NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.

 

Principal Amount: $250,000.00 Issue Date: December 7, 2015

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, LIFE CLIPS, INC. formerly known as BLUE SKY MEDIA CORP., a
Wyoming corporation (the “Company”), hereby promises to pay to the order of
Susannah Forest, or registered assigns (the “Holder”) on November 30, 2017 (the
“Maturity Date”) $250,000.00 (the “Principal Amount”), and to pay interest on
the outstanding Principal Amount at the rate of 10.00% per annum (the “Note”).
Interest shall commence accruing on the date hereof (the “Issue Date”), computed
on the basis of a 365-day year and the actual number of days elapsed, provided
that any payment otherwise due on a Saturday, Sunday or legal Bank holiday may
be paid on the following business day. Interest shall be payable quarterly on
January 1, April 1, July 1 and October 1, beginning on the first such date after
the Issue Date and on each Conversion Date (with respect only to the Principal
Amount being converted) (each such date, a “Interest Payment Date”) (if any
Interest Payment Date is not a Trading Day, the applicable payment shall be due
on the next succeeding Trading Day) in cash, or at the Holder’s option, such
interest shall be accreted to, and increase, the outstanding Principal Amount.
All payments due hereunder, shall be made in lawful money of the United States
of America.

 

The following terms shall apply to this Note:

 

Section 1. Definitions. For the purposes hereof, the definitions set forth in
Exhibit A shall have the meanings set forth in such exhibit.

 

Section 2. Interest.

 

a) Interest Calculations. Interest shall cease to accrue with respect to any
Principal Amount converted, provided that, the Company actually delivers the
Conversion Shares within the time period required by Section 4(c)(i) herein.

 

b) Late Fees. Any interest that are not paid within three Trading Days following
a Interest Payment Date shall continue to accrue and shall entail a late fee,
which must be paid in cash, at the rate of 18% per annum or the lesser rate
permitted by applicable law which shall accrue daily from the Interest Payment
Date through and including the date of actual payment in full.

 

c) Prepayment. At any time upon ten (10) days written notice to the Holder, the
Company may prepay any portion of the principal amount of this Note and any
accrued and unpaid interest. If the Company exercises its right to prepay any
portion of the Note, the Company shall make payment to the Holder of an amount
in cash equal to the sum of the then outstanding principal amount of this Note
being prepaid and accrued interest thereon multiplied by 130%. The Holder may
continue to convert the Note from the date notice of the prepayment is given
until the date of the prepayment.

 

1

 

 

d) Other Securities. So long as any of the Notes shall remain outstanding,
neither the Company nor any Subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities. So long as any
of the Notes shall remain outstanding, neither the Company nor any Subsidiary
thereof shall directly or indirectly pay or declare any dividend or make any
distribution upon, nor shall any distribution be made in respect of, any Junior
Securities as long as any interest due on the Notes remain unpaid, nor shall any
monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities or shares pari passu with
the Notes.

 

Section 3. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall
be entitled to receive out of the assets, whether capital or surplus, of the
Company an amount equal to the Principal Amount, plus any accrued and unpaid
interest thereon and any other fees or liquidated damages then due and owing
thereon under this Note. A Fundamental Transaction or Change of Control
Transaction shall not be deemed Liquidation.

 

Section 4. Conversion and Redemption.

 

a) Conversions at Option of Holder. The Holder shall have the right at any time
and from time to time from and after the Issue Date at the option of the Holder,
to convert all or a part of the outstanding and unpaid principal amount of this
Note, accrued and unpaid interest and such other amounts as may due to the
Holder under this Note (the “Indebtedness”) into that number of shares of Common
Stock (subject to the limitations set forth in Section 4(d)) determined by
dividing the amount to be converted by the Conversion Price (the “Conversion
Shares”). The Holder shall effect conversions by providing the Company with the
form of conversion notice attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the amount to be converted, the
principal balance of the Note outstanding prior to the conversion, the amount of
accrued interest and other amounts due under this Note, the number of shares of
Common Stock owned subsequent to the conversion at issue and the date on which
such conversion is to be effected, which date may not be prior to the date the
applicable Holder delivers by facsimile such Notice of Conversion to the Company
(such date, the “Conversion Date”). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion to the Company is deemed delivered hereunder. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any Notice of Conversion form be required.
To effect conversions hereunder, the Holder shall not be required to physically
surrender this Note to the Company unless the entire principal amount of this
Note, plus all accrued and unpaid interest thereon, has been so converted.
Conversions hereunder shall have the effect of lowering the outstanding
principal amount of this Note (and accrued interest thereon, if applicable) in
an amount equal to the applicable conversion. The Holder and the Company shall
maintain records showing the principal amount(s) converted and the date of such
conversion(s). The Company may deliver an objection to any Notice of Conversion
within one (1) Business Days of delivery of such Notice of Conversion. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.

 

b) Conversion Price. The conversion price shall equal (i) seventy-five percent
(75%) times (ii) the Volume Weighted Average Price (“VWAP”) for a five (5) day
period prior to the Conversion Date as quoted on the OTC Markets (or the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market or the New York Stock Exchange (or any successors to any of the
foregoing) (a “Trading Market”) on which the Company’s common stock is then
listed or quoted for trading) (“Share Price”), subject to adjustment herein (the
“Conversion Price”), provided that that the minimum Share Price shall (A) not be
less than the per Share Price as determine based on a Three Million Dollar
($3,000,000) Total Market Value (as hereinafter defined) (the “Minimum
Conversion Price”) or (B) not greater than a maximum per Share Price as
determined based on a Twenty Million Dollar ($20,000,000) Total Market Value
(the “Maximum Conversion Price”). “Total Market Value” shall be computed by
multiplying the then Share Price by the total number of shares of Common Stock
outstanding as of the date of the Conversion. The Conversion Price will be
appropriately adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction that proportionately decreases or
increases the Common Stock during such measuring period in addition to such
other events as may be provided for herein. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event of Default pursuant
to Section 6 hereof and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

 

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c) Mechanics of Conversion

 

i. Delivery of Conversion Shares Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company
shall issue to the converting Holder (A) the number of Conversion Shares being
acquired upon the conversion of the Indebtedness which, on or after the earlier
of (i) six month anniversary of the Issue Date or (ii) the Effective Date, shall
be free of restrictive legends and trading restrictions (other than those which
may then be required by the Purchase Agreement), and (B) a bank check in the
amount of accrued and unpaid interest, if such interest amount is paid in cash
instead of under (a) above. If the Common Stock is listed or quoted for public
trading, the Company may deliver the Conversion Shares required to be delivered
by the Company under this Section 4 electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

 

ii. Delivery of Certificate Upon Conversion. By the Share Delivery Date, the
Company shall deliver, or cause to be delivered, to the Holder a certificate or
certificates representing the Conversion Shares which, on or after the date on
which such Conversion Shares are registered on a Registration Statement or
eligible to be sold under Rule 144 without the need for current public
information and the Company has received an opinion of counsel to such effect
reasonably acceptable to the Company (the reasonable cost of which shall be
borne by the Holder), shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being acquired upon the
conversion of this Note. All certificate or certificates required to be
delivered by the Company under this Section 4(c) shall be delivered
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions. If the Conversion Date is
prior to the date on which such Conversion Shares are registered on a
Registration Statement or eligible to be sold under Rule 144 without the need
for current public information, the Conversion Shares shall bear a restrictive
legend in substantially the following form, as appropriate:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES, UNLESS
OTHERWISE PROHIBITED BY FEDERAL OR STATE SECURITIES LAWS.”

 

3

 

 

Notwithstanding the foregoing, commencing on such date that the Conversion
Shares are eligible for sale under Rule 144 subject to current public
information requirements, the Company shall obtain a legal opinion to allow for
such sales under Rule 144 (the reasonable cost of which shall be borne by the
Holder).

 

iii. Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates issued to such Holder pursuant to the rescinded
Conversion Notice.

 

iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligation to
issue and deliver the Conversion Shares upon conversion of the Indebtedness in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by a Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by such Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a waiver by
the Company of any such action that the Company may have against such Holder. In
the event a Holder shall elect to convert any or all of the Indebtedness, the
Company may not refuse conversion based on any claim that such Holder or anyone
associated or affiliated with such Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and/or enjoining conversion of all or part of the
Note held by such Holder shall have been sought and obtained, and the Company
posts a surety bond for the benefit of such Holder in the amount of 150% of the
Indebtedness which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment. In the absence of such injunction, the Company shall issue
Conversion Shares and, if applicable, cash, upon a properly noticed conversion.
If the Company fails to deliver to a Holder such Conversion Shares pursuant to
Section 4(c)(i) on the second Trading Day after the Share Delivery Date
applicable to such conversion, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of Indebtedness being
converted, $50 per Trading Day (increasing to $100 per Trading Day on the third
Trading Day and increasing to $200 per Trading Day on the sixth Trading Day
after such damages begin to accrue) for each Trading Day after such second
Trading Day after the Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare a Triggering Event pursuant
to Section 10 hereof for the Company’s failure to deliver Conversion Shares
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit a Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

 

v. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to a Holder the applicable Conversion
Shares by the Share Delivery Date pursuant to Section 4(c)(i), and if after such
Share Delivery Date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale
by such Holder of the Conversion Shares which such Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to such Holder (in addition to any other
remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for
the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) reduce the Principal Amount equal to the amount
submitted for conversion (in which case, such conversion shall be deemed
rescinded). For example, if a Holder purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of the Note with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay such Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to such Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver the
Conversion Shares upon conversion of the shares of Note as required pursuant to
the terms hereof.

 

4

 

 

vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock a number of shares of Common Stock at least
equal to 100% of the Conversion Shares for the sole purpose of issuance upon
conversion of this Note and payment of interest on this Note, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder, not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of the then
outstanding principal amount of this Note and payment of interest hereunder. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable.

 

vii. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of the Note. As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon such
conversion, the Company shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share.

 

viii. Transfer Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Note shall be made without charge to any Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such Conversion Shares, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such Conversion Shares upon conversion in a
name other than that of the Holder of the Note and the Company shall not be
required to issue or deliver such Conversion Shares unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

 

5

 

 

d) Beneficial Ownership Limitation. The Company shall not effect any conversion
of the Note, and a Holder shall not have the right to convert any portion of the
Note, to the extent that, after giving effect to the conversion set forth on the
applicable Notice of Conversion, such Holder (together with such Holder’s
Affiliates, and any Persons acting as a group together with such Holder or any
of such Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by such Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
conversion of the Note with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which are issuable upon
(i) conversion of the remaining, unconverted Indebtedness held by the Holder or
any of its Affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, the Note) beneficially owned by such
Holder or any of its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. To the extent that the limitation contained in this
Section 4(d) applies, the determination of whether the Note is convertible (in
relation to other securities owned by such Holder together with any Affiliates)
and what amounts are convertible shall be in the sole discretion of such Holder,
and the submission of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the Note may be converted (in relation to other
securities owned by such Holder together with any Affiliates) and how much of
the Note is convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, Holder will be deemed to
represent to the Company each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or confirm the
accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(d), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as stated in the most recent of the following: (i) the Company’s
most recent periodic or annual report filed with the Commission, as the case may
be, (ii) a more recent public announcement by the Company or (iii) a more recent
written notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of a Holder, the Company shall within two Trading Days confirm orally and in
writing to such Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including the Note, by such Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of the Note held by the applicable Holder. A
Holder, upon not less than 61 days’ prior notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 4(d)
applicable to its Note provided that the Beneficial Ownership Limitation in no
event exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Note held by the Holder and the provisions of this Section
4(d) shall continue to apply. Any such increase or decrease will not be
effective until the 61st day after such notice is delivered to the Company and
shall only apply to such Holder and no other Holder. The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 4(d) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
the Note.

 

e) Call for Conversion by the Company. Commencing at any time six (6) months
after the Issue Date and subject to the limitations set forth in Section 4(d),
if: (i) the Common Stock is listed on any of the following markets or exchanges:
the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any successors to any of
the foregoing) (a “Trading Market”); (ii) the average closing bid price of the
Company’s common stock as quoted on the OTC Markets (or such other Trading
Market on which the Company’s common stock is then listed or quoted for trading)
for any 60 consecutive trading days exceeds the Minimum Conversion Price; and
(iii) the average daily trading volume of the Company’s common stock exceeds an
amount equal to 25% of the Conversion Shares issuable upon conversion of this
Note (and each of the other Notes outstanding) for any 30 consecutive trading
days (a “Trigger Period”), the Company shall have the right, upon 30 days’
notice to the Holder (the “Call Notice”), to require that the Holder convert
this Note into the Conversion Shares within thirty (30) days of the Call Notice
(the “Forced Conversion Date”). The Company may not deliver a Call Notice, and
any Call Notice delivered by the Company shall not be effective, unless all of
the Equity Conditions have been met on each Trading Day through and including
the later of the Forced Conversion Date and the Trading Day after the date that
the Conversion Shares issuable pursuant to such conversion are actually
delivered to the Holders pursuant to the Forced Conversion Notice.

 

6

 

 

Section 5. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company, at any time while this Note
is outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any
other Common Stock Equivalents (which, for avoidance of doubt, shall not include
any shares of Common Stock issued by the Company upon conversion of, or payment
of a dividend on, this Note), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the Common
Stock, any shares of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 5(a) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

 

b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the
Company or any Subsidiary, as applicable sells or grants any option to purchase
or sells or grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other disposition), any
Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock at an effective price per share that is lower than the then
Conversion Price (such lower price, the “Base Conversion Price” and such
issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common
Stock or Common Stock Equivalents 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 issuance, be entitled to
receive shares of Common Stock at an effective price per share that is lower
than the Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price on such date of the Dilutive Issuance), then the
Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. If the Company enters into a Variable Rate Transaction, despite the
prohibition set forth Section 7(a), the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible conversion price
at which such securities may be converted or exercised. The Company shall notify
the Holders in writing, no later than the Trading Day following the issuance of
any Common Stock or Common Stock Equivalents subject to this Section 5(b),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon
the occurrence of any Dilutive Issuance, the Holders are entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether a Holder accurately refers
to the Base Conversion Price in the Notice of Conversion.

 

7

 

 

c) Pro Rata Distributions. During such time as this Note is outstanding, if the
Company declares or makes any dividend or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any time after the issuance of
this Note, then, in each such case, the Holder shall be entitled to participate
in such Distribution to the same extent that the Holder would have participated
therein if the Holder had held the number of shares of Common Stock acquirable
upon complete Conversion of this Note (without regard to any limitations on
Conversion hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distribution would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Distribution to such extent (or in the beneficial ownership
of any shares of Common Stock as a result of such Distribution to such extent)
and the portion of such Distribution shall be held in abeyance for the benefit
of the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).

 

d) Fundamental Transaction. If, at any time while this Note is outstanding, (i)
the Company, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination) (each a
“Fundamental Transaction”), then, upon any subsequent conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction (without regard to any limitation in Section 4(d)
on the conversion of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation in Section
4(d) on the conversion of this Note). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Note
following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the
Company under this Note and the other Transaction Documents (as defined in the
Purchase Agreement) in accordance with the provisions of this Section 5(e)
pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this Note,
deliver to the Holder in exchange for this Note a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Note which is convertible for a corresponding number of shares
of capital stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon conversion of this
Note (without regard to any limitations on the conversion of this Note) prior to
such Fundamental Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the
purpose of protecting the economic value of this Note immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Designation and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Note and the other
Transaction Documents with the same effect as if such Successor Entity had been
named as the Company herein.

 

8

 

 

e) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

 

f) Notice to the Holder. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

 

g) Notice to Allow Conversion by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be delivered to each Holder at its last address as it
shall appear upon the stock books of the Company, at least twenty (20) calendar
days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required
to be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of the Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K, provided that the
requirement in this sentence shall only apply if any of the Company’s securities
are listed or quoted for public trading. Subject to the approval of the
shareholders of the Company, which the undersigned agree to promptly carry out,
the Holder shall remain entitled to convert the Conversion Amount of this Note
(or any part hereof) during the 20-day period commencing on the date of such
notice through the effective date of the event triggering such notice except as
may otherwise be expressly set forth herein.

 

9

 

 

Section 6. Automatic Conversion. If this Note remains outstanding on or after
the Maturity Date and all Equity Conditions have been met (other than the
payment of the principal and interest due under the Notes) on each Trading Day
through and including the later of the Maturity Date and the Trading Day after
the date that the Conversion Shares issuable pursuant to such conversion are
actually delivered to the Holder, then this Note shall be automatically be
deemed to have converted into the Conversion Shares.

 

Section 7. Right of Additional Investment. At any time prior to March 31, 2016
and upon the agreement of the Company, the Holder shall have the right to
purchase one or more additional convertible notes in the aggregate principal
amount of up to $250,000 from the Company on the same terms and conditions as
provided for in this Note .

 

a) Registration Rights. The Holder shall have the registration rights granted
pursuant to Section 4(c) of the Purchase Agreement.

 

Section 8. Negative Covenants. As long as any of the Notes are outstanding,
unless the holders of at least 51% in the Principal Amount of the then
outstanding Notes shall have otherwise given prior written consent, the Company
shall not, and shall not permit any of the Subsidiaries to, directly or
indirectly:

 

a) The Company shall be prohibited from effecting or entering into an agreement
to effect any issuance by the Company or any of its Subsidiaries of Common Stock
or Common Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate Transaction” means a transaction in
which the Company (i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive, additional shares of Common Stock either (A) at a conversion price,
exercise price or exchange rate or other price that is based upon, and/or varies
with, the trading prices of or quotations for the shares of Common Stock at any
time after the initial issuance of such debt or equity securities or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may issue securities at a future determined price. Any
Holder shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages.

 

b) The Company shall be prohibited from offering or selling any Common Stock or
Common Stock Equivalents in an offering where the net proceeds to the Company
are less than $10,000,000.

 

c) The Company shall be prohibited from entering into a Fundamental Transaction
or, enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;

 

10

 

 

d) other than Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom;

 

e) amend its charter documents, including, without limitation, its certificate
of incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;

 

f) repay, repurchase or offer to repay, repurchase or otherwise acquire shares
of its Common Stock, Common Stock Equivalents or Junior Securities, other than
as to the Conversion Shares as permitted or required under the Transaction
Documents;

 

g) pay dividends or distributions on any equity securities of the Company;

 

h) enter into any transaction with any officer, director or any Affiliate of the
Company which would be required to be disclosed in any public filing with the
Commission, unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the independent directors of the Company
(even if less than a quorum otherwise required for board approval);

 

i) So long as the Company shall have any obligation under this Note, the Company
shall not, without the Holder’s written consent, sell, lease or otherwise
dispose of any significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets may be conditioned on a
specified use of the proceeds of disposition; or

 

j) enter into any agreement with respect to any of the foregoing.

 

Section 9. Redemption Upon Triggering Events.

 

a) “Triggering Event” means, wherever used herein any of the following events
(whatever the reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):

 

i. the Company fails to pay the principal hereof or interest thereon when due on
this Note, whether at maturity, upon acceleration or otherwise;

 

ii. the Company shall fail to deliver Conversion Shares issuable upon a
conversion hereunder that comply with the provisions hereof prior to the fifth
Trading Day after such shares are required to be delivered hereunder, or the
Company shall provide written notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any the Notes in accordance with the terms hereof;

 

iii. the Company shall fail for any reason to pay in full the amount of cash due
pursuant to a Buy-In within five calendar days after notice therefor is
delivered hereunder within five days of the date due and payable;

 

iv. the Company shall fail to have available a sufficient number of authorized
and unreserved shares of Common Stock to issue to such Holder upon a conversion
hereunder;

 

v. unless specifically addressed elsewhere in this Note as a Triggering Event,
the Company shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach of the Transaction
Documents, and such failure or breach shall not, if subject to the possibility
of a cure by the Company, have been cured within 10 calendar days after the date
on which written notice of such failure or breach shall have been delivered;

 

11

 

 

vi. Reverse Splits. The Company effectuates a reverse split of its Common Stock
without twenty (20) days prior written notice to the Holder.

 

vii. the Company shall fail to observe or perform any other covenant, agreement
or warranty contained in, or otherwise commit any breach of the obligations in
this Note, and such failure or breach shall not, if subject to the possibility
of a cure by the Company, have been cured within 10 calendar days after the date
on which written notice of such failure or breach shall have been delivered;

 

viii. the Company shall be party to a Change of Control Transaction;

 

ix. the Company shall have filed for protection under any bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights generally;

 

x. at any time on or after the two year anniversary of the Issue Date, the
Common Stock shall fail to have completed a Public Offering;

 

xi. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any subsidiary or any of their respective property or
other assets for more than $25,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days;

 

xii. The Company shall fail to maintain the listing of the Common Stock on at
least one of the OTC Markets or any level of the Nasdaq Stock Market or the New
York Stock Exchange;

 

xiii. The Company shall fail to comply with the reporting requirements of the
1934 Act and/or the Company shall cease to be subject to the reporting
requirements of the 1934 Act.

 

xiv. The restatement of any financial statements filed by the Company with the
SEC for any date or period from two years prior to the Issue Date of this Note
and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a
material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement.

 

xv. The DTC places a “chill” (i.e., a restriction placed by DTC on one or more
of DTC’s services, such as limiting a DTC participant’s ability to make a
deposit or withdrawal of the security at DTC) on any of the Company’s
securities.

 

xvi. A breach or default by the Company of any covenant or other term or
condition contained in any of material agreements or instruments of the Company
(including those filed as exhibits to the Company’s filings with the SEC and
including any other agreement or instrument between the Holder and its
affiliates and the Company), after the passage of all applicable notice and cure
or grace periods, shall, at the option of the Holder, be considered a default
under this Note, in which event the Holder shall be entitled (but in no event
required) to apply all rights and remedies of the Holder under the terms of this
Note.

 

b) Upon the occurrence of a Triggering Event, Holder shall (in addition to all
other rights it may have hereunder or under applicable law) have the right,
exercisable at the sole option of such Holder, to require the Company to redeem
all of the Indebtedness then held by such Holder for a redemption price, in
cash, equal to the Triggering Redemption Amount. The Triggering Redemption
Amount, in cash shall be due and payable within five Trading Days of the date on
which the notice for the payment therefor is provided by a Holder (the
“Triggering Redemption Payment Date”). If the Company fails to pay in full the
Triggering Redemption Amount hereunder on the date such amount is due in
accordance with this Section, the Company will pay interest thereon at a rate
equal to the lesser of 18% per annum or the maximum rate permitted by applicable
law, accruing daily from such date until the Triggering Redemption Amount, plus
all such interest thereon, is paid in full. For purposes of this Section, the
Indebtedness is outstanding until such date as the applicable Holder shall have
received Conversion Shares upon a conversion (or attempted conversion) thereof
that meets the requirements hereof or has been paid the Triggering Redemption
Amount in cash.

 

12

 

 

Section 10. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above Attention: Robert Gruder via email:
bgruder@klearkapture.com or such other email or address as the Company may
specify for such purposes by notice to the Holder delivered in accordance with
this Section 7. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile number or address of such Holder
appearing on the books of the Company, or if no such facsimile number or address
appears on the books of the Company, at the principal place of business of such
Holder, as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth in this Section prior
to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth in this Section on a day that is not
a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day,
(iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay liquidated damages, accrued dividends and accrued
interest, as applicable, on the Notes at the time, place, and rate, and in the
coin or currency, herein prescribed.

 

c) Lost or Mutilated Note. If a Holder’s Note shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft
or destruction of such Note, and of the ownership hereof reasonably satisfactory
to the Company.

 

d) Cost of Collection. If default is made in the payment of this Note, the
Company shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.

 

e) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of Florida
without regard to the principles of conflict of laws thereof. Each party agrees
that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in Palm Beach County, Florida (the “Florida Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the Florida Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such Florida Courts, or such Florida Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Note or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of this Note,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys’ fees and other costs and expenses incurred in
the investigation, preparation and prosecution of such action or proceeding.

 

13

 

 

f) Certain Amounts. Whenever pursuant to this Note the Company is required to
pay an amount in excess of the outstanding principal amount (or the portion
thereof required to be paid at that time) plus accrued and unpaid interest plus
Default Interest on such interest, the Company and the Holder agree that the
actual damages to the Holder from the receipt of cash payment on this Note may
be difficult to determine and the amount to be so paid by the Company represents
stipulated damages and not a penalty and is intended to compensate the Holder in
part for loss of the opportunity to convert this Note and to earn a return from
the sale of shares of Common Stock acquired upon conversion of this Note at a
price in excess of the price paid for such shares pursuant to this Note. The
Company and the Holder hereby agree that such amount of stipulated damages is
not plainly disproportionate to the possible loss to the Holder from the receipt
of a cash payment without the opportunity to convert this Note into shares of
Common Stock.

 

g) Waiver. Any waiver by the Company or a Holder of a breach of any provision of
this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note or
a waiver by any other Holder. The failure of the Company or a Holder to insist
upon strict adherence to any term of this Note on one or more occasions shall
not be considered a waiver or deprive that party (or any other Holder) of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note on any other occasion. Any waiver by the Company or a Holder must
be in writing.

 

h) Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law.

 

14

 

 

i) Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder’s right to
pursue actual and consequential damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by the
Holder to enable the Holder to confirm the Company’s compliance with the terms
and conditions of this Note.

 

j) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

 

k) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of
the provisions hereof.

 

15

 

 

SIGNATURE PAGE FOR CONVERTIBLE NOTE

 

IN WITNESS WHEREOF, the undersigned has executed this Note as of the Issue Date.

 

  Life Clips, Inc. (f/k/a Blue Sky Media Corp.),   a Wyoming corporation      
By: /s/ Robert Gruder   Name: Robert Gruder   Title: CEO           Susannah
Forest

 

16

 

 

EXHIBIT A

 

DEFINITIONS

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 of the Securities
Act.

 

“Alternate Consideration” shall have the meaning set forth in Section 5(d).

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section
4(d).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of Florida are authorized or required by law or other
governmental action to close.

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company (other than by means of conversion of the
Indebtedness), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 50% of the aggregate voting power of the
Company or the successor entity of such transaction, (c) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
50% of the aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a one year period of more
than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors on the
Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members on the Issue
Date), or (e) the execution by the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events set forth in
clauses (a) through (d) above.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant
to the Purchase Agreement.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto and all
conditions precedent to (i) Holder’s obligations to pay the Subscription Amount
and (ii) the Company’s obligations to deliver the Securities have been satisfied
or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Company’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities may hereafter
be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Conversion Amount” means the sum of the Principal Amount, accrued interest and
any other amounts due under this Note.

 

17

 

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Equity Conditions” means, during the period in question, (a) the Company shall
have duly honored all conversions scheduled to occur or occurring by virtue of
one or more Notices of Conversion of the applicable Holder on or prior to the
dates so requested or required, if any, (b) all of the Conversion Shares
issuable pursuant to the Transaction Documents may be resold pursuant to Rule
144 without volume or manner-of-sale restrictions or current public information
requirements as determined by the counsel to the Company as set forth in a
written opinion letter to such effect, addressed and acceptable to the Transfer
Agent and the affected Holder, (c) the Common Stock is trading on a Trading
Market and all of the shares issuable pursuant to the Transaction Documents are
listed or quoted for trading on such Trading Market (and the Company believes,
in good faith, that trading of the Common Stock on a Trading Market will
continue uninterrupted for the foreseeable future), (d) there is a sufficient
number of authorized, but unissued and otherwise unreserved, shares of Common
Stock for the issuance of all of the shares then issuable pursuant to the
Transaction Documents, (e) there is no existing Triggering Event and no existing
event which, with the passage of time or the giving of notice, would constitute
a Triggering Event, (f) the issuance of the shares in question (or, in the case
of a call, the shares issuable upon conversion in full of the call amount) to
the applicable Holder would not violate the Beneficial Ownership Limitation, (g)
there has been no public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that has not been consummated, and
(h) the applicable Holder is not in possession of any information provided by
the Company that constitutes, or may constitute, material non-public
information.

 

“Interest Payment Date” shall have the meaning set forth in the first paragraph
of this Note.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

 

“GAAP” means United States generally accepted accounting principles.

 

“Holder” shall have the meaning given such term in the first paragraph of this
Note.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

 

“Liquidation” shall have the meaning set forth in Section 3.

 

“Florida Courts” shall have the meaning set forth in Section 10(e).

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Issue Date” means the date of the first issuance of any of the Notes.

 

“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, and (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien.

 

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“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of the
Issue Date, among the Company and the original Holder, as amended, modified or
supplemented from time to time in accordance with its terms.

 

“Principal Amount” shall have the meaning set forth in the first paragraph of
this Note.

 

“Registration Statement” means a registration statement covering the resale of
the Underlying Shares by Holder.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(c).

 

“Successor Entity” shall have the meaning set forth in Section 5(d).

 

“Subsidiary” means any subsidiary of the Company and shall, where applicable,
also include any direct or indirect subsidiary of the Company.

 

“Trading Day” means a day on which the New York Stock Exchange is open for
business.

 

“Transaction Documents” means this Note and the Purchase Agreement, all exhibits
and schedules thereto and hereto and any other documents or agreements executed
in connection with the transactions contemplated pursuant to the Purchase
Agreement.

 

“Trading Market” shall have the meaning set forth in Section 4(b).

 

“Triggering Event” means, wherever used herein any of the following events
(whatever the reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):

 

xvii. the Company fails to pay the principal hereof or interest thereon when due
on this Note, whether at maturity, upon acceleration or otherwise;

 

xviii. the Company shall fail to deliver Conversion Shares issuable upon a
conversion hereunder that comply with the provisions hereof prior to the fifth
Trading Day after such shares are required to be delivered hereunder, or the
Company shall provide written notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of the Note in accordance with the terms hereof;

 

xix. the Company shall fail to have available a sufficient number of authorized
and unreserved shares of Common Stock to issue to such Holder upon a conversion
hereunder;

 

19

 

 

xx. unless specifically addressed elsewhere in this Note as a Triggering Event,
the Company shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach of the Transaction
Documents, and such failure or breach shall not, if subject to the possibility
of a cure by the Company, have been cured within 10 calendar days after the date
on which written notice of such failure or breach shall have been delivered;

 

xxi. the Company shall be party to a Change of Control Transaction;

 

xxii. the Company shall have filed for protection under any bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights generally;

 

xxiii. The Company shall fail to maintain the listing of the Common Stock on at
least one of the OTC Markets or any level of the Nasdaq Stock Market or the New
York Stock Exchange;

 

The Company shall fail to comply with the reporting requirements of the 1934 Act
and/or the Company shall cease to be subject to the reporting requirements of
the 1934 Act.

 

“Triggering Redemption Amount” means the sum of (a) the Principal Amount; and
(b) all accrued but unpaid interest thereon.

 

“Triggering Redemption Payment Date” shall have the meaning set forth in Section
9(b).

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of this Note and issued and issuable in lieu of the
cash payment of interest on the Principal Amount in accordance with the terms of
this Note.

 

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ANNEX A

 

NOTICE OF CONVERSION

 

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT PROMISSORY NOTE)

 

The undersigned hereby elects to convert $[     ] principal amount of the Note
(defined below) into that number of shares of Common Stock to be issued pursuant
to the conversion of the Note (“Common Stock”) as set forth below, of Life
Clips, Inc. (f/k/a Blue Sky Media Corp.), a Wyoming corporation (the “Company”)
according to the conditions of the Convertible Promissory Note of the Company
dated as of November [     ], 2015 (the “Note”), as of the date written below.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Note, as determined in accordance
with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

 

Conversion calculations:

 

  Date to Effect Conversion:    

 

  Balance of Principal Amount of the Note prior to Conversion:    

 

  Principal Amount of Note to be Converted:    

 

  Number of shares of Common Stock to be Issued:    

 

  Applicable Conversion Price:    

 

  Balance of Principal Amount of Note subsequent to Conversion:    

 

  Address for Delivery:       or       DWAC Instructions:    

 

  Broker no:    

 

  Account no:    

 

[HOLDER] 

 

By:    : Name:   Title:  

 

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