Document:

EXHIBIT 10.1

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(this “Agreement”) is made and entered into this 31st day of March, 2017 (the “Effective
Date”), by and between Sportsman’s Warehouse Holdings, Inc., a Delaware corporation (the “Company”),
and Jon Barker (the “Executive”).

 

RECITALS

 

THE PARTIES ENTER THIS AGREEMENT on the basis of the following
facts, understandings and intentions:

 

A.       The Company desires
to provide for the services of the Executive on the terms and conditions set forth in this Agreement.

 

B.       The Executive
desires to accept employment with the Company on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the above recitals incorporated
herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby expressly acknowledged, the parties agree as follows:

 

1. Employment
and Duties

 

		1.1	Employment. The Company does hereby employ the Executive for the Period of Employment (as such term is defined in Section
1.3) on the terms and conditions expressly set forth in this Agreement. The Executive does hereby accept and agree to such hiring,
engagement and employment, on the terms and conditions expressly set forth in this Agreement.

 

		1.2	Title and Duties. During the Period of Employment, the Executive will serve as President and Chief Operating Officer
of the Company and have the duties and exercise the authority that the Board of Directors of the Company (the “Board”)
or the Chief Executive Officer of the Company (the “CEO”) assigns to the Executive from time to time.

 

During the Period of Employment, the Executive shall (i) devote substantially
all of the Executive’s business time, energy and skill to the performance of the Executive’s duties for the Company,
(ii) perform such duties in a faithful manner to the best of his abilities, and (iii) hold no other employment. The Executive may
serve on the boards of directors of non-profit charitable or educational organizations. The Company shall have the right, however,
to require the Executive to resign from any board or similar body (including, without limitation, any association, corporate, civic
or charitable board or similar body) which he may then serve if the Board reasonably determines that any business related to such
service is then in competition with any business of, or such service by the Executive interferes with Executive’s performance
of his duties to, the Company or any of its affiliates.

 

During the Period of Employment, the Executive’s principal place of employment
shall be the Company’s principal executive office as it may be located from time to time. The Executive acknowledges that
he will be required to travel from time to time in the course of performing his duties for the Company.

 

		1.3	Period of Employment. The “Period of Employment” shall commence on the Effective Date and shall continue
through, and end with, January 30, 2021, subject to extension by mutual written agreement. Notwithstanding the foregoing, the Period
of Employment is subject to earlier termination as provided below in this Agreement. If the Executive’s employment by the
Company continues beyond the Period of Employment, such employment will be “at will” and terminable by either party
at any time, for any reason (or no reason), and without any payment under this Agreement, other than for payment of the Accrued
Obligations, as defined below.

 

     

     

    

 

		1.4	No Breach of Contract. The Executive hereby represents to the Company and agrees that: (i) the execution and delivery
of this Agreement by the Executive and the Company and the performance by the Executive of the Executive’s duties hereunder
do not and shall not constitute a breach of, conflict with, or otherwise contravene or cause a default under, the terms of any
other agreement or policy to which the Executive is a party or otherwise bound or any judgment, order or decree to which the Executive
is subject; (ii) the Executive will not enter into any new agreement that would or reasonably could contravene or cause a default
by the Executive under this Agreement; (iii) the Executive has no information (including, without limitation, confidential information
and trade secrets) relating to any other Person which would prevent, or be violated by, the Executive entering into this Agreement
or carrying out his duties hereunder; (iv) the Executive is not bound by any employment, consulting, non-compete, non-solicitation,
confidentiality, trade secret or similar agreement (other than this Agreement) with any other Person; (v) to the extent the Executive
has any confidential or similar information that he is not free to disclose to the Company, he will not disclose such information
to the extent such disclosure would violate applicable law or any other agreement or policy to which the Executive is a party or
by which the Executive is otherwise bound; and (vi) the Executive understands the Company will rely upon the accuracy and truth
of the representations and warranties of the Executive set forth herein and the Executive consents to such reliance. As used herein,
the term “Person” shall be construed broadly and shall include, without limitation, an individual, a partnership, a
limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision thereof.

 

2. Compensation
and Benefits

 

		2.1	Base Salary. During the Period of Employment, the Company will pay the Executive a base salary (the “Base Salary”),
which shall be paid in accordance with the Company’s regular payroll practices in effect from time to time. Beginning March
31st, 2017, the Executive’s Base Salary shall be at an annualized rate of $350,000. The Board (or a committee thereof) will
review the Executive’s rate of Base Salary on a periodic basis (annually, commencing with fiscal year 2017) and may, in its
sole discretion, increase, but shall not decrease, the rate then in effect.

 

		2.2	Bonus. During the Period of Employment, the Executive will be entitled to participate in a cash bonus program. For any
fiscal year of the Company that occurs during the Period of Employment, the bonus program for such fiscal year will be based on
certain financial metrics, such as EBITDA, and may include a component based on the Executive’s individual performance and
contributions to the Company, all as determined by the Board (or a committee thereof) in its sole discretion. The Executive’s
target bonus for a fiscal year shall be 75% of the Executive’s Base Salary for such fiscal year, with the Executive’s
actual bonus for any year to be determined by the Board (or a committee thereof). The Executive’s bonus (if any) for a particular
fiscal year shall be paid not later than two and one-half months following the end of that fiscal year. Except as otherwise expressly
provided in Section 3, the Executive must be employed by the Company on the date that the Company actually pays bonuses under such
program for a particular fiscal year in order to be considered for and to have earned his bonus (if any) for such fiscal year.
The Board (or a committee thereof) may, in its sole discretion, consult with the CEO regarding any Base Salary increase or bonus
for the Executive.

 

     

     

    

 

		2.3	Equity Awards. The Company has adopted the 2013 Performance Incentive Plan (the “2013 Plan”). The
Board (or a committee thereof) will consider the Executive for an award under the 2013 Plan, the terms and conditions of which
will be established by the Board (or a committee thereof) in its sole discretion.

 

		2.4	Benefits and Expenses. During the Period of Employment, the Executive will be entitled to participate in benefit plans
generally made available by the Company to the executives of the Company, as they are in effect from time to time. The Company
will reimburse the Executive for the Executive’s reasonable and necessary business expenses incurred by the Executive in
carrying out his duties for the Company during the Period of Employment, in accordance with and subject to the Company’s
standard policies regarding expense reimbursement.

 

3. Termination

 

		3.1	Death. The Executive’s employment with the Company and the Period of Employment will terminate automatically upon
the Executive’s death.

 

		3.2	Incapacity. If the Board determines in good faith that the Executive has suffered an Incapacity (as defined below),
the Company can terminate the Executive’s employment with the Company and the Period of Employment on at least 15 days’
written notice (so long as the Executive has not returned to full-time performance of the Executive’s duties within that
period). For purposes of this Agreement, “Incapacity” means any mental or physical illness or disability that
renders the Executive incapable of performing the Executive’s duties, even with a reasonable accommodation, for more than
12 consecutive weeks in any twelve-month period, unless a longer period is required by law. The date of Incapacity will be the
date on which the Board declares the Incapacity on the grounds described above.

 

		3.3	Gross Misconduct. The Company can terminate the Executive’s employment and the Period of Employment at any time
for Gross Misconduct. “Gross Misconduct” means the occurrence of any of the following:

 

		(a)	the Executive’s commission of any felony;

 

		(b)	the Executive takes any actions or omissions intentionally causing the Company to violate any law, rule or regulation (other
than technical violations that have no material adverse impact on the Company);

 

		(c)	the Executive’s willful or reckless act or omission that injures the Company’s reputation or business in any material
way or is otherwise demonstrably detrimental to the Company;

 

     

     

    

 

		(d)	the Executive willfully fails or refuses to follow the legal and clear directives of the Board or the CEO (unless the following
of such directive would be a violation of applicable law);

 

		(e)	the Executive has been dishonest in connection with his employment activities or committed or engaged in an act of theft, embezzlement
or fraud; or

 

		(f)	the Executive has materially breached any provision of any agreement to which the Executive is a party with the Company or
any fiduciary duty the Executive owes to the Company; provided that the Company provides written notice to Executive of the condition(s)
claimed to constitute a material breach of this Agreement or any fiduciary duty and Executive fails to remedy such condition(s)
within thirty (30) days of the receiving such written notice thereof.

 

		3.4	Termination without Gross Misconduct. The Company can terminate the Executive’s employment with the Company and
the Period of Employment at any time, and for any reason (with or without cause), upon written notice to the Executive.

 

		3.5	Resignation. The Executive can voluntarily resign his employment with the Company and terminate the Period of Employment
upon 30 days’ prior written notice to the Company.

 

		3.6	Resignation for Good Reason. The Executive can terminate his employment with the Company and the Period of Employment
for Good Reason. “Good Reason” means the occurrence of any of the following by the Company without the Executive’s
express written consent: (a) a significant and material diminution in the Executive’s position, responsibilities, reporting
responsibilities or title, or a reduction in the Executive’s base salary; or (b) a material breach of this Agreement by the
Company; provided, however, that any such condition or conditions, as applicable, shall not constitute grounds for a termination
for Good Reason unless both (x) the Executive provides written notice to the Company of the condition claimed to constitute grounds
for Good Reason within sixty (60) days of the initial existence of such condition(s), and (y) the Company fails to remedy such
condition(s) within thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination
of the Executive’s employment with the Company shall not constitute a termination for Good Reason unless such termination
occurs not more than one hundred and eighty (180) days following the initial existence of the condition claimed to constitute grounds
for Good Reason.

 

		3.7	The Company’s Obligations upon Termination.

 

3.7.1        Death
or Incapacity. If the Executive’s employment by the Company and the Period of Employment are terminated pursuant
to Section 3.1 or 3.2, the Company shall have no further obligation to make or provide to the Executive, and the Executive shall
have no further right to receive or obtain from the Company, any payments or benefits except for payment to the Executive (or,
in the event of the Executive’s death, to his estate) of the Accrued Obligations. “Accrued Obligations”
means the following: earned and accrued salary and personal time off through the date of termination of the Executive’s employment
with the Company, and reimbursement of any business expenses incurred by the Executive during the Period of Employment that are
reimburseable by the Company pursuant to this Agreement, each in accordance with the Company’s policies then in effect and
each to the extent not previously paid.

 

     

     

    

 

3.7.2        Gross
Misconduct or Resignation. If the Executive’s employment by the Company and the Period of Employment are terminated
pursuant to Section 3.3 or 3.5, the Company shall have no further obligation to make or provide to the Executive, and the Executive
shall have no further right to receive or obtain from the Company, any payments or benefits except for payment to the Executive
of the Accrued Obligations.

 

3.7.3        Termination
without Gross Misconduct or for Good Reason. If the Executive’s employment by the Company and the Period of Employment
are terminated pursuant to Section 3.4 or 3.6, the Company shall have no further obligation to make or provide to the Executive,
and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits except for payment
to the Executive of the Accrued Obligations and, subject to Section 3.7.5, the following severance benefits:

 

		(a)	The Company will pay the Executive (as severance) continued payment of the Executive’s Base Salary (at the regular rate
per payroll period in effect immediately prior to the termination of the Executive’s employment with the Company and paid
in accordance with the Company’s regular payroll practices) through and ending with the date that is twelve (12) months after
the date the Executive’s employment with the Company terminated (the date the Executive’s employment with the Company
terminates is referred to as the “Severance Date”); provided that the continued Base Salary benefit for the
period commencing with the day following the Severance Date and ending with the 60th day following the Severance Date
shall not be paid over such 60-day period but shall instead be accumulated and paid on (or within two (2) business days after)
such 60th day following the Severance Date.

 

		(b)	The Company will pay the Executive an amount equal to the Executive’s target bonus (as determined by the Board in accordance
with Section 2.2) for the fiscal year in which the Severance Date occurs, pro-rated through the Severance Date for the portion
of the fiscal year the Executive was actually employed by the Company. Such amount is to be paid on (or within two (2) business
days after) the 60th day following the Severance Date.

 

		(c)	The Company will pay or reimburse the Executive for his premiums charged to continue medical coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Executive
(and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the Severance Date, to the extent
that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement
pursuant to this clause (c) shall commence with continuation coverage for the month following the month in which the Executive’s
Severance Date occurs and shall cease with continuation coverage for the twelfth (12th) month following the month in
which the Executive’s Severance Date occurs (or, if earlier, shall cease upon the first to occur of the Executive’s
death, the date the Executive becomes eligible for coverage under the health plan of a future employer, or the date the Company
ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer
COBRA continuation coverage to the Executive). To the extent the Executive elects COBRA coverage, he shall notify the Company in
writing of such election prior to such coverage taking effect and complete any other continuation coverage enrollment procedures
the Company may then have in place.

 

		(d)	Any equity awards (i.e., restricted stock, restricted stock units or options) granted to the Executive by the Company that
are outstanding and otherwise unvested immediately prior to the Severance Date shall, on the Severance Date, become fully vested.

 

     

     

    

 

		(e)	Through and ending with the date that is twelve (12) months after the Severance Date, the Executive will be entitled to continued
participation in any program generally made available by the Company to its employees allowing them to purchase Company merchandise
at a discount, as any such program may be in effect from time to time.

 

3.7.4        Exclusive
Remedy. The Executive agrees that the payments contemplated by this Agreement will constitute the Executive’s sole
and exclusive remedy for any termination of the Executive’s employment (other than any right to continued benefit coverage
under and to the extent required by COBRA, and except for payment of any vested benefit the Executive may have under a retirement
program sponsored or maintained by the Company that is intended to be qualified under Section 401(a) of the Internal Revenue Code
(any such benefit to be paid under and in accordance with the terms and conditions of such plan)). The Executive covenants that
he will not assert or pursue any other remedies, at law or in equity, with respect to any such termination. The Executive agrees
to resign, on the Severance Date, as an officer and director of the Company and any affiliate of the Company, and as a fiduciary
of any benefit plan of the Company or any affiliate of the Company, and to promptly execute and provide to the Company any further
documentation, as reasonably requested by the Company, to confirm such resignation.

 

3.7.5        Offsets.
All severance amounts due from the Company to the Executive under Section 3.7.3 will be subject to offset or reduction to take
into account any of the Executive’s obligations to the Company. As a condition precedent to any Company obligation to the
Executive pursuant to Section 3.7.3 (other than payment of the Accrued Obligations), the Executive shall, upon or promptly following
the Severance Date (and in all cases within twenty-one (21) days following the Severance Date unless a longer period of time is
required under applicable law to obtain an effective general release, in which case such longer period of time shall apply), deliver
to the Company a valid, executed general release of the Executive’s claims in a form reasonably satisfactory to the Company,
and such general release shall not be revoked by the Executive pursuant to any revocation rights afforded by applicable law.

 

4. Protective Covenants.

 

		4.1	Confidential Information; Inventions.

 

4.1.1        The
Executive shall not disclose or use at any time, either during the Period of Employment or thereafter, any Confidential Information
(as defined below) of which the Executive is or becomes aware, whether or not such information is developed by him, except to the
extent that such disclosure or use is directly related to and required by the Executive’s performance in good faith of duties
for the Company. The Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect
it against disclosure, misuse, espionage, loss and theft. The Executive shall deliver to the Company at the termination of the
Period of Employment, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as hereinafter
defined) of the business of the Company or any of its Affiliates (as defined below) which the Executive may then possess or have
under his control. Notwithstanding the foregoing, the Executive may truthfully respond to a lawful and valid subpoena or other
legal process, but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as
possible, make available to the Company and its counsel the documents and other information sought, and shall assist the Company
and such counsel in resisting or otherwise responding to such process. The Executive understands that nothing in this Agreement
is intended to limit the Executive’s right (i) to discuss the terms, wages, and working conditions of the Executive’s
employment to the extent permitted and/or protected by applicable labor laws, (ii) to report Confidential Information in a confidential
manner either to a federal, state or local government official or to an attorney where such disclosure is solely for the purpose
of reporting or investigating a suspected violation of law, or (iii) to disclose Confidential Information in an anti-retaliation
lawsuit or other legal proceeding, so long as that disclosure or filing is made under seal and the Executive does not otherwise
disclose such Confidential Information, except pursuant to court order. The Company encourages Executive, to the extent legally
permitted, to give the Company the earliest possible notice of any such report or disclosure.

 

     

     

    

 

4.1.2        As
used in this Agreement, the term “Confidential Information” means information that is not generally known to
the public and that is used, developed or obtained by the Company in connection with its business, including, but not limited to,
information, observations and data obtained by the Executive while employed by the Company or any predecessors thereof (including
those obtained prior to the Effective Date) concerning (i) the business or affairs of the Company (or such predecessors), (ii)
products or services, (iii) fees, costs and pricing structures and strategies, (iv) designs, (v) analyses, (vi) drawings, photographs
and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals
and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, product roadmaps,
methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients,
customer or client lists, and the preferences of, and negotiations with, customers and clients, (xiii) personnel information of
other employees and independent contractors (including their compensation, unique skills, experience and expertise, and disciplinary
matters), (xiv) other copyrightable works, (xv) all production methods, processes, technology and trade secrets, and (xvi) all
similar and related information in whatever form. Confidential Information will not include any information that has been published
(other than a disclosure by the Executive in breach of this Agreement) in a form generally available to the public prior to the
date the Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published
merely because individual portions of the information have been separately published, but only if all material features comprising
such information have been published in combination.

 

4.1.3        As
used in this Agreement, the term “Work Product” means all inventions, innovations, improvements, technical information,
systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and
all similar or related information (whether patentable or unpatentable, copyrightable, registerable as a trademark, reduced to
writing, or otherwise) which relates to the Company’s or any of its Affiliates’ actual or anticipated business, research
and development or existing or future products or services and which are conceived, developed or made by the Executive (whether
or not during usual business hours, whether or not by the use of the facilities of the Company or any of its Affiliates, and whether
or not alone or in conjunction with any other person) while employed by the Company (including those conceived, developed or made
prior to the Effective Date) together with all patent applications, letters patent, trademark, trade name and service mark applications
or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. All Work Product that the
Executive may have discovered, invented or originated during his employment by the Company or any of its Affiliates prior to the
Effective Date, that he may discover, invent or originate during the Period of Employment or at any time in the period of twelve
(12) months after the Severance Date, shall be the exclusive property of the Company and its Affiliates, as applicable, and Executive
hereby assigns all of Executive’s right, title and interest in and to such Work Product to the Company or its applicable
Affiliate, including all intellectual property rights therein. Executive shall promptly disclose all Work Product to the Company,
shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect
its (or any of its Affiliates’, as applicable) rights therein, and shall assist the Company, at the Company’s expense,
in obtaining, defending and enforcing the Company’s (or any of its Affiliates’, as applicable) rights therein. The
Executive hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed
necessary by the Company to protect or perfect the Company, the Company’s (and any of its Affiliates’, as applicable)
rights to any Work Product.

 

     

     

    

 

4.1.4       
As used in this Agreement, “Affiliate” of the Company means a Person that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company. As used in this
definition, the term “control,” including the correlative terms “controlling,” “controlled by”
and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by
contract or otherwise) of a Person.

 

		4.2	Restriction on Competition. The Executive agrees that if the Executive were to become employed by, or substantially
involved in, the business of a competitor of the Company or any of its Affiliates during the twelve (12) month period following
the Severance Date, it would be very difficult for the Executive not to rely on or use the Company’s and its Affiliates’
trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company’s and its Affiliates’
trade secrets and confidential information, and to protect such trade secrets and confidential information and the Company’s
and its Affiliates’ relationships and goodwill with customers, during the Period of Employment and for a period of twelve
(12) months after the Severance Date, the Executive will not directly or indirectly through any other Person engage in, enter the
employ of, render any services to, have any ownership interest in, nor participate in the financing, operation, management or control
of, any Competing Business. For purposes of this Agreement, the phrase “directly or indirectly through any other Person engage
in” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise,
whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation
in such enterprise as an employee, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement,
“Competing Business” means only the following: (a) the businesses commonly known as Bass Pro Shops, Cabela’s,
Scheels, Field and Stream Stores, Backcountry.com, and REI CO-OP; (b) any successor to any business identified in clause (a); and
(c) any affiliate of a business identified in clause (a) or clause (b); provided, however, that a “Competing Business”
shall not include a parent company or sister company of a business identified in clause (a) or clause (b) if both (x) such parent
company is also engaged (directly or through other affiliates) in businesses that are not competitive with any business described
in clause (a) or clause (b) (or, in the case of a sister company, such sister company is not engaged in any business that is competitive
with any business described in clause (a) or clause (b)), and (y) the Executive’s position, services and responsibilities
with such entity are limited to the distribution of merchandise that is not competitive with any business described in clause (a)
or clause (b) and the Executive does not participate in any way in any business identified in clause (a) or clause (b). For example,
and to clarify the foregoing proviso based on circumstances as in effect on the date of this Agreement, the Field and Stream Stores
are a division of Dick’s Sporting Goods, Inc., and Dick’s Sporting Goods, Inc. would not be considered a “Competing
Business” for purposes of this Agreement so long as (x) Dick’s Sporting Goods, Inc. also engaged (directly or through
other affiliates) in businesses that are not competitive with any business described in clause (a) or clause (b) of the preceding
sentence, and (y) the Executive’s position, services and responsibilities with Dick’s Sporting Goods, Inc. (or an affiliate)
were limited to the distribution of merchandise that is not competitive with any business described in clause (a) or clause (b)
of the preceding sentence and the Executive did not participate in any way in the business of the Field and Stream Stores or any
other business described in clause (a) or clause (b) of the preceding sentence. Nothing herein shall prohibit the Executive from
being a passive owner of not more than 2% of the outstanding stock of any class of a Competing Business which is publicly traded,
so long as the Executive has no active participation in the business of such corporation.

 

     

     

    

 

		4.3	No Conflicting Employment. The Executive hereby agrees that, during the Period of Employment, the Executive will not
engage in any other employment, occupation or consulting directly related to the business in which the Company or any of its Affiliates
is now involved or becomes involved during the Period of Employment, nor will the Executive engage in any other activities that
conflict with the Executive’s obligations to the Company or any of its Affiliates.

 

		4.4	Non-Solicitation of Employees and Consultants. During the Period of Employment and for a period of twenty four (24)
months after the Severance Date, the Executive will not directly or indirectly through any other Person solicit, induce or encourage,
or attempt to solicit, induce or encourage, any employee or independent contractor of the Company or any Affiliate of the Company
to leave the employ or service, as applicable, of the Company or such Affiliate, or become employed or engaged by any third party,
or in any way interfere with the relationship between the Company or any such Affiliate, on the one hand, and any employee or independent
contractor thereof, on the other hand.

 

		4.5	Return of Items. Upon termination of this Agreement, the Executive will promptly deliver to the Company all Company
equipment and other materials relating to the Company’s business and in the Executive’s possession or control.

 

     

     

    

 

		4.6	Litigation/Audit Cooperation. Following the termination of the Executive’s employment for any reason, the Executive
will reasonably cooperate with the Company in connection with (a) any internal or governmental investigation or administrative,
regulatory, arbitral or judicial proceeding involving the Company with respect to matters as to which the Executive had responsibility
or knowledge arising out of the Executive’s employment with, or service as a member of the Board of, the Company (collectively,
“Litigation”); or (b) any audit of the financial statements of the Company with respect to the period of time
when the Executive was employed by the Company (“Audit”). To the extent (if any) the Company requests such services
from the Executive, or the Executive is compelled by a governmental authority to provide services in a matter that does not involve
the Executive, the Company will: (i) reimburse the Executive for reasonable travel and other expenses incurred in connection with
providing his services under this Section 4.6, and (ii) compensate the Executive for each hour that the Executive provides services
pursuant to this Section 4.6 at the rate of $350 per hour. With respect to any month during which the Executive provides services
pursuant to this Section 4.6, the Executive will submit a written invoice to the Company that details the amount of time and a
description of the services rendered and expenses incurred during such month. The Executive will submit such invoice to the Company
not later than fifteen (15) days after the end of such month, and the Company will pay any such invoice within fifteen (15) days
after its receipt of such invoice from the Executive.

 

		4.7	Understanding of Covenants. The Executive acknowledges that, in the course of his employment with the Company and/or
its affiliates and their predecessors, he has become familiar with the Company’s and its affiliates’ and their predecessors’
trade secrets and with other confidential and proprietary information concerning the Company, its affiliates and their respective
predecessors and that his services have been and will be of special, unique and extraordinary value to the Company and its affiliates.
The Executive agrees that the foregoing covenants set forth (or referred to, as the case may be) in this Section 4 (together, the
“Restrictive Covenants”) are reasonable and necessary to protect the Company’s and its affiliates’
trade secrets and other confidential and proprietary information, good will, stable workforce, and customer relations.

 

Without limiting the generality of the Executive’s agreement in the preceding
paragraph, the Executive (i) represents that he is familiar with and has carefully considered the Restrictive Covenants, (ii) represents
that he is fully aware of his obligations hereunder, (iii) agrees to the reasonableness of the length of time, scope and geographic
coverage, as applicable, of the Restrictive Covenants, (iv) agrees that the Company and its affiliates currently conduct business
throughout North America, and (v) agrees that the Restrictive Covenants will continue in effect for the applicable periods contemplated
by the Restrictive Covenants regardless of whether the Executive is then entitled to receive severance pay or benefits from the
Company. The Executive understands that the Restrictive Covenants may limit his ability to earn a livelihood in a business similar
to the business of the Company and any of its affiliates, but he nevertheless believes that he has received and will receive sufficient
consideration and other benefits as an employee of the Company and as otherwise provided hereunder or as described in the recitals
hereto to clearly justify such restrictions which, in any event (given his education, skills and ability), the Executive does not
believe would prevent him from otherwise earning a living. The Executive agrees that the Restrictive Covenants do not confer a
benefit upon the Company disproportionate to the detriment of the Executive.

 

     

     

    

 

		4.8	Enforcement. The Executive agrees that the Executive’s services are unique and that he has access to confidential
information of the Company and its affiliates. Accordingly, the Executive agrees that a breach by the Executive of any of the Restrictive
Covenants may cause immediate and irreparable harm to the Company that would be difficult or impossible to measure, and that damages
to the Company for any such injury would therefore be an inadequate remedy for any such breach. Therefore, the Executive agrees
that in the event of any breach or threatened breach of any Restrictive Covenant, the Company shall be entitled, in addition to
and without limitation upon all other remedies the Company may have under this Agreement or otherwise, at law or otherwise, to
obtain specific performance, injunctive relief and/or other appropriate relief (without posting any bond or deposit) in order to
enforce or prevent any violations of the Restrictive Covenants, or require the Executive to account for and pay over to the Company
all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions
constituting a breach of the Restrictive Covenants, if and when final judgment of a court of competent jurisdiction is so entered
against the Executive.

 

5. Miscellaneous 

 

		5.1	Indemnification; Insurance. The Company will offer the Executive an indemnification agreement in a form similar to the
indemnification agreement it has offered to the Company’s other executive officers. During the Period of Employment, the
Executive shall be covered by the Company’s directors and officers liability insurance on the same terms and conditions as
generally applicable to all officers of the Company.

 

		5.2	No Assignment by the Executive. This Agreement is personal to the Executive and will not be assignable by the Executive.

 

		5.3	Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees
that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation
and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against
either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read
and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering
into this Agreement and has had ample opportunity to do so.

 

		5.4	Arbitration.

 

5.4.1        Scope.
Subject to Section 4.8, any controversy or claim arising out of or relating to (a) the Executive’s employment with the Company,
(b) the termination of that employment, (c) this Agreement, (d) the interpretation or enforcement of this Agreement, (f) any alleged
breach, default, or misrepresentation in connection with this Agreement, or (g) any other dispute or claim between the Executive
and the Company, whether arising in contract, tort, common law or statute, or because of an alleged breach, default, or misrepresentation
in connection with any of the provisions of any such agreement, including (without limitation) any state or federal statutory claims,
shall be submitted to arbitration in Salt Lake City, Utah, before a sole arbitrator selected from Judicial Arbitration and Mediation
Services, Inc. or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator
shall be selected from the American Arbitration Association; provided, however, that provisional injunctive relief may, but need
not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such
court shall remain effective until the matter is finally determined by the arbitrator. The arbitration shall be administered by
JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction.
This arbitration provision covers all disputes or claims that the Executive may have against the Company and any affiliated party,
and also covers any claims that the Company may have against the Executive. The parties agree that the arbitrator will not impose
punitive damages or any similar penalty and hereby waive any right to make a claim for any such damages. The parties acknowledge
and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either
of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the
matters referenced in the first sentence of this paragraph.

 

     

     

    

 

5.4.2        Arbitrator’s
Authority. The arbitrator will have exclusive authority to (a) resolve any dispute as to whether any claim or matter
is subject to this Section 5.4; (b) supervise discovery; (c) rule on pre-hearing disputes; (d) rule on motions,
including motions for summary adjudication; (e) conduct hearings, and (f) make a final decision on the claim or matter
being arbitrated. Remedies, substantive law and statutes of limitations will be the same as they would be in a court. The arbitrator
will render a final decision in writing, together with a summary statement of the conclusions upon which the decision is based.

 

5.4.3        Costs.
The Company will pay the forum costs of the arbitration itself (including arbitration fees and the fees and expenses of the arbitrator
and court reporters). Each party will pay the costs of presenting its case, including the fees and expenses of its counsel, unless
an applicable statute requires otherwise. Unless otherwise required or limited by statute, the arbitrator shall have the discretion
to award the party prevailing in the arbitration, in addition to all other relief, reasonable attorneys’ fees and expenses
relating to the arbitration (other than the forum costs referred to in the first sentence of this paragraph).

 

		5.5	Binding on Successors. This Agreement will inure to the benefit of and be binding upon the Company and its successors
and assigns. Any such successor or assignee will be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used in this Agreement, “successor” and “assignee” will include any person or
business entity that at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the equity of the Company
or to which the Company assigns this Agreement by operation of law or otherwise.

 

		5.6	Amendments. This Agreement cannot be amended or modified other than by a written agreement executed by the Executive
and by an officer of the Company (other than the Executive) authorized by the Board (or a committee thereof) to execute such amendment
or modification on the Company’s behalf.

 

		5.7	Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to
the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.
If any provision of this Agreement or its application is held by a court of competent jurisdiction to be invalid or unenforceable,
the invalidity or unenforceability will not affect the other provisions or applications of this Agreement that can be given effect
without the invalid or unenforceable provisions or applications. To this end, the provisions of this Agreement are declared severable.
Furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement,
a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding
the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not
to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other
jurisdiction.

 

     

     

    

 

		5.8	Waiver of Breach. No waiver of any breach of any provision of this Agreement will be construed to be, or will be, a
waiver of any other breach of this Agreement. No waiver will be binding unless in writing and signed by the party waiving the breach.

 

		5.9	Notices. Either party can change its address for notice purposes by giving written notice to the other party. Any notice
or other communication required or permitted to be given under this Agreement will be in writing and will be sent by (a) facsimile
transmission with confirmation of transmission; (b) nationally-recognized courier service; (c) certified mail, return receipt requested,
postage prepaid, and will be addressed to the parties at the following facsimile numbers or mailing addresses:

 

If to the Company:

 

The Board of Directors of Sportsman’s Warehouse, Inc.

7035 South High Tech Drive

Midvale, Utah 84047

 

 

If to the Executive, to the Executive at his last address reflected in the Company’s
records.

 

Any notice or other communication will be deemed to be given, as applicable,
(a) on the date of delivery by facsimile; (b) on the third day after the date of deposit in the United States mail; or
(c) the date of delivery by nationally-recognized courier service.

 

		5.10	Entire Agreement. This Agreement constitutes and contains the entire agreement and final understanding between the parties
concerning the Executive’s employment with the Company and the related subject matters addressed in this Agreement. It supersedes
and replaces all prior negotiations and all agreements, written or oral, concerning the Executive’s employment by the Company
and such other subject matters (including, without limitation, the Executive’s offer letter from the Company dated [December
13th, 2016]). Any prior negotiations, correspondence, agreements, proposals or understandings relating to any such matter shall
be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence,
agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties,
or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set
forth herein.

 

     

     

    

 

		5.11	Governing Law. Utah law (without regard to conflict-of-laws principles of the laws of the State of Utah or any other
jurisdiction) will govern this Agreement and its interpretation and enforcement.

 

		5.12	Withholding. The Company may withhold from any payments due the Executive under this Agreement the amounts required
by applicable tax or other laws.

 

		5.13	Section 409A.

 

		(a)	It is intended that any amounts payable under this Agreement will comply with and avoid the imputation of any tax, penalty
or interest under Section 409A of the Internal Revenue Code of 1986, as amended (including the Treasury Regulations and other published
guidance related thereto) (“Section 409A”). This Agreement will be construed and interpreted consistent with
that intent.

 

		(b)	To the extent that any reimbursement pursuant to this Agreement is taxable to the Executive, the Executive will provide the
Company with documentation of the related expenses promptly so as to facilitate the timing of the reimbursement payment contemplated
by this paragraph, and any reimbursement payment due to the Executive pursuant to such provision will be paid to the Executive
on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred.
Such reimbursement obligations pursuant to this Agreement are not subject to liquidation or exchange for another benefit and the
amount of such benefits that the Executive receives in one taxable year will not affect the amount of such benefits that the Executive
receives in any other taxable year.

 

		(c)	For purposes of this Agreement, a termination of employment will mean a separation from service as defined in Treasury Regulations
Section 1.409A-1(h) without regard to any optional alternative definitions available under that section.

 

		(d)	If Executive is a “specified employee” within the meaning of Section 409A as of the date of the Executive’s
“separation from service” (as defined under Section 409A), Executive shall not be entitled to any payment or benefit
pursuant to this Agreement until the earlier of (i) the date which is six (6) months after Executive’s separation from service
for any reason other than death, or (ii) the date of the death. The provisions of this paragraph shall only apply if, and to the
extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable
to Executive upon or in the six (6) month period following Executive’s separation from service that are not so paid by reason
of this paragraph shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the
date that is six (6) months after Executive’s separation from service (or, if earlier, as soon as practicable, and in all
events within thirty (30) days, after the date of Executive’s death).

 

		(e)	None of the Company, its affiliates or any of their respective officers, directors, employees, owners or shareholders shall
be held liable for any taxes, interest, penalties or other amounts owed by Executive as a result of the compensation and benefits
contemplated by this Agreement (including, without limitation, by application of Section 409A), subject to the Company’s
withholding right pursuant to Section 5.12.

 

     

     

    

 

		5.14	Number and Gender; Examples. Where the context requires, the singular shall include the plural, the plural shall include
the singular, and any gender shall include all other genders. Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates.

 

		5.15	Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are
for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction
or interpretation thereof.

 

		5.16	Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original
as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu
of the originals for any purpose.

 

[The remainder of this page has intentionally been left blank.]

 

 

 

 

 

 

     

     

    

 

The parties have executed this Agreement as of the Effective
Date.

 

 

	 	/s/ Kevan P. Talbot	 
	 	Kevan P. Talbot	 
	 	 	 
	 	 	 
	 	 	 
	 	Sportsman’s Warehouse Holdings, Inc.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Jon Barker	 
	 	Jon Barker	 
	 	 	 	 
	 	Its:Blueprint

  EXHIBIT
4.1

 

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

 

	

Principal Amount: $159,750.00

	

Issue Date: February 2, 2017

 

    8%
CONVERTIBLE NOTE

 

FOR VALUE RECEIVED, FRIENDABLE, INC., a
Nevada corporation (“Borrower” or
“Company”), hereby promises to pay to the order
of
EMA FINANCIAL, LLC, a
Delaware limited liability company, or its registered assigns (the
“Holder”), on February 2, 2018, (subject to extension
as set forth below, the “Maturity Date”), the sum of
$159,750.00 as set forth herein, together with interest on the
unpaid principal balance hereof at the rate of eight (8%) per annum
(the “Interest Rate”) from the date of issuance hereof
until this Note plus any and all amounts due hereunder are paid in
full, and any additional amounts set forth herein, including
without limitation any Additional Principal (as defined herein).
Interest shall be computed on the basis of a 365-day year and the
actual number of days elapsed. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the
rate of twenty-four (24%) per annum from the due date thereof until
the same is paid (“Default Interest”). All payments due
hereunder shall be made in lawful money of the United States of
America. All payments shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in
accordance with the provisions of this Note. Whenever any amount
expressed to be due by the terms of this Note is due on any day
which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any
interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in that
certain Securities Purchase Agreement entered into by and between
the Company and Holder dated on or about the date hereof, pursuant
to which this Note was originally issued (the “Purchase
Agreement”). The Holder may, by written notice to the
Borrower at least five (5) days before the Maturity Date (as may
have been previously extended), extend the Maturity Date to up to
one (1) year following the date of the original Maturity Date
hereunder.

 

 

 

1

 

 

This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.

 

The
following terms shall apply to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

1.1. Conversion
Right. The Holder shall have the right, in its sole and
absolute discretion, at any time from time to time, to convert all
or any part of the outstanding amount due under this Note into
fully paid and non-assessable shares of Common Stock, as such
Common Stock exists on the Issue Date, or any shares of capital
stock or other securities of the Borrower into which such Common
Stock shall hereafter be changed or reclassified at the conversion
price (the “Conversion Price”) determined as provided
herein (a “Conversion”); provided, however, that in no event shall
the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations
contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with
respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso, provided, further, however, that the limitations
on conversion may be waived by the Holder upon, at the election of
the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall
continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver). The number of shares of Common Stock to be issued upon
each Conversion of this Note (“Conversion Shares”)
shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the
date specified in the notice of conversion, in the form attached
hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section
1.4 below; provided that the Notice of Conversion is submitted by
facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower before 11:59 p.m.,
New York, New York time on such conversion date (the
“Conversion Date”). The term “Conversion
Amount” means, with respect to any Conversion of this Note,
the sum of (1) the principal amount of this Note to be converted in
such Conversion, plus (2) accrued and
unpaid interest, if any, on such principal amount being converted
at the interest rates provided in this Note to the Conversion Date,
plus (3) at
the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or
(2), plus (4) any
Additional Principal for such Conversion, plus (5) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.2(c) and 1.4(g) hereof.

 

 

2

 

 

1.2. Conversion
Price.

 

a) Calculation of Conversion
Price. The conversion price hereunder (the
“Conversion Price”) shall equal the lower of: (i) the
closing sale price of the Common Stock on the Principal Market on
the Trading Day immediately preceding the Closing Date, and (ii)
50% of either the lowest sale price for the Common Stock on the
Principal Market during the twenty five (25) consecutive Trading
Days immediately preceding the Conversion Date or the closing bid
price, whichever is lower, provided, however, if the
Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the
Conversion Price may, in the Holder’s sole and absolute
discretion, be reduced to a fixed conversion price of 0.00001 (if
lower than the conversion price otherwise), and provided, that if on the date of
delivery of the Conversion Shares to the Holder, or any date
thereafter while Conversion Shares are held by the Holder, the
closing bid price per share of Common Stock on the Principal Market
on the Trading Day on which the Common Shares are traded is less
than the sale price per share of Common Stock on the Principal
Market on the Trading Day used to calculate the Conversion Price
hereunder, then such Conversion Price shall be automatically
reduced such that the Conversion Price shall be recalculated using
the new low closing bid price (“Adjusted Conversion
Price”) and shall replace the Conversion Price above, and
Holder shall be issued a number of additional shares such that the
aggregate number of shares Holder receives is based upon the
Adjusted Conversion Price, and provided, further, that the Conversion
Price shall be subject to Section 1.2(b) below. For the purpose of
clarity, any shares required to be issued as a result of an
Adjusted Conversion Price shall be deemed to be “Conversion
Shares” under this Note. If an
Event of Default under Section 3.9 of the Note has occurred,
Holder, in its sole discretion, may elect to use a Conversion Price
which shall equal the lower of: (i) the closing sale price of the
Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date; (ii) 50% of either the lowest sale
price or the closing bid price, whichever is lower
for the Common Stock on the Principal
Market during any Trading Day in which the Event of Default has not
been cured. If such Common Stock is not traded on the OTCBB,
OTCQB, OTC Pink, NASDAQ or NYSE, then such sale price shall be the
sale price of such security on the principal securities exchange or
trading market where such security is listed or traded or, if no
sale price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets”
by the National Quotation Bureau, Inc. If such sale price cannot be
calculated for such security on such date in the manner provided
above, such price shall be the fair market value as mutually
determined by the Borrower and the Holder. If the Borrower’s
Common stock is chilled for deposit at DTC, becomes chilled at any
point while this Note remains outstanding or deposit or other
additional fees are payable due to a Yield Sign, Stop Sign or other
trading restrictions, or if the closing sale price at any time
falls below $0.0009 (as appropriately and equitably adjusted for
stock splits, stock dividends, stock contributions and similar
events), then such 50% figure specified in clause 1.2(a)(ii) above
shall be reduced to 35%. In the event that the shares of the
Borrower’s Common Stock are not deliverable via DWAC
following the conversion of any amount hereunder, an additional 5%
discount will be attributed to the Conversion Price. Additionally,
the Borrower acknowledges that it will
take all reasonable steps necessary or appropriate, including
providing a board of directors resolution authorizing the issuance
of common stock to Holder . So long as the requested sale may be
made pursuant to Rule 144, the Company agrees to accept an opinion
of counsel to the Holder confirming the rights of the Holder to
sell shares of Common Stock issuable or issued to Holder on
conversion of this Note pursuant to Rule 144 as promulgated by the
SEC (“Rule 144”), as such Rule 144 may be in effect
from time to time, which opinion will be issued at the
Company’s expense and the conversion dollar amount will be
reduced by $750.00 to cover the cost of such legal opinion.
“Trading Day” shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. Additionally, if the Company
ceases to be a reporting company pursuant to the 1934 Act or if the
Note cannot be converted into free trading shares after 181 days
from the issuance date, an additional 15% discount will be
attributed to the Conversion Price for any and all Conversions
submitted thereafter.

 

 

3

 

 

b) If at any time the
Conversion Price as determined hereunder for any Conversion would
be less than the par value of the Common Stock, then the Conversion
Price hereunder shall equal such par value for such Conversion and
the Conversion Amount for such Conversion shall be increased to
include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
Conversion Shares issuable upon such Conversion to equal the same
number of Conversion Shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2(b).

 

c) Without in any way
limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (as defined below) the
Borrower shall pay to the Holder $1,000.00 per day in cash, for
each day beyond the Deadline that the Borrower fails to deliver
such Common Stock. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued
or, at the option of the Holder, shall be added to the principal
amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert this Note is a valuable right to the Holder.
The damages resulting from a failure, attempt to frustrate, or
interference with such conversion right are difficult if not
impossible to quantify. Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section are
justified.

 

1.3. Authorized
Shares. The Borrower covenants that the Borrower will at all
times while this Note is outstanding reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon
the full conversion or adjustment of this Note. The Borrower is
required at all times to have authorized and reserved five (5)
times the number of shares that is actually issuable upon full
conversion or adjustment of this Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved
Amount”). Initially, the Company will instruct the Transfer
Agent to reserve eight hundred eighty-seven million, five hundred
thousand (887,500,000) shares of common stock in the name of the
Holder for issuance upon conversion hereof. The Borrower represents
that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable. In addition, if the Borrower shall
issue any securities or make any change to its capital structure
which would change the number of shares of Common Stock into which
this Note shall be convertible at the then current Conversion
Price, the Borrower shall at the same time make proper provision so
that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights,
for conversion of this Note in full. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.

 

 

4

 

 

If, at
any time the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under Section 3.2 of the
Note.

 

1.4. Method
of Conversion.

 

a) Mechanics of Conversion.
Subject to Section 1.1, this Note may be converted by the Holder in
whole or in part at any time and from time to time after the Issue
Date, by submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 11:59 p.m., New York,
New York time).

 

b) Book Entry upon Conversion.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Borrower
shall, prima facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid
principal amount of this Note. 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 represented by this Note may be less than the amount stated on
the face hereof.

 

c) Payment of Taxes. The Borrower
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or
deliver any such shares or other securities or property unless and
until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has
been paid.

 

d) Delivery of Common Stock upon
Conversion. Upon receipt by the Borrower from the
Holder of a facsimile transmission or e-mail (or other reasonable
means of communication) of a Notice of Conversion meeting the
requirements for conversion as provided in this Section 1.4 or upon
an event triggering the calculation of an Adjusted Conversion
Price, the Borrower shall issue and deliver or cause to be issued
and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3)
business days after such receipt or such an event (the
“Deadline”) (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note)
in accordance with the terms hereof and the Purchase
Agreement.

 

 

5

 

 

e) Obligation of Borrower to Deliver
Common Stock. Upon receipt by the Borrower of a duly and
properly executed Notice of Conversion or upon an event triggering
the calculation of an Adjusted Conversion Price, the Holder shall
be deemed to be the holder of record of the Common Stock issuable
upon such conversion or as a result of an Adjusted Conversion
Price, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such
conversion or adjustment, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the
portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If
the Holder shall have given a Notice of Conversion as provided
herein or upon an event triggering the calculation of an Adjusted
Conversion Price, the Borrower’s obligation to issue and
deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the
Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Borrower to the
holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59 p.m., New York, New York time, on such
date.

 

f) Delivery of Common Stock by Electronic
Transfer. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided
the Borrower is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer
(“FAST”) program, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this
Section 1.4, the Borrower shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion or upon an event triggering the calculation of an
Adjusted Conversion Price to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“DWAC”) system.

 

g) Failure to Deliver Common Stock Prior
to Deadline. Without in any way limiting the
Holder’s right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery
of the Common Stock issuable upon conversion or adjustment of this
Note is not delivered by the Deadline, the Borrower shall pay to
the Holder $1,000.00 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock to
the Holder. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at
the option of the Holder, shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert and/or receive shares in the event of an
adjustment is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, or interference with such
conversion or adjustment right are difficult if not impossible to
qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are
justified.

 

 

6

 

 

h) The
Borrower acknowledges that it will take all reasonable steps
necessary or appropriate, including accepting an opinion of counsel
to Holder confirming the rights of Holder to sell shares of Common
Stock issued to Holder on conversion or adjustment of the Note
pursuant to Rule 144 as promulgated by the SEC (“Rule 144"),
as such Rule may be in effect from time to time. So long as the
requested sale may be made pursuant to Rule 144 the Borrower agrees
to accept an opinion of counsel to the Holder which opinion will be
issued at the Borrower’s expense.

 

i) Charges and
Expenses. Issuance of Common
Stock to Holder, or any of its assignees, upon the conversion of
this Note shall be made without charge to the Holder for any
issuance fee, transfer tax, legal opinion and related charges,
postage/mailing charge or any other expense with respect to the
issuance of such Common Stock. Company shall pay all Transfer Agent
fees incurred from the issuance of the Common Stock to Holder, as
well as any and all other fees and charges required by the Transfer
Agent as a condition to effectuate such issuance. Any such fees or
charges as noted in this Section that are paid by the Holder
(whether from the Company’s delays, outright refusal to pay,
or otherwise), will be automatically added to the Principal Amount
of the Note and tack back to the Issue Date herein for purposes of
Rule 144.

 

1.5. Restricted
Securities. The shares of Common Stock issuable upon
conversion or adjustment of this Note may not be sold or
transferred unless (i) such shares are sold pursuant to an
effective registration statement under the Act or (ii) the Borrower
or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“Rule 144”) or
(iv) such shares are transferred to an “affiliate” (as
defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section
1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Any legend set forth on any stock certificate
evidencing any Conversion Shares shall be removed and the Borrower
shall issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel
  form,  substance  and  scope  customary  for
opinions of counsel in  comparable transactions, to the
effect that a  public sale or  transfer of such
Common Stock may be made without registration under the Act, which
opinion shall be reasonably acceptable to the  Company,
or (ii) in the case of the Common Stock issued or issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.

 

1.6. Effect
of Certain Events.

 

a) Effect of Merger, Consolidation,
Etc. At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting
power of the Borrower is disposed of, or the consolidation, merger
or other business combination of the Borrower with or into any
other Person (as defined below) or Persons when the Borrower is not
the survivor shall either: (i) be deemed to be an Event of Default
(as defined in Article III) pursuant to which the Borrower shall be
required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section
1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association,
trust or other entity or organization.

 

 

7

 

 

b) Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued
and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time, for
clarification, the Holder shall be entitled to convert this Note)
and (b) the resulting successor or acquiring entity assumes by
written instrument the obligations of this Section 1.6(b). The
above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share
exchanges.

 

c) Adjustment Due to Distribution.
If the Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock
as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the
Borrower’s shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the
date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder
of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution. Such
assets shall be held in escrow by the Company pending any such
conversion

 

d) Purchase Rights. If, at any
time when any Notes are issued and outstanding, the Borrower issues
any convertible securities or rights to purchase stock, warrants,
securities or other property (the “Purchase Rights”)
pro rata to the record holders of any class of Common Stock, then
the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the
number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on
conversion contained herein) 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 Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

 

 

8

 

 

e) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any securities convertible into or
exercisable for Common Stock; (B) subdivides outstanding shares of
Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (D) issues, in the
event of a reclassification of shares of the Common Stock, any
shares of capital stock of the Company, then the Conversion Price
(and each sale or bid price used in determining the Conversion
Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock 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.

 

f) Notice of Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price as a result of the events described in this Section 1.6, the
Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.

 

1.7. Revocation.
If any Conversion Shares are not received by the Deadline, the
Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible
after the Maturity Date hereof until this Note is repaid or
converted in full.

 

 

 

 

 

 

 

9

 

 

1.8. Prepayment.
Notwithstanding anything to the contrary contained in this Note,
subject to the terms of this Section, at any time during the period
beginning on the Issue Date and ending on the date which is six (6)
months following the Issue Date (“Prepayment Termination
Date”), Borrower shall have the right, exercisable on not
less than five (5) Trading Days prior written notice to the Holder
of this Note, to prepay the outstanding balance on this Note
(principal and accrued interest), in full, in accordance with this
Section. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than ten (10) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date.  If the Borrower
exercises its right to prepay the Note, the Borrower shall make
payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the Prepayment Factor (as
defined below), multiplied by the sum of: (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid
interest on the unpaid principal amount of this Note to the
Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and
(x) plus (z) any amounts owed to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the
Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to the Holder of the Note within
two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section. After the Prepayment Termination Date,
the Borrower shall have no right to prepay this Note. For purposes
hereof, the “Prepayment Factor” shall equal one hundred
and fifty percent (150%), provided that such Prepayment factor
shall equal one hundred and thirty five percent (135%) if the
Optional Prepayment Date occurs on or before the date which is
ninety (90) days following the Issue Date hereof.

 

ARTICLE
II. CERTAIN COVENANTS

 

2.1. Distributions
on Capital Stock. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent (a) pay, declare or set apart for
such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.

 

2.2. Restriction
on Stock Repurchases. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such
shares.

 

2.3. Borrowings;
Liens. Notwithstanding section 4(m) of the Purchase
Agreement, so long as the Borrower shall have any obligation under
this Note, the Borrower shall not (i) create, incur, assume
guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection, or suffer to
exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date hereof and of which the Borrower
has informed Holder in writing prior to the date hereof, or (b)
indebtedness to trade creditors or financial institutions incurred
in the ordinary course of business, or (ii) enter into, create or
incur any liens, claims or encumbrances 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, securing any indebtedness occurring after the date
hereof.

 

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

 

 

10

 

 

2.5. Advances
and Loans. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any
person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and
affiliates of the Borrower, except loans, credits or advances in
existence or committed on the date hereof and which the Borrower
has informed Holder in writing prior to the date
hereof.

 

2.6. Charter.
So long as the Borrower shall have any obligations under this Note,
the Borrower shall not 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.

 

2.7. Transfer
Agent. The Borrower shall not change its transfer agent
without the prior written consent of the Holder. Any resignation by
the transfer agent without a replacement transfer agent consented
to by the Holder prior to such replacement taking effect shall
constitute an Event of Default hereunder.

 

ARTICLE
III. EVENTS OF DEFAULT

 

Any one
or more of the following events which shall occur and/or be
continuing shall constitute an event of default (each, an
“Event of Default”):

 

3.1. Failure
to Pay Principal or Interest. The Borrower fails to pay
the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.

 

3.2. Conversion
and the Shares. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens in writing
that it will not honor its obligation to do so at any time
following the execution hereof or) upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of
this Note, fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not
to transfer or delays, impairs, and/or hinders its transfer agent
in transferring (or issuing) (electronically or in certificated
form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note, or fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for five
(5) business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an event of
default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to
process a conversion, such advanced funds shall be paid by the
Borrower to the Holder within forty eight (48) hours of a demand
from the Holder.

 

 

11

 

 

3.3. Breach
of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of seven (7) days
after written notice thereof to the Borrower from the
Holder.

 

3.4. Breach
of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to
this Note or the Purchase Agreement.

 

3.5. Receiver
or Trustee. The Borrower or any subsidiary of the Borrower
shall 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 shall otherwise be appointed.

 

3.6. Judgments.
Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000.00, and shall
remain unvacated, unbonded or unstayed for a period of twenty (20)
days unless otherwise consented to by the Holder, which consent
will not be unreasonably withheld.

 

3.7. Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the
Borrower.

 

3.8. Delisting
of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, or OTCQB,
OTC Pink or an equivalent replacement exchange, NASDAQ, the NYSE or
AMEX.

 

3.9. Failure
to Comply with the Exchange Act. The Borrower shall fail to
comply in any material respect with the reporting requirements of
the Exchange Act; and/or the Borrower shall cease to be subject to
the reporting requirements of the Exchange Act.

 

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

 

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

 

3.12. Maintenance
of Assets.  The failure by Borrower, during the
term of this Note, to maintain any material intellectual property
rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the
future).

 

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

 

 

12

 

 

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

 

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

 

3.16. Cross-Default.
Notwithstanding anything to the contrary contained in this Note or
the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained
in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the
Holder, be considered a default under this Note and the Other
Agreements, in which event the Holder shall be entitled (but in no
event required) to apply all rights and remedies of the Holder
under the terms of this Note and the Other Agreements by reason of
a default under said Other Agreement or
hereunder. “Other Agreements” means, collectively,
all agreements and instruments between, among or by: (1) the
Borrower, and, or for the benefit of, (2) the Holder and any
affiliate of the Holder, including, without limitation, promissory
notes; provided, however, the term “Other Agreements”
shall not include the related or companion documents to this Note.
Each of the loan transactions will be cross-defaulted with each
other loan transaction and with all other existing and future debt
of Borrower to the Holder.

 

Upon
the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the
principal hereof or interest thereon when due at the Maturity
Date), the Note shall become immediately due and payable and the
Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the Default Sum (as
defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF
ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO
THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN);
MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the
continuation of any Event of Default specified in Sections 3.1
(solely with respect to failure to pay the principal hereof or
interest thereon when due on this Note upon a Trading Market
Prepayment Event pursuant to Section 1.7 or upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 and/or
3. 15 exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and
upon the occurrence of an Event of Default specified in the
remaining sections of Articles III (other than failure to pay the
principal hereof or interest thereon at the Maturity Date specified
in Section 3,1 hereof), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150% times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the
date of payment (the “Mandatory Prepayment
Date”) plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and/or
(x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of
payment plus the amounts referred
to in clauses (x), (y) and (z) shall collectively be known as the
“Default Sum”) or (ii) the “parity value”
of the Default Sum to be prepaid, where parity value means (a) the
highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with
Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for
purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period
beginning on the date of first occurrence of the Event of Default
and ending one day prior to the Mandatory Prepayment Date (the
“Default Amount”) and all other amounts payable
hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law
or in equity.

 

 

13

 

 

If the
Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then
the Holder shall have the right at any time, so long as the
Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower,
upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal
to the Default Amount divided by the Conversion Price then in
effect. The Holder may still convert any amounts due hereunder,
including without limitation the Default Sum, until such time as
this Note has been repaid in full.3.17. Inside Information. The
Borrower or its officers, directors, and/or affiliates attempt to
transmit, convey, disclose, or any actual transmittal, conveyance,
or disclosure by the Borrower or its officers, directors, and/or
affiliates of, material non-public information concerning the
Borrower, to the Holder or its successors and assigns, which is not
immediately cured by Borrower’s filing of a Form 8-K pursuant
to Regulation FD on that same date.

 

3.18   
Bid Price. The
Borrower shall lose the “bid” price for its Common
Stock ($0.0001 on the “Ask” with zero market makers on
the “Bid” per Level 2) and/or a market (including the
OTC Pink, OTCQB or an equivalent replacement
exchange).

 

ARTICLE
IV. MISCELLANEOUS

 

4.1. Failure
or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

4.2. 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, email or facsimile, 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 or email,
with accurate confirmation generated by the transmitting facsimile
machine or computer, at the address, email or number designated in
the Purchase Agreement (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) 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.

 

 

14

 

 

4.3. Amendments.
This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument (and the
other Notes issued pursuant to the Purchase Agreement) as
originally executed, or if later amended or supplemented, then as
so amended or supplemented.

 

4.4. Assignability.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an
“accredited investor” (as defined in Rule 501(a) of the
1933 Act). Notwithstanding anything in this Note to the contrary,
this Note may be pledged as collateral in connection with
a bona fide margin account or other lending
arrangement.

 

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

 

4.6. Governing
Law. This Note shall
be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles
that would result in the application of the substantive laws of
another jurisdiction.  Any action brought by either party
against the other concerning the transactions contemplated by
this Agreement must be brought only in the civil or state courts of
New York or in the federal courts located in the State and county
of New York.  Both parties and the individual signing
this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  The prevailing party shall
be entitled to recover from the other party its reasonable
attorney’s fees and costs.  In the event that any
provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or unenforceability of
any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or
taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower’s obligations to
Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other decision in favor of
the Holder.  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.

 

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

 

 

15

 

 

4.8. Disclosure.
Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not
constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1)
Trading Day after any such receipt or delivery, publicly disclose
such material, non-public information on a Current Report on Form
8-K or otherwise. In the event that the Company believes that a
notice contains material, non-public information relating to the
Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and
in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not
constitute material, non-public information relating to the Company
or its Subsidiaries.

 

4.9. Notice
of Corporate Events. Except as otherwise provided below, the
Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into
Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders
(and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a
record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the
Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30)
days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section
4.9.

 

4.10. Remedies.
The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Borrower acknowledges that the remedy at law for a
breach of its obligations under this Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.

 

4.11. Usury.
This Note shall be subject to the anti-usury limitations contained
in the Purchase Agreement.

 

(Remainder
of Page intentionally left blank)

 

 

 

 

 

 

 

16

 

 

IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the Issue Date first set
forth above.

 

 

FRIENDABLE, INC.

 

 

	

By:

	

 /s/
Robert A Rositano Jr.

	
 

	
 

	

Name:
Robert A Rositano, Jr.

	
 

	
 

	

Title:
CEO

	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

EXHIBIT
A

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 8%
Convertible Note of FRIENDABLE, INC., a Nevada corporation (the
Company”),
into shares of common stock (the “Common Stock”), of the
Company 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
the Company 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 the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 1.1 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 pursuant
to any prospectus.

 

Conversion
calculations:

 

	

Issue Date of Note:
___________________________________________________

	

Date to Effect Conversion:
_____________________________________________

	
 

	

Conversion Price:
____________________________________________________

	
 

	

Principal Amount of Note to be Converted:
________________________________

	
 

	

Interest Accrued on Account

	

of Conversion at Issue:
________________________________________________

	
 

	

Additional Principal on Account of Conversion

	

Pursuant to Section 1.2(b) of the Note:
____________________________________

	

Number of shares of Common Stock to be issued:
___________________________

	

____________________________________________________________________

	

Remaining Balance of Note*:
___________________________________________

	

Signature:
___________________________________________________________

	

Name:
______________________________________________________________

	

Address for Delivery of Common Stock Certificates:
_________________________

	

____________________________________________________________________

	

____________________________________________________________________

	
 

	

Or

	
 

	

DWAC Instructions:

	

Broker No: ___________________

	

Account No: __________________

*Sum
provided does not include accrued interest and/or additional
fees

 

 

 

 

 

 

 

 

 

 

 

 

 

18

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