This
5.0% Convertible Debenture (the “Debenture”) and the securities underlying this Debenture have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”) and may not be offered, sold or otherwise
transferred, assigned, pledged, or hypothecated in the absence of such registration or an exemption therefrom under such Securities
Act, any applicable state securities laws, and the rules and regulations thereunder.


 


GIGGLES
‘N HUGS, INC.


5.0%
Convertible Debenture


Due
August 31, 2016


 


	  $50,000
    	August
    24, 2015


 


GIGGLES
‘N HUGS, INC., a Nevada corporation (the “Company”, which term includes any successor corporation),
for value received, hereby promises to pay to J & N invest LLC. (the “Holder”), or registered
assigns, on _August 31, 2016 (the “Maturity Date”), the sum of $50,000 (the “Principal
Amount”), with accrued and unpaid interest thereon to the registered Holder hereof from the date hereof as provided
herein. Payment of the principal hereof and interest on this Debenture will be made by stock or immediately available funds, in
lawful tender of the United States, to an account designated in writing by the Holder. In the event of a default, and subject
to the cure provisions of Article Five, the principal hereof, together with accrued and unpaid interest, shall, at the option
of the Holder hereof, become immediately due and payable.


 


ARTICLE
ONE 

SUBORDINATION


 


1.1
Senior Indebtedness. As used in this Debenture, the term “Senior Indebtedness” shall mean any
indebtedness secured by assets of the Company, to the extent of and with respect to such assets; provided, however, that the term
shall not include indebtedness which by the terms of the instrument creating or evidencing it is subordinated to or on parity
with this Debenture.


 


1.2.
Subordination. The Company covenants and agrees and the Holder, by acceptance hereof, covenants, expressly for the benefit
of holders of Senior Indebtedness, that the payment of the principal and interest on this Debenture is expressly subordinated
in right of payment to the payment of all principal and interest under the Senior Indebtedness in case of any event of default,
bankruptcy, insolvency, receivership, or other similar proceeding, whether voluntary or otherwise, of or with respect to the Company.


 




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ARTICLE
TWO

PAYMENT


 


2.1
Rate and Payment of Interest. Interest will accrue on the Principal Amount of this Debenture (or any portion thereof that
remains unpaid) from the date hereof until the entire Principal Amount is paid or converted into securities of the Company accordance
with Article Three herein, at the rate of 5.0% per annum (computed on the basis of a year of 360 days).


 


2.2
Payment. The Principal Amount and any interest accruing hereunder shall be due and payable on the Maturity Date. No payments
shall be due until the Maturity Date.


 


2.3
Prepayment. Prepayments of the Principal Amount, in whole or in part, and any interest thereon shall be permitted without
penalty to the Maker.


 


ARTICLE
THREE

CONVERSION


 


3.1
Definitions. For purposes of this Debenture the following terms shall have the meaning as set forth below:








 


“Common
Stock” shall mean the Company’s Common Stock, par value $0.001 per share.








 


“Sale
of the Company” shall mean (i) the sale of all or substantially all the assets of the Company, or (ii) the transfer,
assignment or sale of all of the outstanding capital stock of the Company to one or more persons who collectively own less than
twenty percent (20%) of the outstanding capital stock of the Company, by merger, stock sale, or otherwise.


 


“Transaction
Documents” shall mean this Debenture and any documents related to any of the foregoing or the consummation of the
transactions contemplated by this Debenture.


 


3.2
Holder’s Optional Conversion. At any time after the date hereof, Holder shall have the right, but not the obligation,
to convert any or all of the outstanding principal and accrued but unpaid interest under this Debenture into share of Common Stock
at $0.10 per share; provided that any incremental amount converted in accordance with this Section 3.2 shall be at least $10,000
or greater. (the “Conversion Rate”).


 


3.3
Notice of Conversion. Before the Holder shall be entitled to convert this Debenture in accordance with Section 3.2 of this
Debenture, in part or in full, into Units, it shall surrender this Debenture at the office of the Company and shall give written
notice by mail, postage prepaid, to the Company at its principal corporate office, of the election to convert the same, and shall
state therein the name or names in which the certificate or certificates for shares of Common Stock to purchase shares of Common
Stock are to be issued. The Company shall, as soon as practicable thereafter, issue and deliver to the Holder of this Debenture
a certificate or certificates for the number of shares of Common Stock underlying the Debenture shall be entitled as aforesaid.
If this Debenture shall be converted in part, the Company shall cancel this Debenture and issue a new debenture of identical terms
and conditions for the unconverted principal amount. Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of this Debenture, and the person or persons entitled to receive the Units issuable
upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such
date.


 




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3.4
Mandatory Conversion. On the earlier to occur of (the “Mandatory Conversion Date”) (A) in the
Company’s sole and absolute discretion, on or after the date on which the Company’s Common Stock has been publicly
traded on the OTCQB, or such other public stock exchange as the Company’s Common Stock may be listed from time to time:
(i) at an average daily volume of at least 40,000 shares for thirty (30) consecutive trading days, and (ii) at an average closing
trading price of at least $0.20 for that same period; or (B) the Maturity Date, this Debenture shall be converted pursuant to
the terms hereof. Provided that the Holder has received the certificates or other instruments representing the securities issued
upon conversion pursuant to this Section 3.4 within ten (10) business days following the Mandatory Conversion Date, this Debenture
shall be deemed cancelled and of no further force or effect as of the Mandatory Conversion Date.


 


3.5
Effect, Mechanics of Conversion. No fractional shares of capital stock shall be issued upon conversion of this Debenture.
If the conversion would result in the issuance of any fractional share, the number of shares of capital stock shall be rounded
up or down to the nearest whole number, and no cash shall be paid to Holder in lieu of the deficiency, if any. At its expense,
the Company shall, as soon as practicable after conversion, issue and deliver to the Holder a certificate or certificates for
the number of shares of Common Stock to which the Holder shall be entitled upon such conversion, together with any other securities
and property to which the Holder is entitled upon such conversion under the terms of this Debenture.


 


ARTICLE
FOUR 

CONVERSION RATE ADJUSTMENTS


 


4.1
Adjustments for Stock Splits and Subdivisions. In the event the Company should at any time or from time to time after the
date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares
of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment
of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional
shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion Rate of this Debenture shall be appropriately decreased
so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be increased in proportion to such
increase of outstanding shares, unless such adjustment has already been made to the Conversion Rate.


 




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4.2
Adjustments for Reverse Stock Splits. If the number of shares of Common Stock outstanding at any time after the date hereof
is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination,
the Conversion Rate for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable
on conversion hereof shall be decreased in proportion to such decrease in outstanding shares, unless such adjustment has already
been made to the Conversion Rate.


 


4.3
Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the conversion of this Debenture such number of its shares
of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal
amount and accrued interest of this Debenture, in addition to such other remedies as shall be available to the holder of this
Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized, but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.


 


4.4
Favored nation status. If company should do another round of financing with better terms, then holder has the right to
receive the same terms.


 


ARTICLE
FIVE

EVENTS OF DEFAULT


 


The
occurrence of any of the following events of default shall, at the option of the Holder hereof, make all sums of Principal Amount
and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived:


 


5.1
Breach of Covenant. The breach of any covenant or other term or condition of this Debenture and continuance thereof for
a period of thirty (30) days after written notice to the Company from the Holder.


 


5.2
Insolvency; Receiver or Trustee. The Company shall become insolvent or admit in writing its inability to pay its debts
as they mature; or make an assignment for the benefit of creditors; or apply for or consent to the appointment of a receiver or
trustee for it or for a substantial part of its property or business; or such a receiver or trustee otherwise shall be appointed.


 




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5.3
Bankruptcy. Bankruptcy, insolvency, reorganization, or liquidation proceeding or other proceedings or relief under any
bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company.


 


ARTICLE
SIX 

MISCELLANEOUS


 


6.1
Entire Debenture. This Debenture and the documents referred to herein constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except
as specifically set forth herein or therein. The terms and conditions of this Debenture shall inure to the benefit of and be binding
upon the respective heirs, personal representatives, successors and assigns of the parties, except to the extent assignability
is limited herein.


 


6.2
Waiver and Amendment. Any provision of this Debenture may be amended, waived, or modified upon the written consent of the
Company and the Holder.


 


6.3
Governing Law. This Debenture shall be governed by and construed under the laws of the State of California.


 


6.4
Titles and Subtitles. The titles and subtitles used in this Debenture are used for convenience only and are not to be considered
in construing or interpreting this Debenture.


 


6.5
Notices. Any notice required or permitted under this Debenture shall be given in writing and shall be deemed effectively
given upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid,
or by reputable overnight courier such as FedEx and addressed in the following manner:


 


	(a)	If
    to the Holder:
	 	___________________
	 	___________________
	 	___________________
	 	 
	(b)	If
    to the Company:
	 	 
	 	Giggles
    N Hugs, Inc.
	 	10250
    Santa Monica, #155
	 	Los
    Angeles, CA 90067
	 	Attention:
    Joey Parsi, CEO
	 	Telephone:
    310-553-4847
	 	 
	 	With
    a copy to (which shall not constitute notice):
	 	 
	 	Richardson
    & Patel LLP
	 	1100
    Glendon Avenue, Suite 850
	 	Los
    Angeles, CA 90024
	 	Attn:
    Peter Hogan, Esq.


 


6.6
Amendments and Waivers. Any term of this Debenture may be amended and the observance of any term of this Debenture may
be waived (either generally or in a particular instance and either retroactively or prospectively), pursuant to a written agreement
of the Company and Holder, and not otherwise.


 


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IN
WITNESS WHEREOF, the Company has caused this Debenture to be signed in its name by the manual signature of its Chief Executive
Officer.


 


	 	GIGGLES N HUGS, INC., 
	 	a Nevada corporation
	 	 	 
	 	By:	 
	 	 	Joey
    Parsi, Chief Executive Officer


 


	Name
    of Holder: 	__________________________________
	 	 
	Address:
    	__________________________________
		 
	 	__________________________________


 








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