represents and covenant,
individually, to the Company that:

 

a.Assignee has all requisite power and authority to execute and deliver this
Agreement and any other document contemplated by this Agreement to be signed by
the Assignee and to perform its obligations hereunder and to consummate the
transactions contemplated hereby;

 

b.Assignee understand that the shares to be issued upon conversion of the Note
have not been, and may not be, registered under the Securities Act of 1933, as
amended (the “Securities Act”) by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of Assignee’s representations as expressed herein or otherwise made
pursuant hereto;

 

c.Assignee has substantial experience in evaluating and investing in securities
of companies similar to the Company and acknowledges that it can protect its own
interests. Assignee has such knowledge and experience in financial and business
matters so it is capable of evaluating the merits and risks of its investment in
the Company. Assignee is an “accredited investor” within the meaning of
Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission
under the Securities Act;

 

d.Assignee has had an opportunity to receive all information related to the
Company requested by them and to ask questions of and receive answers from the
Company regarding the Company, and its business. Assignee has reviewed the
Company’s periodic reports on file with Securities and Exchange Act filings;

 

 

3

 

 

e.Assignee understands that there is a limited trading market for the shares
issued upon conversion of the Note and that an active market may not develop for
the shares.

 

f.Assignee represents and warrants that it has read the terms of the Note and
agrees to such terms.

 

5.Entire Agreement. This Agreement constitutes the entire agreement between the
parties in respect of the assignments contemplated hereby and there are no
warranties, representations, terms, conditions, or collateral agreements
expressed or implied, statutory or otherwise, other than expressly set forth in
this Agreement. This Agreement expressly supersedes and replaces any and all
prior understandings or agreements between the parties with respect to the
subject matter of this Agreement.

 

6.All Further Acts. Each of the parties hereto will do any and all such acts and
will execute any and all such documents as may reasonably be necessary from time
to time to give full force and effect to the provisions and intent of this
Agreement. The Assignor further agrees that it will, at any time and from time
to time after the date hereof, upon the Assignee’s request, execute, acknowledge
and deliver or cause to be executed and delivered, all further documents or
instruments necessary to effect the transactions contemplated in this Agreement.

 

7.Choice of Law. This Agreement shall be governed by, and construed with, the
laws of the State of New York, without giving effect to the conflict of law
provisions thereof.

 

8.Notices. Notices to Assignee under the Note, shall be to the address set forth
above.

 

9.Headings. The headings and captions contained in this Agreement are for
convenience of reference only and will not in any way affect the meaning or
interpretation of this Agreement.

 

10.Survival. Each party is entitled to rely on the representations and
warranties of the other party and all such representations and warranties will
be effective regardless of any investigation that the party has undertaken of
failed to undertake. The representations and warranties will survive the
effective date of this Agreement and continue in full force and effect until six
(6) months after the effective date of this Agreement.

 

11.No Assignment. No Party may assign any right, benefit or interest in this
Agreement without the written consent of the other party, which consent may not
be unreasonably withheld. This Agreement will inure to the benefit of, and be
binding upon, the Assignors and the Assignee and their respective successors and
assigns.

 

12.Amendment. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.

 

 

4

 

 

13.Counterparts and Electronic Means. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original and all of which
will together constitute one and the same instrument. Delivery of an executed
copy of this Agreement by electronic facsimile transmission or other means of
electronic communication capable of producing a printed copy wit' be deemed to
be execution and delivery of this Agreement as of the day and year first written
above.

 

14.Conditions_ The Assignor acknowledges the Assignee's participation, in
respect to this Agreement, is on a conditions permitting basis. In the evert
that the transaction's risk profile., market pricing or implied volatility
substantially changes, due diligence concerns, or any other conditions material
to the successful closing of the transaction change., the Assignee reserves the
right to terminate the Agreement at any lime before delivering the cash
consideration. as described hereof, to the Assignor.

 

15.Deposit and Clearance. If the Assignee is unable to deposit and clear the
shares of the Company for any reason. the Assignee may return any shares for
cancellation to the transfer agent and (a) cancel the transaction and not make
payrnents to the Assignor or (b) demand the return of any payments advanced by
the Assignee to the Assignor.

 

WITNESS THEREOF the parties hereto have executed this Agreement as of the day
and year first above written.

 

Assignor:

 

Star Financial Corporation

 

/s/ Fay Passley                                         

Name: Fay Passley

Title: President

 

 

Assignee:

 

Magna Group LLC

 

/s/ Joshua Sason                                     

Joshua Sason, CEO

 

 

Company:

 

EPAZZ, Inc.

 

/s/ Shaun Passley                                    

Shaun Passley, CEO, CFO, President

 

 

 

5

 

 

STATEMENT OF NON-AFFILIATION

 

 

I, Star Financial Corporation, am not an officer, director, control person, or
beneficial owner of more than 9.9% of any class of security of the Issuer and I
am not and have not been during the preceding three months an affiliate of the
Company as that term is defined by Rule 144 of the Securities Act of 1933.

 

All information furnished herein is true, accurate and complete. In the event of
a change of any information contained herein, or in the event any information
shall come into my possession which would indicate that the information
contained herein is not accurate or complete, I shall immediately inform you of
such change or information in writing.

 

 

 

Signed: /s/ Fay Passley                        

Star Financial Corporation

 

Date: February 4, 2014

 

 

6

 

MEMORANDUM

 

TO: Magna Group. I..LC     FROM: Vivienne Passley     DATE: February 4.2014    
RE: Disbursement of Funds

 

Pursuant to that certain Assignment Agreement between the parties listed above
dated February 4, 2014. a disbursement of funds will take place in the amount
and manner described below:

 

Please disburse to:   Amount to disburse: $24,152.00 Form of distribution Wire
Name Vivienne Passley Address

2629 N. Wilshire Lane

Arlington Heights, IL 60004

Bank Name: CitiBank Bank Address 333 E. Northwest Hwy, Palatine, IL 60067 Bank
Phone # 847-202-2110 ABA Routing # 271070801 Account # 0928572355

 

 

$700 to be Withheld for Legal and Administrative Fees

 

TOTAL: $24,852.60

 

 

 

 

By: /s/ Vivien Passley                             Dated February 4, 2014 Name:
Vivien Passley   Title:  

 

 

 

7

 

 

STATEMENT OF NON-AFFILIATION

 

 

I, Vivienne Passley, am not an officer, director, control person, or beneficial
owner of more than 9.9% of any class of security of the Issuer and I am not and
have not been during the preceding three months an affiliate of the Company as
that term is defined by Rule 144 of the Securities Act of 1933.

 

All information furnished herein is true, accurate and complete. In the event of
a change of any information contained herein, or in the event any information
shall come into my possession which would indicate that the information
contained herein is not accurate or complete, I shall immediately inform you of
such change or information in writing.

 

 

Signed: /s/ Vivien Passley                                   

Vivien Passley

 

 

Date: February 4, 2014

 

 

8

 

 

ASSIGNMENT AGREEMENT

 

THIS ASSIGNMENT AGREEMENT (the "Agreement") is made effective as of the 4th day
of February, 2014, by and among Vivienne Passley (the "Assignor"); Magna Group,
LLC (the "Assignee") and EPAZZ, Inc. (the "Company").

 

WHEREAS, Assignee wish to assume, all of the Assignors' right, title, and
interest in and to that Promissory Note, dated as of July 19, 2013 made by the
Company in the original principal amount of $23,000 in favor of Assignor (the
"Note") ; and

 

WHEREAS, the Assignor desires to assign to the Assignee all of the Assignors'
right, title, and interest in and to the Note, based on the terms and conditions
set out herein.

 

WHEREAS, after the funding of this Agreement the Assignee and the Company will
enter into a restated convertible promissory note attached as Exhibit A to this
Agreement, which the Assignor will not be a party to and will have no
involvement in.

 

NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the parties hereto, the parties hereto agree as follows:

 

1.Assignment. Subject to and in accordance with the terms and conditions set
forth in this Agreement, the Assignor hereby grants, sells, assigns, and conveys
to the Assignee, without recourse, all of the Assignor's right, title and
interest in and to the Note. Within two (2) business days of receipt of the
consideration (as set forth below), Assignor shall mail to the Company, at the
address provided to it by the Company the original Note. Upon receipt of the
original Note, the Company shall issue new notes to the Assignee

 

2.Consideration. In consideration for the assignment of the Note, Assignee shall
pay to the Assignor within approximately 24 hours from receipt of the first
certificate of the Company, from the first notice of conversion to the Company
and as further defined in Sections 14 and 15 hereunder, in lawful money of the
United States of America, to the account provided by the Assignor in a
Memorandum to Magna Group, LLC. $1,000 will be withheld from the Assignor and
will be designated for legal fees associated with this transaction.

 

3.Representations of Assignor. Assignor hereby represents and covenants to
Assignee that:

 

a.Assignor has all requisite authority to execute and deliver this Agreement and
any other document contemplated by this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby;

 

 

9

 

b.The outstanding principal amount of the Note, as of February 4, 2014 is
$23,000 and the accrued and unpaid interest is $1,852.60.

 

c.Assignor's interest in and to the Note are free and clear of all liens,
encumbrances, obligations or defects which are of record prior to the date of
this Agreement.

 

d.Assignor is an "accredited investor" within the meaning of Regulation D, Rule
501(a), promulgated by the Securities and Exchange Commission under the
Securities Act.

 

e.Neither Assignor nor any of its officers and directors are now, or have been
in the last 90-days, officers or directors of the Company, or beneficial holders
of 10% or more of its stock

 

4.Representations of Assignee. The Assignee hereby represents and covenant,
individually, to the Company that:

 

a.Assignee has all requisite power and authority to execute and deliver this
Agreement and any other document contemplated by this Agreement to be signed by
the Assignee and to perform its obligations hereunder and to consummate the
transactions contemplated hereby;

 

b.Assignee understand that the shares to be issued upon conversion of the Note
have not been, and may not be, registered under the Securities Act of 1933, as
amended (the "Securities Act") by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of Assignee's representations as expressed herein or otherwise made
pursuant hereto;

 

c.Assignee has substantial experience in evaluating and investing in securities
of companies similar to the Company and acknowledges that it can protect its own
interests. Assignee has such knowledge and experience in financial and business
matters so it is capable of evaluating the merits and risks of its investment in
the Company. Assignee is an "accredited investor" within the meaning of
Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission
under the Securities Act;

 

d.Assignee has had an opportunity to receive all information related to the
Company requested by them and to ask questions of and receive answers from the
Company regarding the Company, and its business. Assignee has reviewed the
Company's periodic reports on file with Securities and Exchange Act filings;

 

 

10

 

e.Assignee understands that there is a limited trading market for the shares
issued upon conversion of the Note and that an active market may not develop for
the shares.

 

f.Assignee represents and warrants that it has read the terms of the Note and
agrees to such terms.

 

5.Entire Agreement. This Agreement constitutes the entire agreement between the
parties in respect of the assignments contemplated hereby and there are no
warranties, representations, terms, conditions, or collateral agreements
expressed or implied, statutory or otherwise, other than expressly set forth in
this Agreement. This Agreement expressly supersedes and replaces any and all
prior understandings or agreements between the parties with respect to the
subject matter of this Agreement.

 

6.All Further Acts. Each of the parties hereto will do any and all such acts and
will execute any and all such documents as may reasonably be necessary from time
to time to give full force and effect to the provisions and intent of this
Agreement. The Assignor further agrees that it will, at any time and from time
to time after the date hereof, upon the Assignee's request, execute, acknowledge
and deliver or cause to be executed and delivered, all further documents or
instruments necessary to effect the transactions contemplated in this Agreement.

 

7.Choice of Law. This Agreement shall be governed by, and construed with, the
laws of the State of New York, without giving effect to the conflict of law
provisions thereof.

 

8.Notices. Notices to Assignee under the Note, shall be to the address set forth
above.

 

9.Headings. The headings and captions contained in this Agreement are for
convenience of reference only and will not in any way affect the meaning or
interpretation of this Agreement.

 

10.Survival. Each party is entitled to rely on the representations and
warranties of the other party and all such representations and warranties will
be effective regardless of any investigation that the party has undertaken of
failed to undertake. The representations and warranties will survive the
effective date of this Agreement and continue in full force and effect until six
(6) months after the effective date of this Agreement.

 

11.No Assignment. No Party may assign any right, benefit or interest in this
Agreement without the written consent of the other party, which consent may not
be unreasonably withheld. This Agreement will inure to the benefit of, and be
binding upon, the Assignors and the Assignee and their respective successors and
assigns.

 

12.Amendment. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.

 

 

11

 

 

13.Counterparts and Electronic Means. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original and all of which
will together constitute one and the same instrument. Delivery of an executed
copy of this Agreement by electronic facsimile transmission or other means of
electronic communication capable of producing a printed copy will be deemed to
be execution and delivery of this Agreement as of the day and year first written
above.

 

14.Conditions. The Assignor acknowledges the Assignee's participation, in
respect to this Agreement, is on a conditions permitting basis. In the event
that the transaction's risk profile, market pricing or implied volatility
substantially changes, due diligence concerns, or any other conditions material
to the successful closing of the transaction change, the Assignee reserves the
right to terminate the Agreement at any time before delivering the cash
consideration, as described hereof, to the Assignor.

 

15.Deposit and Clearance. If the Assignee is unable to deposit and clear the
shares of the Company for any reason, the Assignee may return any shares for
cancellation to the transfer agent and (a) cancel the transaction and not make
payments to the Assignor or (b) demand the return of any payments advanced by
the Assignee to the Assignor.

 

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.

 

 

Assignor:

 

Vivienne Passley

 

/s/ Vivienne Passley                                 

Name: Vivienne Passley

Title:

 

 

Assignee:

 

Magna Group LLC

 

/s/ Joshua Sason                                     

Joshua Sason, CEO

 

 

Company:

 

EPAZZ, Inc.

 

/s/ Shaun Passley                                    

Shaun Passley, CEO, CFO, President

 

 

 

12

 

 

Rule 144 Representation

 

EPAZZ, Inc. (the “Company”) hereby represents that (a) the Company is not, and
has never been, a “shell company” as described in Rule 144(i)(1)(i) of the
Securities Act of 1933, as amended (the “Securities Act”), or, alternatively,
(b) the Company is a former shell company as described in Rule 144(i)(1)(i),
(ii) and (i) ceased to be a shell company as described in Rule 144(i)(1)(i);
(ii) is subject to the reporting requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”); (iii) has
filed all reports and other materials required to be filed by Section 13 or
15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for
such shorter period that the issuer was required to file such reports and
materials), other than Form 8-K reports; and (iv) one year has elapsed from the
date that the Company filed current “Form 10 information” with the Commission
reflecting its status as an entity that is no longer an “shell company” as
defined in Rule 144(i)(1)(i).

 

All information furnished herein is true, accurate and complete. In the event of
a change of any information contained herein, or in the event any information
shall come into my possession which would indicate that the information
contained herein is not accurate or complete, I shall immediately inform you of
such change or information in writing.

 

/s/ Shaun Passley                          

EPAZZ, Inc.

 

By: Shaun Passley

 

Title:

 

February 4, 2014

 

 

13

 

CORPORATE RESOLUTION OF THE BOARD OF DIRECTORS OF

EPAZZ, Inc.

 

We, the undersigned, do hereby certify that at a meeting of the Board of
Directors of EPAZZ, Inc., a IL corporation organized under the laws of the State
of IL (the “Corporation”), duly held on February 4, 2014 at 205 W. Wacker Dr.
Suite 1320, Chicago, IL 60606 which said meeting no less than two directors were
present and voting throughout, the following resolution, upon motions made,
seconded and carried, was duly adopted and is now in full force and effect:

 

WHEREAS, the Board of Directors of the Corporation deem it in the best interests
of the Corporation to enter into the Assignment and Modification Agreement dated
February 4, 2014 (the “Agreement”), in connection with the issuance of an 12%
convertible note of the Corporation, in the aggregate principal amount of
$35,490.96 (the “Note”), convertible into shares of common stock, par value
$0.001 per share, of the Company (the “Common Stock”), upon the terms and
subject to the limitations and conditions set forth in such Note, along with an
irrevocable letter agreement with Island Stock Transfer, the Corporation’s
transfer agent, with respect to the reserve of shares of common stock of the
Corporation to be issued upon any conversion of the Note; the issuance of such
shares of common stock in connection with a conversion of the Note; and the
indemnification of Island Stock Transfer for all loss, liability, or expense in
carrying out the authority and direction contained in the irrevocable letter
agreement (the “Letter Agreement”);

 

NOW, THEREFORE, BE IT:

 

RESOLVED, that the Corporation is hereby authorized to enter into the Agreement,
the Note and the Letter Agreement which provides in pertinent part: (i) reserve
shares of common stock of the Corporation to be issued upon any conversion of
the Note; (ii) issue such shares of common stock in connection with a conversion
of the Note (issuance upon receipt of a notice of conversion of the holder of
the Note) without any further action or confirmation by the Corporation; and the
Corporation indemnifies Island Stock Transfer for all loss, liability, or
expense in carrying out the authority and direction contained in the Letter
Agreement:

 

RESOLVED, that any executive officer of the Corporation be, and hereby is,
authorized, empowered and directed, from time to time, to take such additional
action and to execute, certify and deliver to the transfer agent of the
Corporation, as any appropriate or proper to implement the provisions of the
foregoing resolutions:

 

The undersigned, do hereby certify that we are members of the Board of Directors
of the Corporation; that the attached is a true and correct copy of resolutions
duly adopted and ratified at a meeting of the Board of Directors of the
Corporation duly convened and held in accordance with its by-laws and the laws
of the State of IL, as transcribed by us from the minutes; and that the same
have not in any way been modified, repealed or rescinded and are in full force
and effect.

 

IN WITNESS WHEREOF, We have hereunto set our hands as President/CEO and Members
of the Board of Directors of the Corporation.

 

Dated: February 4, 2014

 

  /s/ Shaun Passley                                                      Shaun
Passley,     CEO, CFO, President/Member of the Board                      
Signature: /s/ Shaun Passley                                   Member of the
Board           Print Name: Shaun Passley                                   

 

 

 

14

 

EPAZZ, Inc.

$35,490.96

 

TWELVE PERCENT (12%) CONVERTIBLE NOTE
DATED FEBRUARY 4, 2014

 

THIS NOTE (the “Note”) is a duly authorized Convertible Note of EPAZZ, Inc.,
a(n) IL corporation (the “Company”).

 

FOR VALUE RECEIVED, the Company promises to pay Magna Group, LLC (the “Holder”),
the principal sum of $35,490.96 (the “Principal Amount”) or such lesser
principal amount following the conversion or conversions of this Note in
accordance with Paragraph 2 (the “Outstanding Principal Amount”) on February 4,
2015 (the “Maturity Date”), and to pay interest on the Outstanding Principal
Amount (“Interest”) in a lump sum on the Maturity Date, at the rate of twelve
percent (12%) per Annum (the “Rate”) from the date of issuance.

 

Accrual of Interest shall commence on the date of this Note and continue until
the Company repays or provides for repayment in full the Outstanding Principal
Amount and all accrued but unpaid Interest. Accrued and unpaid Interest shall
bear Interest at the Rate until paid, compounded monthly. The Outstanding
Principal Amount of this Note is payable on the Maturity Date in such coin or
currency of the United States as at the time of payment is legal tender for
payment of public and private debts, at the address last appearing on the Note
Register of the Company as designated in writing by the Holder from time to
time. The Company may prepay principal and interest on this Note at any time
before the Maturity Date.

 

The Company will pay the Outstanding Principal Amount of this Note on the
Maturity Date, free of any withholding or deduction of any kind (subject to the
provision of paragraph 2 below), to the Holder as of the Maturity Date and
addressed to the Holder at the address appearing on the Note Register.

 

This Note is subject to the following additional provisions:

 

1.           All payments on account of the Outstanding Principal Amount of this
Note and all other amounts payable under this Note (whether made by the Company
or any other person) to or for the account of the Holder hereunder shall be made
free and clear of and without reduction by reason of any present and future
income, stamp, registration and other taxes, levies, duties, cost, and charges
whatsoever imposed, assessed, levied or collected by the United States or any
political subdivision or taxing authority thereof or therein, together with
interest thereon and penalties with respect thereto, if any, on or in respect of
this Note (such taxes, levies, duties, costs and charges being herein
collectively called “Taxes”).

 

2.           The Holder of this Note is entitled, at its option, at any time
after the issuance of this Note, to convert all or any lesser portion of the
Outstanding Principal Amount and accrued but unpaid Interest into Common Stock
at a conversion price (the “Conversion Price”) for each share of Common Stock
equal to a price which is a 50% discount from the lowest trading price in the 5
days prior to the day that the Holder requests conversion, unless otherwise
modified by mutual agreement between the Parties (the “Conversion Price”) (The
Common stock into which the Note is converted shall be referred to in this
agreement as “Conversion Shares”). If the Issuer’s Common stock is chilled for
deposit at DTC and/or becomes chilled at any point while this Agreement remains
outstanding, an additional 8% discount will be attributed to the Conversion
Price defined hereof. The Issuer will not be obligated to issue fractional
Conversion Shares. The Holder may convert this Note into Common Stock by
surrendering the Note to the Company, with the form of conversion notice
attached to the Note as Exhibit B, executed by the Holder of the Note evidencing
such Holder’s intention to convert the Note. Additionally, in no event shall the
Conversion Price be less than $0.00004. If the Borrower is unable to issue any
shares under this provision due to the fact that there is an insufficient number
of authorized and unissued shares available, the Holder promises not to force
the Borrower to issue these shares or trigger an Event of Default, provided that
Borrower takes immediate steps required to get the appropriate level of approval
from shareholders or the board of directors, where applicable to raise the
number of authorized shares to satisfy the Notice of Conversion.

 

The Company will not issue fractional shares or scrip representing fractions of
shares of Common Stock on conversion, but the Company will round the number of
shares of Common Stock issuable up to the nearest whole share. The date on which
a Notice of Conversion is given shall be deemed to be the date on which the
Holder notifies the Company of its intention to so convert by delivery, by
facsimile transmission or otherwise, of a copy of the Notice of Conversion.
Notice of Conversion may be sent by email to the Company, attn: Mr. Shaun
Passley, CEO, CFO, President. The Holder will deliver this Note, together with
original executed copy of the Notice of Conversion, to the Company within three
(3) business days following the Conversion Date. At the Maturity Date, the
Company will pay any unconverted Outstanding Principal Amount and accrued
Interest thereon, at the option of the Company, in either (a) cash or (b) Common
Stock valued at a price equal to the Conversion Price determined as if the Note
was converted in accordance with its terms into Common Stock on the Maturity
Date.

 

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3.           No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to the payment of the
Outstanding Principal Amount of this Note at the Maturity Date, and in the coin
or currency herein prescribed. This Note and all other Notes now or hereafter
issued on similar terms are direct obligations of the Company. In the event of
any liquidation, reorganization, winding up or dissolution, repayment of this
Note shall not be subordinate in any respect to any other indebtedness of the
Company outstanding as of the date of this Note or hereafter incurred by the
Company.

 

Such non-subordination shall extend without limiting the generality of the
foregoing, to all indebtedness of the Company to banks, financial institutions,
other secured lenders, equipment lessors and equipment finance companies, but
shall exclude trade debts. Any warrants, options or other securities convertible
into stock of the Company issued before the date hereof shall rank pari passu
with the Note in all respects

 

4.           If at any time or from time to time after the date of this Note,
the Common Stock issuable upon the conversion of the Note is changed into the
same or different numbers of shares of any class or classes of stock, whether by
recapitalization or otherwise, then in each such event the Holder shall have the
right thereafter to convert the Note into the kind of security receivable in
such recapitalization, reclassification or other change by holders of Common
Stock, all subject to further adjustment as provided herein. In such event, the
formulae set forth herein for conversion and redemption shall be equitably
adjusted to reflect such change in number of shares or, if shares of a new class
of stock are issued, to reflect the market price of the class or classes of
stock issued in connection with the above described transaction.

 

5.           Events of Default.

 

5.1.A default shall be deemed to have occurred upon any one of the following
events:

 

5.1.1.Withdrawal from registration of the Issuer under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), either voluntary or involuntary.

 

5.1.2.Issuer filing for bankruptcy protection under the federal bankruptcy laws,
the calling of a meeting of creditors, or any act of insolvency under any state
law regarding insolvency, without written notification to the Investor within
five business days of such filing, meeting or action.

 

5.1.3.The Borrower fails to issue shares of Common Stock to the Holder (or
announces or threatens in writing that it will not honor its obligation to do
so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer
agent to transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note, the
Borrower directs its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring or issuing (electronically or in
certificated form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, or fails to remove (or directs its transfer agent not to
remove or impairs, delays, and/or hinders its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note (or makes any written announcement, statement or threat that it does
not intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any written announcement, statement or threat
not to honor its obligations shall not be rescinded in writing) for three (3)
business days after the Holder shall have delivered a Notice of Conversion.

 

5.1.4.Failure to pay the principal and unpaid but accrued interest on the Note
when due.

 

5.1.5.Any dissolution, liquidation, or winding up of Borrower or any substantial
portion of its business.

 

5.1.6.Any cessation of operations by Borrower or Borrower admits it is otherwise
generally unable to pay its debts as such debts become due, provided, however,
that any disclosure of the Borrower’s ability to continue as a “going concern”
shall not be an admission that the Borrower cannot pay its debts as they become
due.

 

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5.1.7.The failure by Borrower to maintain any material intellectual property
rights, personal, real property or other assets which are necessary to conduct
its business (whether now or in the future).

 

5.1.8.The Borrower effectuates a reverse split of its Common Stock without
twenty (20) days prior written notice to the Holder.

 

5.1.9In the event that the Borrower proposes to replace its transfer agent, the
Borrower fails to provide, prior to the effective date of such replacement,
fully executed Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not limited to the
provision to irrevocable reserve shares of Common Stock in the Reserved Amount)
signed by the successor transfer agent to Holder and the Borrower.

 

5.1.10The failure by Borrower to pay any and all Post-Closing Expenses as
defined in section 15.

 

5.1.11From and after the initial trading, listing or quotation of the Common
Stock on a Principal Market, an event resulting in the Common Stock no longer
being traded, listed or quoted on a Principal Market; failure to comply with the
requirements for continued quotation on a Principal Market; or notification from
a Principal Market that the Borrower is not in compliance with the conditions
for such continued quotation and such non-compliance continues for seven (7)
trading days following such notification.

 

5.1.12If the Company does not submit their quarterly or annual report (10-Q or
10-K or the equivalent), and therefore, the Company files a late notification
(NT 10-Q or NT 10-K or the equivalent), and then the Company does not file the
appropriate quarterly or annual report within fifteen (15) business days from
the specific late notification.

 

5.1.13Omitted Intentionally.

 

5.2.Default remedies. Upon the occurrence and during the continuation of any
Event of Default specified in Section 5.1. (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the
Note shall become immediately due and payable and the Borrower shall pay to the
Holder, in full satisfaction of its obligations hereunder, an amount equal to
the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 5.1., THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN
FULL SATISFACTION OF ITS OBLIGTAIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE
DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence
and during the continuation of any Event of Default specified in Sections 5.1.
(solely with respect to failure to pay the principal hereof or interest thereon
when due on this Note, 5.1.1, 5.1.2, 5.1.5, 5.1.6, 5.1.7, 5.1.8, 5.1.9, 5.1.10,
5.1.11, 5.1.12, 5.1.13 exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and upon the occurrence of an
Event of Default specified in the remaining sections of Section 5.1. (other than
failure to pay the principal hereof or interest thereon at the Maturity Date
specified in Section 5.1. hereof), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the greater of (i) 150% times the sum
of (w) the then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the date of
payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and/or (x) (the then outstanding
principal amount of this Note to the date of payment plus the amounts referred
to in clauses (x) and (y) shall collectively be known as the “Default Sum”) or
(ii) the “parity value” of the Default Sum to be prepaid, where parity value
means (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum, treating the Trading Day
immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for
purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of such breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the Conversion Date,
multiplied by (b) the highest Closing Price for the Common Stock during the
period beginning on the date of first occurrence of the Event of Default and
ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and
all other amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses, of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at low or in equity.

 

 

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If the Borrower fails to pay the Default Amount within five (5) business days of
written notice that such amount is due and payable, then the Holder shall have
the right at any time, so long as the Borrower remains in default (and so long
and to the extent that there are sufficient authorized shares), to require the
Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal to the
Default Amount divided by the Conversion Price then in effect.

 

6.         Prepayment. At any time that the Note remains outstanding, upon three
business days’ written notice (the “Prepayment Notice”) to the Holder, the
Company may pay 150% of the entire Outstanding Principal Amount of the Note plus
any accrued but unpaid Interest. If the Company gives written notice of
prepayment, the Holder continues to have the right to convert principal and
interest on the Note into Conversion Shares until three business days elapses
from the Prepayment Notice.

 

7.         Anti-Dilution. If, at any time the Note is outstanding, the Issuer
issues Common Stock, or grants options or warrants, at a price per share that is
less than the Conversion Price on the date of such issuance or grant, the
Conversion Price will be adjusted to such lower price for the remainder of the
term of the Note.

 

8.         The Company covenants that until all amounts due under this Note are
paid in full, by conversion or otherwise, unless waived by the Holder or
subsequent Holder in writing, the Company shall:

 

give prompt written notice to the Holder of any Event of Default or of any other
matter which has resulted in, or could reasonably be expected to result in a
materially adverse change in its financial condition or operations;

 

give prompt notice to the Holder of any claim, action or proceeding which, in
the event of any unfavorable outcome, would or could reasonably be expected to
have a Material Adverse Effect (as defined below) on the financial condition of
the Company;

 

at all times reserve and keep available out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of this Note into
Common Stock, such number of its duly authorized shares of Common Stock as shall
from time to time be sufficient to effect the conversion of the Outstanding
Principal Amount of this Note into Common Stock.

 

“Material Adverse Effect” means (i) any condition, occurrence, state of facts or
event having, or insofar as reasonably can be foreseen would likely have, any
material adverse effect on the legality, validity or enforceability of the
Transaction Documents or the transactions contemplated thereby, (ii) any
condition, occurrence, state of facts or event having, or insofar as reasonably
can be foreseen would likely have, any effect on the business, operations,
properties or financial condition of the Company that is material and adverse to
the Company and its Subsidiaries, taken as a whole, and/or (iii) any condition,
occurrence, state of facts or event that would, or insofar as reasonably can be
foreseen would likely, prohibit or otherwise materially interfere with or delay
the ability of the Company to perform any of its obligations under any of the
Transaction Documents to which it is a party.

 

9.         Upon receipt by the Company of evidence from the Holder reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note,

 

 

 

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(i)           in the case of loss, theft or destruction, upon provision of
indemnity reasonably satisfactory to it and/or its transfer agent, or

 

(ii)         in the case of mutilation, upon surrender and cancellation of this
Note, then the Company at its expense will execute and deliver to the Holder a
new Note, dated the date of the lost, stolen, destroyed or mutilated Note, and
evidencing the outstanding and unpaid principal amount of the lost, stolen,
destroyed or mutilated Note.

 

10.       If any term in this Note is found by a court of competent jurisdiction
to be unenforceable, then the entire Note shall be rescinded, the consideration
proffered by the Holder for the remaining Debt acquired by the Holder not
converted by the Holder in accordance with this Note shall be returned in its
entirety and any Conversion Shares in the possession or control of the Investor
shall be returned to the Issuer.

 

11.       The Note and the Agreement between the Company and the Holder
(including all Exhibits thereto) constitute the full and entire understanding
and agreement between the Company and the Holder with respect to the subject
hereof. Neither this Note nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the Company and the
Holder.

 

12.       This Note shall be governed by and construed in accordance with the
internal laws of the State of New York.

 

13.       Legal Opinion. The Issuer’s counsel has provided an opinion regarding
the applicable exemption from registration under the Securities Act for the
issuance of the Conversion Shares pursuant to the terms and conditions of this
Agreement and the Note, which provides that upon conversion at any time
following the date hereof, the shares received as a result of the conversion
shall be issued unrestricted in accordance with the appropriate exemption. If
the Issuer declines to provide, or requests that Investor counsel prepare an
opinion, the Issuer agrees to bear the cost of the letter.

 

14.       Conditions. The Issuer acknowledges the Investor’s participation in
respect to this Agreement is on a conditions permitting basis. In the event that
the transaction risk profile substantially changes, market pricing or implied
volatility substantially change, due diligence raises concerns or any other
conditions material to the successful closing of the transaction change, the
Investor reserves the right to terminate the Agreement at any time before
delivering to the Non Affiliate Debtholder the cash consideration as described
hereof.

 

15.       Post-Closing Expenses. The Issuer will bear any and all miscellaneous
expenses that may arise as a result of this Agreement post-closing. These
expenses include, but are not limited to, the cost of legal opinion production,
transfer agent fees, equity issuance fees, etc. The failure to pay any and all
Post-Closing Expenses will be deemed a default as described in Section 5.1.10
herein.

 

16.       Miscellaneous

 

16.1.Counterparts. This Agreement may be executed in any number of counterparts
by original, facsimile or email signature. All executed counterparts shall
constitute one Agreement not withstanding that all signatories are not
signatories to the original or the same counterpart. Facsimile and scanned
signatures are considered original signatures.

 

16.2.Severability. This Agreement is not severable. If any term in this
Agreement is found by a court of competent urisdiction to be unenforceable, then
the entire Agreement shall be rescinded, the consideration proffered by the
Investor for the remaining Debt acquired by Investor not converted by the
Investor in accordance with this Agreement shall be returned in its entirety and
any Conversion Shares in the possession or control of the Investor shall be
returned to the Issuer.

 

16.3.Legal Fees. Except as provided in Section 15 of this agreement, each Party
will bear its own legal expenses in the execution of this Agreement. If the
Issuer defaults and the Investor is required to expend funds for legal fees and
expenses, such costs will be reimbursed to the Investor, solely by the Issuer.

 

 

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16.4Trading Activities. Neither the Holder nor their affiliates has an open
short position in the common stock of the Company and the Holder agree that they
shall not, and that they will cause their affiliates not to, engage in any short
sales of or hedging transactions with respect to the common stock of the
Company.

 

16.5.Modification. This Agreement and the Note may only be modified in a writing
signed by all Parties.

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized, as of the date first written above.

 

EPAZZ, Inc.

 

 

By: /s/ Shaun Passley                            

Shaun Passley, CEO, CFO, President

 

 

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Exhibit B

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $                           of the
principal amount of the Note (defined below) into Shares of Common Stock of
EPAZZ, Inc., a(n) IL Corporation (the “Borrower”) according to the conditions of
the Convertible Note of the Borrower dated as of February 4, 2014 (the “Note”).
No fee will be charged to the Holder or Holder’s Custodian for any conversion,
except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

oThe Borrower shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
with DTC through its Deposit Withdrawal Agent Commission system (“DWAC
Transfer”).

 

Name of DTC Prime Broker:
Account Number:

 

oThe undersigned hereby requests that the Borrower issue a certificate or
certificates for the number of shares of Common Stock set forth below (which
numbers are based on the Holder’s calculation attached hereto) in the name(s)
specified immediately below:

 

Magna Group, LLC
EIN #: 27-2162659

 

Date of Conversion:           Conversion Price:           Shares to Be
Delivered:           Remaining Principal Balance Due     After This Conversion:
          Signature           Print Name: Joshua Sason  

 

 

 

 

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