Blueprint






Exhibit
10.2



 


NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO BORROWER. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.


 


Original
Issue Date: July 21,
2017


 



Principal Amount: $300,000.00


 



Original Conversion Price (subject to adjustment herein):
$0.0003


 


 



SECURED CONVERTIBLE NOTE



DUE JULY 21, 2018


 


THIS
CONVERTIBLE NOTE is one of a series of duly authorized and validly
issued Notes of FRIENDABLE,
INC., a Nevada corporation, (the “Borrower”), having its
principal place of business at 125 East Campbell Avenue,
2nd Floor,
Campbell CA 95008, due
July 21, 2018 (this note,
the “Note” and, collectively
with the other notes of such series, the “Notes”).


 


FOR
VALUE RECEIVED, Borrower promises to pay to ALPHA CAPITAL ANSTALT or its registered
assigns (the “Holder”), with an address
at: Lettstrasse 32, 9490 Vaduz, Liechtenstein, Fax:
011-423-2323196, or shall have paid pursuant to the terms
hereunder, the principal sum of Three Hundred Thousand Dollars
($300,000.00) on
July 21, 2018 (the
“Maturity
Date”) or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay
interest, if any, to the Holder on the aggregate unconverted and
then outstanding principal amount of this Note in accordance with
the provisions hereof.


 


The
Holder of this Note has been granted a security interest in assets
of Borrower, specifically in Fan Pass, Inc. in Borrower’s
ownership in Fan Pass, Inc.


 


This
Note is subject to the following additional
provisions:


 


Section
1.          Definitions.
For the purposes hereof, in addition to the terms defined elsewhere
in this Note, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b)
the following terms shall have the following meanings:


 


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


 



 

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“Bankruptcy Event” means
any of the following events: (a) Borrower or any Subsidiary thereof
commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to Borrower or any Subsidiary thereof, (b)
there is commenced against Borrower or any Subsidiary thereof any
such case or proceeding that is not dismissed within 60 days after
commencement, (c) Borrower or any Subsidiary thereof is adjudicated
insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered, (d) Borrower or
any Subsidiary thereof suffers any appointment of any custodian or
the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such
appointment, (e) Borrower or any Subsidiary thereof makes a general
assignment for the benefit of creditors, (f) Borrower or any
Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts
or (g) Borrower or any Subsidiary thereof, by any act or failure to
act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the
foregoing.


 


“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 New York are required by law or other
governmental action to close.


 


“Buy-In” shall have the
meaning set forth in Section 4(c)(v).


 


“Change of Control
Transaction” means, other than by means of conversion
or exercise of the Notes and the Securities issued together with
the Notes, 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 Borrower,
by contract or otherwise) of in excess of 50% of the voting
securities of Borrower, (b) Borrower merges into or consolidates
with any other Person, or any Person merges into or consolidates
with Borrower and, after giving effect to such transaction, the
stockholders of Borrower immediately prior to such transaction own
less than 50% of the aggregate voting power of Borrower or the
successor entity of such transaction, (c) Borrower sells or
transfers all or substantially all of its assets to another Person
and the stockholders of Borrower 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 three 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 Original 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 date hereof), or (e) the execution by Borrower of an
agreement to which Borrower is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.


 


“Closing Price” means on
any particular date (a) the last reported closing bid price
per share of Common Stock on such date on the Trading Market (as
reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or
(b) if there is no such price on such date, then the closing bid
price on the Trading Market on the date nearest preceding such date
(as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
or (c)  if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then reported
in the “pink sheets” published by OTC Pink Marketplace
(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) if the shares of Common Stock
are not then publicly traded the fair market value of a share of
Common Stock as determined by an independent appraiser selected in
good faith by the Holder and reasonably acceptable to Borrower, the
fees and expenses of which shall be paid by Borrower.


 



 

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“Conversion” shall have
the meaning ascribed to such term in Section 4.


 


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


 


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


 


“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Note in accordance with the terms hereof.


 


“Dilutive Issuance” shall
have the meaning set forth in Section 5(e).


 


“Equity Conditions” means,
during the period in question, (a)
Borrower 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) Borrower shall have paid all liquidated
damages and other amounts owing to the applicable Holder in respect
of this Note and the other Transaction Documents, (c) (i)
there is an effective registration statement pursuant to which the
Holders are permitted to utilize the prospectus thereunder to
resell all of the Underlying Shares (and Borrower believes, in good
faith, that such effectiveness will continue uninterrupted for the
foreseeable future), or (ii) all of the Underlying Shares (and
shares issuable in lieu of cash payments of interest) may be resold
pursuant to Rule 144 without volume or manner-of-sale restrictions
or current public information requirements as confirmed by counsel
to Borrower in a written opinion letter to such effect, addressed
and acceptable to the Borrower’s Transfer Agent and the
affected Holders, (d) 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 Borrower believes, in good faith, that trading of the Common
Stock on a Trading Market will continue uninterrupted for the
foreseeable future), (e) 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, (f) an Event of Default has not
occurred, whether or not such Event of Default has been cured, (g)
there is no existing event which, with the passage of time or the
giving of notice, would constitute an Event of Default, (h) the
issuance of the shares in question to the applicable Holder would
not exceed the Beneficial Ownership Limitation, (i) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, and (j) the applicable
Holder is not in possession of any information provided by Borrower
that constitutes, or may constitute, material non-public
information.


 


“Event of Default” shall
have the meaning set forth in Section 8(a).


 


“Fan Pass Transaction”
means the Company’s transactions in connection with Fan Pass,
Inc. as defined in the Securities Purchase Agreement.


 


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


 


“Interest Payment Date”
shall have the meaning set forth in Section 2(a).


 


“Interest Share Amount”
shall have meaning set forth in Section 2(a).


 



 

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“Mandatory Default Amount”
means the sum of (a) the greater of (i) the outstanding principal
amount of this Note divided by the Conversion Price on the date the
Mandatory Default Amount is either (A) demanded (if demand or
notice is required to create an Event of Default) or otherwise due
or (B) paid in full, whichever has a lower Conversion Price,
multiplied by the VWAP on the date the Mandatory Default Amount is
either (x) demanded or otherwise due or (y) paid in full, whichever
has a higher VWAP, or (ii) 125% of the outstanding principal amount
of this Note and (b) all other amounts, costs, expenses and
liquidated damages due in respect of this Note.


 


“New York Courts” shall
have the meaning set forth in Section 9(d).


 


“Note Register” shall have
the meaning set forth in Section 2(c).


 


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


 


“Original Issue Date”
means the date of the first issuance of the Notes, regardless of
any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such
Notes.


 


“Other Holders” means
holders of Other Notes.


 


“Other Notes” means Notes
nearly identical to this Note issued to other Holders pursuant to
the Purchase Agreement.


 


“Permitted Indebtedness”
means (a) any liabilities for borrowed money or amounts owed not in
excess of $100,000 in the aggregate (other than trade accounts
payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance
sheet (or the notes thereto) not affecting more than $100,000 in
the aggregate, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business; and (c) the present value of any
lease payments not in excess of $100,000 due under leases required
to be capitalized in accordance with GAAP. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.


 


“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 Borrower) have been established in accordance
with GAAP, (b) Liens imposed by law which were incurred in the
ordinary course of Borrower’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of Borrower’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 Borrower 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, and (c) Liens incurred
prior to the Closing Date in connection with Permitted Indebtedness
under clauses (a) and (b) thereunder, and Liens incurred in
connection with Permitted Indebtedness under clause (c) thereunder,
provided that such Liens are not secured by assets of Borrower or
its Subsidiaries other than the assets so acquired or
leased.


 



 

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“Purchase Agreement” means
the Securities Purchase Agreement, dated as of June ___, 2017 among
Borrower and the original Holders, as amended, modified or
supplemented from time to time in accordance with its
terms.


 


“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)(ii).


 


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


 


“Trading Day” means a day
on which the principal Trading Market is open for
trading.


 


“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ
Global Select Market, the New York Stock Exchange, the OTC Bulletin
Board, the OTCQB, the OTCQX or the OTC Pink Marketplace (or any
successors to any of the foregoing).


 


“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b)  if any of the NASDAQ markets or exchanges is not a
Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or
quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported on the OTCQX, OTCQB or OTC Pink
Marketplace maintained by the OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices), the volume weighted average price of the Common Stock on
the first such facility (or a similar organization or agency
succeeding to its functions of reporting prices), or (d) in
all other cases, the fair market value of a share of Common Stock
as determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to Borrower, the fees and
expenses of which shall be paid by Borrower.


 


Section
2.       
 Interest.


 


a)           Interest.
Simple interest payable on the interest bearing portion of this
Note shall accrue at the annual rate of ten percent (10%) and in
arrears on the Maturity Date (the “Interest Payment
Date”) (if the Interest Payment Date is not a Trading Day,
the applicable payment should be made on the next succeeding
Trading Day). Interest shall be payable in duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock (the
amount to be paid in shares of Common Stock, the
“Interest Share
Amount”). The Interest Share Amount will be determined
by dividing the amount of interest on the subject Interest Payment
Date by the lesser of (i) Conversion Price in effect on such date
(ii) or the average of the closing price for the Common Stock for
the 5 Trading Days prior to the Interest Payment Date as reported
by Bloomberg L.P. on the Trading Market on which the Common Stock
is then listed or quoted. The Holders shall have the same rights
and remedies with respect to the delivery of any such shares as if
such shares were being issued pursuant to Section 4. Borrower may
not pay interest by delivery of Common Stock without the consent of
the Holder in the event that the Equity Conditions are not in
effect on each day from the relevant Interest Payment Date through
the date the Interest Share Amount is delivered to the Holder.
Borrower may not pay any Interest Share Amount in excess of the
Beneficial Ownership Limitation when applicable, unless waived by
Holder. Following the occurrence and during the continuance of an
Event of Default, then from the first date of such occurrence, the
annual interest rate on this Note shall be eighteen percent (18%).
Such interest shall be due and payable on the Maturity Date,
whether by acceleration or otherwise.


 



 

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b)           Payment
Grace Period. The Borrower shall not have any grace period
to pay any monetary amounts due under this Note.


 

c)          
Conversion
Privileges. The Conversion Rights set forth in Section 4
shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full regardless of the
occurrence of an Event of Default. This Note shall be payable in
full on the Maturity Date, unless previously converted into Common
Stock in accordance with Section 4 hereof.


 

d)          
Application of
Payments. Interest on this Note shall be calculated on the
basis of a 360-day year and the actual number of days elapsed.
Payments made in connection with this Note shall be applied first
to amounts due hereunder other than principal and interest,
thereafter to interest and finally to principal.


 

e)          
Pari Passu. Except
as otherwise set forth herein, all payments made on this Note and
the Other Notes and all actions taken by the Borrower with respect
to this Note and the Other Notes, shall be made and taken
pari passu with respect to
this Note and the Other Notes. Notwithstanding anything to the
contrary contained herein or in the Transaction Documents, it shall
not be considered non-pari passu for a Holder or Other Holder to
elect to receive interest paid in shares of Common Stock or for the
Borrower to actually pay interest in shares of Common Stock to such
electing Holder or Other Holder.


 


f)           Manner
and Place of Payment. Principal and interest on this Note
and other payments in connection with this Note shall be payable at
the Holder’s offices as designated above in lawful money of
the United States of America in immediately available funds without
set-off, deduction or counterclaim. Upon assignment of the interest
of Holder in this Note, Borrower shall instead make its payment
pursuant to the assignee’s instructions upon receipt of
written notice thereof. Except as set forth herein, this Note may
not be prepaid or mandatorily converted without the consent of the
Holder.


 


Section
3.       
   Registration of Transfers and
Exchanges.


 


a)
         Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.


 


b)
         Investment Representations.
This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.


 


c)
         Reliance on Note Register.
Prior to due presentment for transfer to Borrower of this Note,
Borrower and any agent of Borrower may treat the Person in whose
name this Note is duly registered on the Note Register as the owner
hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Note is overdue, and
neither Borrower nor any such agent shall be affected by notice to
the contrary.


 



 

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Section
4.     
     Conversion.


 


a)
         Voluntary Conversion. At any
time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any
time and from time to time (subject to the conversion limitations
set forth in Section 4(d) hereof). The Holder shall effect
conversions by delivering to Borrower a Notice of Conversion, the
form of which is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount
of this Note to be converted and the date on which such conversion
shall be effected (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 is
deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to
Borrower unless the entire principal amount of this Note has been
so converted. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Note in an amount
equal to the applicable conversion. The Holder and Borrower shall
maintain records showing the principal amount(s) converted and the
date of such conversion(s). Borrower may deliver an objection to
any Notice of Conversion within one (1) Business Day 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. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note,
the unpaid and unconverted principal amount of this Note may be
less than the amount stated on the face hereof.


 


b)
         Conversion Price. The
conversion price for the principal and interest, if any, in
connection with voluntary conversions by the Holder shall be equal
to $0.0003, subject to
adjustment herein (the “Conversion
Price”).


 


c)
         Mechanics of
Conversion.


 


i.       
  Conversion
Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the
outstanding principal amount of this Note to be converted plus
interest, if any, elected by the Holder to be converted by (y) the
Conversion Price.


 


ii.         Delivery
of Certificate Upon Conversion. Not later than two (2)
Trading Days after each Conversion Date (the “Share Delivery Date”),
Borrower shall deliver, or cause to be delivered, to the Holder a
certificate or certificates representing the Conversion Shares
which, on or after the earlier of (i) the six month anniversary of
the Original 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) representing
the number of Conversion Shares being acquired upon the conversion
of this Note. Borrower shall use its best efforts to deliver any
certificate or certificates required to be delivered by Borrower
under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing
similar functions.


 


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 Borrower
at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event Borrower
shall promptly return to the Holder any original Note delivered to
Borrower and the Holder shall promptly return to Borrower the
Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.


 



 

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iv.         Obligation
Absolute; Partial Liquidated Damages. Borrower’s
obligations to issue and deliver the Conversion Shares upon
conversion of this Note in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction
by the 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 the Holder or any other Person of any
obligation to Borrower or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of
Borrower to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by Borrower of any such action
Borrower may have against the Holder. In the event the Holder of
this Note shall elect to convert any or all of the outstanding
principal amount hereof, Borrower may not refuse conversion based
on any claim that the Holder or anyone associated or affiliated
with the 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 this Note shall have been sought and obtained, and Borrower
posts a surety bond for the benefit of the Holder in the amount of
150% of the outstanding principal amount of this Note, 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 the Holder to the
extent it obtains judgment. In the absence of such injunction,
Borrower shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If Borrower fails for any
reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(c)(ii) by the Share Delivery Date, Borrower
shall pay to the Holder, in cash, as liquidated damages and not as
a penalty, for each $1,000 of principal amount being converted, $10
per Trading Day (increasing to $20 per Trading Day on the fifth
(5th)
Trading Day after such liquidated damages being to accrue) for each
Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 8 hereof for
Borrower’s failure to deliver Conversion Shares within the
period specified herein 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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v.           Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the
Holder, if Borrower fails for any reason to deliver to the Holder
such certificate or certificates by the Share Delivery Date
pursuant to Section 4(c)(ii), and if after such Share Delivery Date
the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder or
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a
“Buy-In”), then Borrower
shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any,
by which (x) the 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 the 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) at the option of the
Holder, either reissue (if surrendered) this Note in a principal
amount equal to the principal amount of the attempted conversion
(in which case such conversion shall be deemed rescinded) or
deliver to the Holder the number of shares of Common Stock that
would have been issued if Borrower had timely complied with its
delivery requirements under Section 4(c)(ii). For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion
of this 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, Borrower shall be required
to pay the Holder $1,000. The Holder shall provide Borrower written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of Borrower, 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
Borrower’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.


 


vi.         Reservation
of Shares Issuable Upon Conversion. Borrower covenants that
it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose
of issuance upon conversion of this Note as herein provided, free
from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of
the Notes), 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 interest
which has accrued and would accrue on such principal amount,
assuming such principal amount was not converted through the
Maturity Date. Borrower 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 this Note.
As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, Borrower 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 certificates for shares
of the Common Stock on conversion of this Note shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, Borrower 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
certificate upon conversion in a name other than that of the Holder
of this Note so converted and Borrower shall not be required to
issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to Borrower
the amount of such tax or shall have established to the
satisfaction of Borrower that such tax has been paid. Borrower
shall pay all Transfer Agent fees required for same-day processing
of any Notice of Conversion.


 



 

9







 






 


d)
          Holder’s
Conversion Limitations. Borrower shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the 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 the Holder and its
Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this 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 principal amount of this Note beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of Borrower subject to a limitation on conversion or
exercise analogous to the limitation contained herein (including,
without limitation, any other Notes or the Warrants) beneficially
owned by the 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 this Note is
convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this
Note is convertible shall be in the sole discretion of the Holder,
and the submission of a Notice of Conversion shall be deemed to be
the Holder’s determination of whether this Note may be
converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this
Note is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to Borrower each time it
delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and
Borrower 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, the
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) Borrower’s
most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by
Borrower, or (iii) a more recent written notice by Borrower or
Borrower’s transfer agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request
of a Holder, Borrower shall within two Trading Days confirm orally
and in writing to the 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 Borrower, including
this Note, by the 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 this
Note held by the Holder. The Holder may decrease the Beneficial
Ownership Limitation at any time and the Holder, upon not less than
61 days’ prior notice to Borrower, and may increase the
Beneficial Ownership Limitation 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 Beneficial Ownership
Limitation provisions of this Section 4(d) shall continue to apply.
Any such increase will not be effective until the 61st day after such
notice is delivered to Borrower. The Beneficial Ownership
Limitation 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 this
Note.


 



 

10







 






 


Section 5.       
   Certain
Adjustments.


 


a)
         Stock Dividends and Stock
Splits. If Borrower, 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 Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by Borrower upon conversion of the Notes), (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 Borrower, 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 Borrower) 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 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 Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a) above, if at any time Borrower grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired 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 exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, 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 grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).


 


c)           Pro
Rata Distributions. During such time as this Note is
outstanding, if Borrower shall declare or make any dividend whether
or not permitted, or makes any 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 exercise of this Note (without regard to any
limitations on exercise 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).


 



 

11







 






 


d)
         Fundamental Transaction. If, at
any time while this Note is outstanding, (i) Borrower, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of Borrower with or into another Person, (ii)
Borrower, 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 Borrower 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) Borrower, 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, (v) Borrower, 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 Borrower, 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 (1) share of Common Stock in such
Fundamental Transaction, and Borrower 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.
Borrower shall cause any successor entity in a Fundamental
Transaction in which Borrower is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of Borrower under this Note and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the
provisions of this Section 5(d) 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 Note and the other
Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every
right and power of Borrower and shall assume all of the obligations
of Borrower under this Note and the other Transaction Documents
with the same effect as if such Successor Entity had been named as
Borrower herein.


 



 

12







 






 


e)           Adjustment
Upon Issuance of Shares of Common Stock. If and whenever on
or after the date hereof, the Company issues or sells, or in
accordance with this Section 5 is deemed to have issued or sold,
any shares of Common Stock (including (i) the issuance or sale of
shares of Common Stock owned or held by or for the account of the
Company, and (ii) all issuances or sales of shares to the Purchaser
pursuant to all prior agreements between the Company and Purchaser,
including but not limited to conversion of notes and exercise of
warrants previously issued to Purchaser, but excluding any Exempt
Issuance issued or sold or deemed to have been issued or sold) for
a consideration per share (the “New Issuance Price”) less
than a price equal to the Conversion Price in effect immediately
prior to such issue or sale or deemed issuance or sale (such
Conversion Price then in effect is referred to as the
“Applicable
Price”) (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to the New Issuance Price. For all
purposes of the foregoing (including, without limitation,
determining the adjusted Conversion Price and consideration per
share under this Section 5(e)), the following shall be
applicable:

 


(i) Issuance of Options. If the
Company in any manner grants or sells any Options (other than
Options that qualify as Exempt Issuances) and the lowest price per
share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting or sale
of such Option for such price per share. For purposes of this
Section 5(e)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Options or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option” shall
be equal to (1) the lower of (x) the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale
of such Option, upon exercise of such Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon
exercise of such Option and (y) the lowest exercise price set forth
in such Option for which one share of Common Stock is issuable upon
the exercise of any such Options or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of
any such Option minus (2) the sum of all amounts paid or payable to
the holder of such Option (or any other Person) upon the granting
or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option plus the value of any other
consideration received or receivable by, or benefit conferred on,
the holder of such Option (or any other Person). Except as
contemplated below, no further adjustment of the Conversion Price
shall be made upon the actual issuance of such shares of Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible
Securities.

 



 

13







 





 


(ii) Issuance
of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities (other than Convertible
Securities that qualify as Exempt Issuances) and the lowest price
per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company
at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this Section
5(e)(ii), the “lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange
thereof” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the
issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security and (y) the
lowest conversion price set forth in such Convertible Security for
which one share of Common Stock is issuable upon conversion,
exercise or exchange thereof minus (2) the sum of all amounts paid
or payable to the holder of such Convertible Security (or any other
Person) upon the issuance or sale of such Convertible Security plus
the value of any other consideration received or receivable by, or
benefit conferred on, the holder of such Convertible Security (or
any other Person). Except as contemplated below, no further
adjustment of the Conversion Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise
or exchange of such Convertible Securities, and if any such issue
or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of this Note has been or is to be made
pursuant to other provisions of this Section 5(e), except as
contemplated below, no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.

 


(iii) Change
in Option Price or Rate of Conversion. If the purchase or
exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time, the Conversion Price in effect at the time of such
increase or decrease shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 5(e)(iii), if the
terms of any Option or Convertible Security that was outstanding as
of the date of issuance of this Note are increased or decreased in
the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock
deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 5(e) shall be made
if such adjustment would result in an increase of the Conversion
Price then in effect.

 



 

14







 





 


(iv)           Calculation
of Consideration Received. If any Option and/or Convertible
Security and/or Adjustment Right is issued in connection with the
issuance or sale or deemed issuance or sale of any other securities
of the Company (as determined by the Holder, the
“Primary
Security”, and such Option and/or Convertible Security
and/or Adjustment Right, the “Secondary Securities”),
together comprising one integrated transaction, the consideration
per share of Common Stock with respect to such Primary Security
shall be deemed to be equal to the difference of (x) the lowest
price per share for which one share of Common Stock was issued in
such integrated transaction (or was deemed to be issued pursuant to
Section 5(e)(i) or 5(e)(ii) above, as applicable) solely with
respect to such Primary Security, minus (y) with respect to such
Secondary Securities, the fair market value of such Secondary
Securities as agreed to by the Company and Holder and absent such
agreement by an independent, reputable appraiser jointly selected
by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the
Company.


 


f)         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 Borrower) issued and outstanding.


 


g)
         Notice to the
Holder.


 


i.            Adjustment
to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, Borrower
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.


 


ii.       
  Notice to
Allow Conversion by Holder. If (A) Borrower shall declare a
dividend (or any other distribution in whatever form) on the Common
Stock, (B) Borrower shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C) Borrower 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 Borrower shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which Borrower is a party, any sale or transfer of all or
substantially all of the assets of Borrower, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property or (E) Borrower shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of Borrower, then, in each case, Borrower 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 the Holder at its
last address as it shall appear upon the Note Register, 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 Borrower or any of the
Subsidiaries, Borrower shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert this Note 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.


 



 

15







 






 


Section
6.                      Negative
Covenants. As long as any portion of this Note remains
outstanding, unless the holders of at least 51% in principal amount
of the then outstanding Notes shall have otherwise given prior
written consent, Borrower shall not, and shall not permit any of
the Subsidiaries to, directly or indirectly:


 


a)           other
than Permitted Indebtedness, 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;


 


b)           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;


 


c)           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;


 


d)           repay,
repurchase or offer to repay, repurchase or otherwise acquire more
than a de
minimis number of
shares of its Common Stock or Common Stock Equivalents other than
as to the Conversion Shares or Warrant Shares as permitted or
required under the Transaction Documents;


 


e)           redeem,
defease, repurchase, repay or make any payments in respect of, by
the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Indebtedness
(other than the Notes if on a pro-rata basis), whether by way of
payment in respect of principal of (or premium, if any) or interest
on, such Indebtedness, the foregoing restriction shall also apply
to Permitted Indebtedness from and after the occurrence of an Event
of Default;


 


f)           declare
or make 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;


 


g)           issue
any Common Stock or Common Stock Equivalents except as permitted
pursuant to the Purchase Agreement;


 


h)           enter
into any transaction with any Affiliate of Borrower 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 disinterested directors of
Borrower (even if less than a quorum otherwise required for board
approval); or


 



 

16







 






 


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


 


Section
7.          
  Events of
Default.


 


a)
         
“Event of
Default” 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.           any
default in the payment of (A) the principal or interest amount of
this Note or (B) liquidated damages and other amounts owing to a
Holder on any Note, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of a
default under clause (B) above, is not cured within 3 Trading Days
after Borrower has become or should have become aware of such
default;


 


ii.         Borrower
shall fail to observe or perform any other covenant or agreement
contained in the Notes (other than a breach by Borrower of its
obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (ix) below) which
failure is not cured, if possible to cure, within the earlier to
occur of (A) 5 Trading Days after
notice of such failure sent by the Holder or by any Other Holder to
Borrower and (B) 10 Trading Days after Borrower has become or
should have become aware of such failure;


 


iii.         a
default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents, or (B) any other
material agreement, lease, document or instrument to which Borrower
or any Subsidiary is obligated (and not covered by clause (vi)
below), which in the case of subsection (B) would reasonably be
expected to have a Material Adverse Effect;


 


iv.         any
representation or warranty made in this Note, any other Transaction
Documents, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered
to the Holder or any Other Holder shall be untrue or incorrect in
any material respect as of the date when made or deemed
made;


 


v.           Borrower
or any Subsidiary shall be subject to a Bankruptcy
Event;


 


vi.         Borrower
or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation
greater than $50,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming
or being declared due and payable prior to the date on which it
would otherwise become due and payable;


 



 

17







 






 


vii.         Borrower
shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or
in excess of 30% of its assets in one transaction or a series of
related transactions (whether or not such sale would constitute a
Change of Control Transaction);


 


viii.        Borrower
does not meet the current public information requirements under
Rule 144;


 


ix.        
 Borrower shall fail for any reason to deliver certificates to
a Holder prior to the fifth Trading Day after a Conversion Date
pursuant to Section 4(c) or Borrower shall provide at any time
notice to the Holder, including by way of public announcement, of
Borrower’s intention to not honor requests for conversions of
any Notes in accordance with the terms hereof;


 


x.       
   any Person shall breach any agreement delivered to the
initial Holders pursuant to Section 2.2 of the Purchase
Agreement;


 


xi.       
 any monetary judgment, writ or similar final process shall be
entered or filed against Borrower, any subsidiary or any of their
respective property or other assets for more than $50,000, and such
judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 90 calendar days;


 

xii.         
any dissolution, liquidation or winding up by Borrower or a
material Subsidiary of a substantial portion of their
business;


 

xiii.        
cessation of operations by Borrower or a material
Subsidiary;


 

xiv.  
      the failure by Borrower or any
material Subsidiary to maintain any material intellectual property
rights, personal, real property, equipment, leases or other assets
which are necessary to conduct its business (whether now or in the
future) and such breach is not cured with twenty (20) days after
written notice to the Borrower from the Holder;


 

xv.          
an event resulting in the Common Stock no longer being listed or
quoted on a Trading Market, or notification from a Trading Market
that the Borrower is not in compliance with the conditions for such
continued quotation and such non-compliance continues for twenty
(20) days following such notification;


 

xvi.         
a Commission or judicial stop trade order or suspension from the
Borrower’s Principal Trading Market;


 

xvii.       
the restatement after the date hereof of any financial statements
filed by the Borrower with the Commission for any date or period
from two years prior to the Original Issue Date and until this Note
is no longer outstanding, if the result of such restatement would,
by comparison to the unrestated financial statements, have
constituted a Material Adverse Effect. For the avoidance of doubt,
any restatement related to new accounting pronouncements shall not
constitute a default under this Section;


 


xviii.       
the Borrower effectuates a reverse split of its Common Stock
without ten (10) days prior written notice to the
Holder;


 



 

18







 






 

xix.   
       a failure by Borrower to
notify Holder of any material event of which Borrower is obligated
to notify Holder pursuant to the terms of this Note or any other
Transaction Document;


 

xx.           
a default by the Borrower of a material term, covenant, warranty or
undertaking of any other agreement to which the Borrower and Holder
are parties, or the occurrence of an event of default under any
such other agreement to which Borrower and Holder are parties which
is not cured after any required notice and/or cure
period;


 

xxi.           
the occurrence of an Event of Default
under any Other Note;


 

xxii.       
any material provision of any Transaction Document shall at any
time for any reason (other than pursuant to the express terms
thereof) cease to be valid and binding on or enforceable against
the Borrower, or the validity or enforceability thereof shall be
contested by Borrower, or a proceeding shall be commenced by
Borrower or any governmental authority having jurisdiction over
Borrower or Holder, seeking to establish the invalidity or
unenforceability thereof, or Borrower shall deny in writing that it
has any liability or obligation purported to be created under any
Transaction Document;


 

xxiii.         
the failure by Borrower to comply with its obligations under the
terms of the Fan Pass Transaction pursuant to the Transaction
Documents; or


 

xxiv.         
any default, failure or breach by Borrower relating to the Fan Pass
Transaction and as further described in the Transaction
Documents.


 


In the
event more than one grace, cure or notice period is applicable to
an Event of Default, then the shortest grace, cure or notice period
shall be applicable thereto.


 


b)
         Remedies Upon Event of Default,
Fundamental Transaction and Change of Control Transaction.
If any Event of Default or a Fundamental Transaction or a Change of
Control Transaction occurs, the outstanding principal amount of
this Note, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount. Commencing on the Maturity Date and also
five (5) days after the occurrence of any Event of Default interest
on this Note shall accrue at an interest rate equal to the lesser
of 18% per annum or the maximum rate permitted under applicable
law. Upon the payment in full of the Mandatory Default Amount, the
Holder shall promptly surrender this Note to or as directed by
Borrower. In connection with such acceleration described herein,
the Holder need not provide, and Borrower hereby waives, any
presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as
a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 7(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.


 


 


 



 

19







 






 

Section
8.                      
Security Interest/Waiver
of Automatic Stay. This Note is secured by a security
interest granted to the Holder pursuant to a Security Agreement, as
delivered by Borrower to Holder. The Borrower acknowledges and
agrees that should a proceeding under any bankruptcy or insolvency
law be commenced by or against the Borrower or a Subsidiary, or if
any of the Collateral (as defined in the Security Agreement) should
become the subject of any bankruptcy or insolvency proceeding, then
the Holder should be entitled to, among other relief to which the
Holder may be entitled under the Transaction Documents and any
other agreement to which the Borrower or a Subsidiary and Holder
are parties (collectively, “Loan Documents”) and/or
applicable law, an order from the court granting immediate relief
from the automatic stay pursuant to 11 U.S.C. Section 362 to permit
the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. THE BORROWER EXPRESSLY
WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C.
SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND
AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF
THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT
LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT,
CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER
TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. The Borrower hereby consents to any motion
for relief from stay that may be filed by the Holder in any
bankruptcy or insolvency proceeding initiated by or against the
Borrower and, further, agrees not to file any opposition to any
motion for relief from stay filed by the Holder. The Borrower
represents, acknowledges and agrees that this provision is a
specific and material aspect of the Loan Documents, and that the
Holder would not agree to the terms of the loan Documents if this
waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that is waiver is knowingly,
intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations
to induce this waiver, that the Borrower has been represented (or
has had the opportunity to by represented) in the signing of this
Note and the Loan Documents and in the making of this waiver by
independent legal counsel selected by the Borrower and that the
Borrower has discussed this waiver with counsel.


 

Section
9.                      
Miscellaneous.


 


a)
         Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall
be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, facsimile, or
electronic mail, addressed as set forth below or to such other
address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to
be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to
be received), or (b) upon receipt, when sent by electronic mail
(provided confirmation of transmission is electronically generated
and keep on file by the sending party), or (c) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be: (i) if to Borrower, to:
Friendable, Inc., 125 East
Campbell Avenue, 2nd Floor, Campbell CA
95008, Attn: Robert Rositano, CEO, fax: (408) 547-0110, email:
robert@ihookupsocial.com, with a copy by fax or email only to:
Lucosky Brookman LLP, 101 Wood Avenue South, Woodbridge, NJ 08830,
Attn: Steven A. Lipstein, Esq., fax: (732) 395-4401, email:
slipstein@lucbro.com, and (ii) if to the Holder, to: the address
and fax number indicated on the front page of this Note, with an
additional copy by fax only to (which shall not constitute notice):
Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream,
New York 11581, fax: (212) 697-3575, email:
counslers@gmail.com.


 



 

20







 






 


b)
         Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of Borrower. This Note ranks
pari passu with all other Notes now
or hereafter issued under the terms set forth
herein.         


 


c)
         Lost or Mutilated Note. If this
Note shall be mutilated, lost, stolen or destroyed, Borrower 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 for the principal
amount of this 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
Borrower.


 


d)
         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 New
York, 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 the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York 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 New York Courts, or such New York 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. This
Note shall be deemed an unconditional obligation of Borrower for
the payment of money and, without limitation to any other remedies
of Holder, may be enforced against Borrower by summary proceeding
pursuant to New York Civil Procedure Law and Rules Section 3213 or
any similar rule or statute in the jurisdiction where enforcement
is sought. For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which
Borrower delivered to Holder, which may be convenient or necessary
to determine Holder’s rights hereunder or Borrower’s
obligations to Holder are deemed a part of this Note, whether or
not such other document or agreement was delivered together
herewith or was executed apart from this Note.


 


e)
         Waiver. Any waiver by Borrower
or the 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. The failure of Borrower or the 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 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
Borrower or the Holder must be in writing.


 



 

21







 






 


f)         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.


 


g)
       Usury. 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. Borrower
covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive Borrower
from paying all or any portion of the principal of or interest on
this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the
performance of this Note, and Borrower (to the extent it may
lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any
such law, hinder, delay or impede the execution of any power herein
granted to the Holder, but will suffer and permit the execution of
every such as though no such law has been enacted.


 


h)
       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.


 


i)         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.


 


j)         Amendment.
Unless otherwise provided for hereunder, this Note may not be
modified or amended or the provisions hereof waived without the
written consent of Borrower and the
Holder.


 


k)
       Facsimile Signature. In the
event that the Borrower’s signature is delivered by facsimile
transmission, PDF, electronic signature or other similar electronic
means, such signature shall create a valid and binding obligation
of the Borrower with the same force and effect as if such signature
page were an original thereof.


 


 


*********************


 



(Signature Pages Follow)


 


 


 


 


 


 


 


 


 




 

22








 






 

 


IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by an authorized officer as of
the 21st day of July, 2017.


 


	
 

	

FRIENDABLE,
INC.


 



/s/ Robert Rositano


By:
___________________________________


Name:
Robert Rositano


Title:
CEO









 



WITNESS:


 



/s/ Dean Rositano



______________________________________


 


 


 


 


 


 


 


 


 


 




 

23








 






 



ANNEX A



 



NOTICE OF CONVERSION

 





The
undersigned hereby elects to convert principal under the
Convertible Note due July 21,
2018 of Friendable, Inc., a Nevada corporation (the
“Company”), into shares of
common stock (the “Common Stock”), of
Borrower according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
Borrower in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.


 


By the
delivery of this Notice of Conversion the undersigned represents
and warrants to Borrower 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: ____________________________


	
 

	
 


	
 

	

Principal
Amount of Note to be Converted: $__________________


	
 

	
 


	
 

	

Accrued
Interest to be Converted: $______________


	
 

	
 


	
 

	

Number
of shares of Common Stock to be issued: ______________


	
 

	
 


	
 

	

Signature:
_________________________________________


	
 

	
 


	
 

	

Name:
____________________________________________


	
 

	
 


	
 

	

Address
for Delivery of Common Stock Certificates: __________


	
 

	

_____________________________________________________ 


	
 

	

_____________________________________________________


	
 

	
 


	
 

	


Or


	
 

	
 


	
 

	

DWAC
Instructions: _________________________________


	
 

	
 


	
 

	

Broker
No:_____________


	
 

	

Account
No: _______________







  


 

 




 

24