Document:

SHARE
EXCHANGE AND FUNDING AGREEMENT

This
Share Exchange and Funding Agreement (this “Agreement”), dated as of April 9, 2018, is by and among SociaPlay
USA, Inc., a Nevada corporation (the “Parent”), Spot and Pay, Inc., a Nevada corporation (the “Company”),
and Karthikeyan Mani, the sole shareholder of the Company (the “Shareholder”). Each of the parties to this Agreement
is individually referred to herein as a “Party” and collectively as the “Parties.”

BACKGROUND

 

The
Company has 1,000,000 shares of common stock issued and outstanding, all of which are held by the Shareholder. The Shareholder
has agreed to transfer 900,000 shares, or 90%, of the issued and outstanding shares of the Company (the “Company Shares”)
to the Parent in exchange for: (i) 500,000 newly issued shares of common stock, par value $0.001 per share, of the Parent (the
“Parent Shares”); and (ii) total cash payments of $300,000, to paid by the Parent and used by the Company in
the manner set forth herein.

The
exchange of the Company Shares for the Parent Shares is intended to constitute a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization
or restructuring provisions as may be available under the Code.

The
Board of Directors of each of the Parent and the Company has determined that it is desirable to effect this plan of reorganization
and share exchange.

AGREEMENT

 

NOW
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE
I

Exchange of Shares

SECTION
1.01.  Exchange by the Shareholder. At the Closing (as defined in Section 1.02), the Shareholder shall sell, transfer,
convey, assign and deliver to the Parent all of the Company Shares free and clear of all Liens in exchange for the Parent Shares.

SECTION
1.02.  Closing. The closing (the “Closing”) of the transactions contemplated by this Agreement
(the “Transactions”) shall take place at the offices of Laxague Law, Inc., 1 East Liberty, Suite 600, Reno,
Nevda, commencing upon the satisfaction or waiver of all conditions and obligations of the Parties to consummate the Transactions
contemplated hereby (other than conditions and obligations with respect to the actions that the respective Parties will take at
Closing) or such other date and time as the Parties may mutually determine (the “Closing Date”).

    	 	 	 

    	 	 	 

    

ARTICLE
II

Representations and Warranties of the Shareholder

The
Shareholder hereby represents and warrants to the Parent, as follows:

SECTION
2.01.  Good Title. The Shareholder is the record and beneficial owner, and has good title to the Company Shares, with
the right and authority to sell and deliver the Company Shares to the Parent as provided herein. Upon delivery of any certificate
or certificates duly endorsed for transfer to the Parent, representing the same as herein contemplated and/or upon registering
of the Parent as the new owner of the Company Shares in the share register of the Company, the Parent will receive good title
to the Company Shares, free and clear of all liens, hypothecs security interests, pledges, equities and claims of any kind, voting
trusts, trust agreements, shareholder agreements, prete-nom agreements and other encumbrances (collectively, “Liens”).

SECTION
2.02.  Power and Authority. All acts required to be taken by the Shareholder to enter into this Agreement and to carry
out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Shareholder
enforceable against the Shareholder in accordance with the terms hereof.

SECTION
2.03.  No Conflicts. The execution and delivery of this Agreement by the Shareholder and the performance by the Shareholder
of his obligations hereunder in accordance with the terms hereof: (i) will not require the consent of any third party or any federal,
state, provincial, local or foreign government or any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (“Governmental Entity”) under any statutes,
laws, ordinances, rules, regulations, orders, writs, injunctions, judgments, or decrees (collectively, “Laws”);
(ii) will not violate any Laws applicable to the Shareholder; and (iii) will not violate or breach any contractual obligation
to which the Shareholder is a party.

SECTION
2.04.  No Finder’s Fee. The Shareholder has not created any obligation for any finder’s, investment banker’s
or broker’s fee in connection with the Transactions that the Company or the Parent will be responsible for.

SECTION
2.05.  Purchase Entirely for Own Account. The Parent Shares proposed to be acquired by the Shareholder hereunder will
be acquired for investment for his own account, and not with a view to the resale or distribution of any part thereof, and the
Shareholder has no present intention of selling or otherwise distributing the Parent Shares, except in compliance with applicable
securities laws.

SECTION
2.06.  Available Information. The Shareholder has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an investment in the Parent.

SECTION
2.07.  Non-Registration. The Shareholder understands that the Parent Shares have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”) and, if issued in accordance with the provisions of this Agreement,
will be issued by reason of a specific exemption from the registration provisions of the Securities Act that depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of the Shareholder’s representations as expressed
herein. The non-registration shall have no prejudice with respect to any rights, interests, benefits and entitlements attached
to the Parent Shares in accordance with the Parent charter documents or the laws of its jurisdiction of incorporation.

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SECTION
2.08.  Restricted Securities. The Shareholder understands that the Parent Shares are characterized as “restricted
securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Shareholder pursuant
hereto, the Parent Shares would be acquired in a transaction not involving a public offering. The Shareholder further acknowledges
that if the Parent Shares are issued to the Shareholder in accordance with the provisions of this Agreement, the Parent Shares
may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Shareholder represents
that he is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.

SECTION
2.09.  Legends. It is understood that the Parent Shares will bear the following legend or another legend that is similar
to the following:

THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.

and
any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented
by the certificate so legended.

SECTION
2.10.  Accredited Investor. The Shareholder is an “accredited investor” within the meaning of Rule 501
under the Securities Act. 

ARTICLE
III

Representations and Warranties of the Company

SECTION
3.01.  Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and in which it has a place of business and has the corporate power and
authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to
own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not
reasonably be expected to have a material adverse effect on the Company, a material adverse effect on the ability of the Company
to perform its obligations under this Agreement or on the ability of the Company to consummate the Transactions (a “Company
Material Adverse Effect”). The Company is duly qualified to do business in each jurisdiction where the nature of its
business or its ownership or leasing of its properties make such qualification necessary except where the failure to so qualify
would not reasonably be expected to have a Company Material Adverse Effect. The Company has delivered to the Parent true and complete
copies of the articles of incorporation and bylaws of the Company and such other constituent instruments of the Company as may
exist, each as amended to the date of this Agreement (as so amended, the “Company Constituent Instruments”).

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SECTION
3.02.  No Company Subsidiaries. The Company does not, as of the date of this Agreement, own, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any other entity.

SECTION
3.03.  Capital Structure. The Company has 1,000,000 shares of common stock issued and outstanding. Except as set forth
above, no shares of capital stock or other voting securities of the Company are issued, reserved for issuance or outstanding.
All outstanding shares of the capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and
not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the applicable corporate laws of Nevada, the Company Constituent Instruments
or any Contract (as defined in Section 3.05) to which the Company is a party or otherwise bound. Except as set forth in this Section
3.03, there are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Shares may vote (“Voting
Company Debt”). Except as set forth above, as of the date of this Agreement, there are not any options, warrants, rights,
convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts, arrangements or undertakings of any kind to which the Company is a party or by which any of them
is bound (a) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock
of or other equity interest in, the Company or any Voting Company Debt, (b) obligating the Company to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give
any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring
to holders of the capital stock of the Company.

SECTION
3.04.  Authority; Execution and Delivery; Enforceability. The Company has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by the Company of this Agreement
and the consummation by the Company of the Transactions have been duly authorized and approved by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the Transactions.
When executed and delivered, this Agreement will be enforceable against the Company in accordance with its terms, subject to bankruptcy,
insolvency and similar laws of general applicability as to which the Company is subject.

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SECTION
3.05.  No Conflicts; Consents.

(a)              
The execution and delivery by the Company of this Agreement does not, and the consummation of the Transactions and compliance
with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company under any
provision of (a) the Company Constituent Instruments, (b) any material contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a “Contract”) to which the Company is a party or by which
any of its properties or assets is bound or (c) subject to the filings and other matters referred to in Section 3.05(b), any material
judgment, order or decree (“Judgment”) or material Law applicable to the Company or its properties or assets,
other than, in the case of clauses (b) and (c) above, any such items that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.

(b)              
No material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration
or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.

SECTION
3.06.  Taxes.

(a)              
The Company has timely filed, or have caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and
all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed
Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse
Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any
failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material
Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. No tax audit is in process or threatened and the Company
has not received a notice of assessment from any tax authority indicating a tax assessment or recalculation of any taxes in any
tax return previously filed.

(b)              
For purposes of this Agreement:

“Taxes”
includes all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed
by a local, municipal, governmental, state, provincial, foreign, federal or other Governmental Entity, or in connection with any
agreement with respect to Taxes, including all interest, penalties and additions imposed with respect to such amounts.

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“Tax
Return” means all federal, state, provincial, local, provincial and foreign Tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax return relating to Taxes.

SECTION
3.07.  Benefit Plans. The Company does not have or maintain any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, share ownership, share purchase, share option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether
or not legally binding) providing benefits to any current or former employee, officer or director of the Company (collectively,
“Company Benefit Plans”). As of the date of this Agreement, there are not any severance or termination agreements
or arrangements between the Company and any current or former employee, officer or director of the Company, nor does the Company
have any general severance plan or policy.

SECTION
3.08.  Litigation. There is no action, suit, inquiry, notice of violation, proceeding (including any partial proceeding
such as a deposition) or investigation pending or threatened in writing against or affecting the Company or any of its properties
before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, provincial, county,
local or foreign), stock market, stock exchange or trading facility (“Action”) that (i) adversely affects or
challenges the legality, validity or enforceability of any of this Agreement or the Company Shares or (ii) could, if there were
an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Company Material Adverse
Effect. Neither the Company, nor any director or officer thereof (in his or her capacity as such), is or has been the subject
of any Action involving a claim or violation of or liability under federal, state or provincial securities laws or a claim of
breach of fiduciary duty.

SECTION
3.09.  Compliance with Applicable Laws. The Company is in compliance with all applicable Laws, including those relating
to occupational health, labor and safety and the environment, except for instances of noncompliance that, individually and in
the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company has not
received any written communication during the past two years from a Governmental Entity that alleges that the Company is not in
compliance in any material respect with any applicable Law. This Section 3.09 does not relate to matters with respect to Taxes,
which are the subject of Section 3.06.

SECTION
3.10.  Brokers; Schedule of Fees and Expenses. Except for those brokers as to which the Company and Parent shall be
solely responsible, no broker, investment banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company.

SECTION
3.11.  Contracts. There are no Contracts that are material to the business, properties, assets, condition (financial
or otherwise), results of operations or prospects of the Company taken as a whole. The Company is not in violation of or in default
under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation
of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for
violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect.

    	 	6	 

    	 	 	 

    

SECTION
3.12.  Title to Properties. The Company does not own any real or immoveable property. The Company has sufficient title
to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and
properties, other than assets and properties in which the Company has leasehold interests, are free and clear of all Liens except
for Liens that, in the aggregate, do not and will not materially interfere with the ability of the Company to conduct business
as currently conducted.

SECTION
3.13.  Intellectual Property. The Company owns, or is validly licensed or otherwise has the right to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights and computer programs (collectively, “Intellectual Property Rights”)
that are material to the conduct of the business of the Company taken as a whole, including, but not limited to, the Intellectual
Property Rights set forth on Schedule 3.13 hereto. There are no claims pending or, to the knowledge of the Company, threatened
that the Company is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property
Right. To the knowledge of the Company, no person is infringing the rights of the Company with respect to any Intellectual Property
Right.

SECTION
3.14.  Labor Matters. There are no collective bargaining or other labor union agreements to which the Company is a
party or by which it is bound. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect
to any of the employees of the Company.

SECTION
3.15.  Solvency. Based on the financial condition of the Company as of the Closing Date (and assuming that the Closing
shall have occurred), (a) the Company’s fair saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as
they mature, (b) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof, and
(c) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of
its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company
is not insolvent or bankrupt and it has not filed for protection under applicable law. Moreover, there has been no petition in
bankruptcy filed by the Company or against the Company.

SECTION
3.16.  Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s charter documents or the laws of its jurisdiction of formation
that is or could become applicable to the Shareholder as a result of the Shareholder and the Company fulfilling their obligations
or exercising their rights under this Agreement, including, without limitation, the issuance of and the Shareholder’s ownership
of the Parent Shares.

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SECTION
3.17.  No Additional Agreements. The Company does not have any agreement or understanding with the Shareholder with
respect to the transactions contemplated by this Agreement other than as specified in this Agreement.

SECTION
3.18.  Investment Company. The Company immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

SECTION
3.19.  Foreign Corrupt Practices. Neither the Company nor any Company Subsidiary, nor, to the Company’s knowledge,
any director, officer, agent, employee or other person acting on behalf of the Company or any Company Subsidiary has, in the course
of its actions for, or on behalf of, the Company (a) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

ARTICLE
IV

Representations and Warranties of the Parent

SECTION
4.01.  Organization, Standing and Power. The Parent is duly organized, validly existing and in good standing under
the laws of the State of Nevada and has full corporate power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to
conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the
lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect
on the Parent, a material adverse effect on the ability of the Parent to perform its obligations under this Agreement or on the
ability of the Parent to consummate the Transactions (a “Parent Material Adverse Effect”). The Parent is duly
qualified to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make
such qualification necessary and where the failure to so qualify would reasonably be expected to have a Parent Material Adverse
Effect. The Parent has delivered to the Company true and complete copies of the articles of incorporation of the Parent, as amended
to the date of this Agreement (as so amended, the “Parent Charter”), and the Bylaws of the Parent, as amended
to the date of this Agreement (as so amended, the “Parent Bylaws”).

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SECTION
4.02.  Subsidiaries; Equity Interests.

(a)              
Schedule 4.02 lists each Company Subsidiary and its jurisdiction of organization. All the outstanding shares of capital
stock or equity investments of each Company Subsidiary have been validly issued and are fully paid and nonassessable and are as
of the date of this Agreement owned by the Company, by another Company Subsidiary or by the Company and another Company Subsidiary,
free and clear of all Liens.

(b)              
Except for its interests in the Company Subsidiaries, the Company does not as of the date of this Agreement own, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.

SECTION
4.03.  Capital Structure. The authorized capital stock of the Parent consists of (1) 200,000,000 shares of common
stock, par value $0.001 per share, of which 11,870,000 shares are issued and outstanding (before giving effect to the issuances
to be made at Closing); and (2) 100,000,000 shares of preferred stock, par value $0.001 per share, of which 10,000,000 have been
designated as Series A Preferred Stock, and of which 0 shares are issued an outstanding. No other shares of capital stock or other
voting securities of the Parent are issued, reserved for issuance or outstanding. All outstanding shares of the capital stock
of the Parent are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly
issued, fully paid and non-assessable and not subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under any provision of the Nevada Revised Statutes, the
Parent Charter, the Parent Bylaws or any Contract to which the Parent is a party or otherwise bound. There are not any bonds,
debentures, notes or other indebtedness of the Parent having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of the Parent Shares may vote (“Voting Parent Debt”).
Except as set forth in the Parent SEC Documents, as of the date of this Agreement, there are no options, warrants, rights, convertible
or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which the Parent is a party or by which it is bound (a) obligating the
Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest
in, the Parent or any Voting Parent Debt, (b) obligating the Parent to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the
Parent. As of the date of this Agreement, there are no outstanding contractual obligations of the Parent to repurchase, redeem
or otherwise acquire any shares of capital stock of the Parent. The Parent is not a party to any agreement granting any security
holder of the Parent the right to cause the Parent to register shares of the capital stock or other securities of the Parent held
by such security holder under the Securities Act.

SECTION
4.04.  Authority; Execution and Delivery; Enforceability. The execution and delivery by the Parent of this Agreement
and the consummation by the Parent of the Transactions have been duly authorized and approved by the Board of Directors of the
Parent and no other corporate proceedings on the part of the Parent are necessary to authorize this Agreement and the Transactions.
This Agreement constitutes a legal, valid and binding obligation of the Parent, enforceable against the Parent in accordance with
the terms hereof.

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SECTION
4.05.  No Conflicts; Consents.

(a)              
The execution and delivery by the Parent of this Agreement, does not, and the consummation of the Transactions and compliance
with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under,
or result in the creation of any Lien upon any of the properties or assets of the Parent under, any provision of (a) the Parent
Charter or Parent Bylaws, (b) any material Contract to which the Parent is a party or by which any of its properties or assets
is bound or (c) subject to the filings and other matters referred to in Section 4.05(b), any material Judgment or material Law
applicable to the Parent or its properties or assets, other than, in the case of clauses (b) and (c) above, any such items that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(b)              
No Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained
or made by or with respect to the Parent in connection with the execution, delivery and performance of this Agreement or the consummation
of the Transactions.

SECTION
4.06.  SEC Documents; Undisclosed Liabilities.

(a)              
The Parent has filed all reports, schedules, forms, statements and other documents required to be filed by the Parent with the
Securities and Exchange Commission (the “Parent SEC Documents”).

(b)              
As of its respective filing date, each Parent SEC Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent that information contained in any Parent SEC Document has been
revised or superseded by a later filed Parent SEC Document, none of the Parent SEC Documents contains any untrue statement of
a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the
Parent included in the Parent SEC Documents comply as to form in all material respects with applicable accounting requirements
and the published guidelines and requirements of the SEC with respect thereto, have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”), and fairly present the consolidated financial position of the Parent
as of the dates thereof and the results of operations and cash flows for the periods shown.

(c)              
Except as set forth in the filed Parent SEC Documents, the Parent has no other liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a balance sheet of the Parent or in the notes
thereto.

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SECTION
4.07.  Information Supplied. None of the information supplied or to be supplied by the Parent for inclusion or incorporation
by reference in any SEC filing or report by the Company contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.

SECTION
4.08.  Absence of Certain Changes or Events. Except as disclosed in the filed Parent SEC Documents, from the date
of the most recent financial statements included in the filed Parent SEC Documents to the date of this Agreement, the Parent has
conducted its business only in the ordinary course, and during such period there has not been:

(a)              
any change in the assets, liabilities, financial condition or operating results of the Parent from that reflected in the Parent
SEC Documents, except changes in the ordinary course of business that have not caused, in the aggregate, a Parent Material Adverse
Effect;

(b)              
any damage, destruction or loss, whether or not covered by insurance, that would have a Parent Material Adverse Effect;

(c)              
any waiver or compromise by the Parent of a valuable right or of a material debt owed to it;

(d)              
any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Parent, except in the ordinary
course of business and the satisfaction or discharge of which would not have a Parent Material Adverse Effect;

(e)              
any material change to a material Contract by which the Parent or any of its assets is bound or subject;

(f)               
any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

(g)              
any resignation or termination of employment of any officer of the Parent;

(h)              
any mortgage, pledge, transfer of a security interest in, or lien, created by the Parent, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and
do not materially impair the Parent’s ownership or use of such property or assets;

(i)                
any loans or guarantees made by the Parent to or for the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the ordinary course of its business;

(j)                
any declaration, setting aside or payment or other distribution in respect of any of the Parent’s capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of such stock by the Parent;

(k)              
any alteration of the Parent’s method of accounting or the identity of its auditors;

    	 	11	 

    	 	 	 

    

(l)                
any issuance of equity securities to any officer, director or affiliate (as defined in the Securities Act), except pursuant to
existing Parent Shares option plans; or

(m)            
any arrangement or commitment by the Parent to do any of the things described in this Section 4.08.

SECTION
4.09.  Taxes.

(a)              
The Parent has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all
such Tax Returns are true, complete and accurate, except to the extent any failure to file, any delinquency in filing or any inaccuracies
in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent
Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the
extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.

(b)              
The most recent financial statements contained in the filed Parent OTC Documents reflect an adequate reserve for all Taxes payable
by the Parent (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all
Taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has
been proposed, asserted or assessed against the Parent, and no requests for waivers of the time to assess any such Taxes are pending,
except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably
be expected to have a Parent Material Adverse Effect.

(c)              
There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of the Parent. The Parent is
not bound by any agreement with respect to Taxes.

SECTION
4.10.  Absence of Changes in Benefit Plans. From the date of the most recent audited financial statements included
in the filed Parent SEC Documents to the date of this Agreement, there has not been any adoption or amendment in any material
respect by the Parent of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits
to any current or former employee, officer or director of the Parent (collectively, “Parent Benefit Plans”).
As of the date of this Agreement there are not any employment, consulting, indemnification, severance or termination agreements
or arrangements between the Parent and any current or former employee, officer or director of the Parent, nor does the Parent
have any general severance plan or policy.

SECTION
4.11.  ERISA Compliance; Excess Parachute Payments. The Parent does not, and since its inception never has, maintained,
or contributed to any “employee pension benefit plans” (as defined in Section 3(2) of ERISA), “employee welfare
benefit plans” (as defined in Section 3(1) of ERISA) or any other Parent Benefit Plan for the benefit of any current or
former employees, consultants, officers or directors of the Parent.

    	 	12	 

    	 	 	 

    

SECTION
4.12.  Litigation. There is no Action that (i) adversely affects or challenges the legality, validity or enforceability
of any of this Agreement or the Parent Shares or (ii) could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Parent Material Adverse Effect. Neither the Parent nor any subsidiary, nor any director
or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of
or liability under federal or state securities laws or a claim of breach of fiduciary duty.

SECTION
4.13.  Compliance with Applicable Laws. The Parent is in compliance with all applicable Laws, including those relating
to occupational health and safety, the environment, export controls, trade sanctions and embargoes, except for instances of noncompliance
that, individually and in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
The Parent has not received any written communication during the past two years from a Governmental Entity that alleges that the
Parent is not in compliance in any material respect with any applicable Law. This Section 4.13 does not relate to matters with
respect to Taxes, which are the subject of Section 4.09.

SECTION
4.14.  Contracts. Except as disclosed in the Parent SEC Documents, there are no other Contracts that are material
to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of the Parent taken
as a whole. The Parent is not in violation of or in default under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or by which
it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Parent Material Adverse Effect.

SECTION
4.15.  Title to Properties. The Parent has good title to, or valid leasehold interests in, all of its properties and
assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which the Parent
has leasehold interests, are free and clear of all Liens except for Liens that, in the aggregate, do not and will not materially
interfere with the ability of the Parent to conduct business as currently conducted. The Parent has complied in all material respects
with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full
force and effect. The Parent enjoys peaceful and undisturbed possession under all such material leases.

SECTION
4.16.  Intellectual Property. The Parent owns, or is validly licensed or otherwise has the right to use, all Intellectual
Property Rights that are material to the conduct of the business of the Parent taken as a whole. No claims are pending or, to
the knowledge of the Parent, threatened that the Parent is infringing or otherwise adversely affecting the rights of any person
with regard to any Intellectual Property Right. To the knowledge of the Parent, no person is infringing the rights of the Parent
with respect to any Intellectual Property Right.

SECTION
4.17.  Labor Matters. There are no collective bargaining or other labor union agreements to which the Parent is a
party or by which it is bound. No material labor dispute exists or, to the knowledge of the Parent, is imminent with respect to
any of the employees of the Parent.

    	 	13	 

    	 	 	 

    

SECTION
4.18.  Market Makers. The Parent has at least one (1) market maker for the Parent Shares and all such market makers
have obtained all permits and made all filings necessary in order for such market makers to continue as market makers of the Parent.

SECTION
4.19.  Transactions With Affiliates and Employees. Except as set forth in the filed Parent SEC Documents, none of
the officers or directors of the Parent and, to the knowledge of the Parent, none of the employees of the Parent is presently
a party to any transaction with the Parent or any subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge
of the Parent, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director,
trustee or partner.

SECTION
4.20.  Application of Takeover Protections. The Parent has taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Parent’s charter documents or the laws of its state of incorporation
that is or could become applicable to the Shareholder as a result of the Shareholder and the Parent fulfilling their obligations
or exercising their rights under this Agreement, including, without limitation, the issuance of the Parent Shares and the Shareholder’s
ownership of the Parent Shares.

SECTION
4.21.  No Additional Agreements. The Parent does not have any agreement or understanding with the Shareholder with
respect to the transactions contemplated by this Agreement other than as specified in this Agreement.

SECTION
4.22.  Investment Company. The Parent is not, and is not an affiliate of, and immediately following the Closing will
not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

SECTION
4.23.  Certain Registration Matters. The Parent has not granted or agreed to grant to any person any rights (including
“piggy-back” registration rights) to have any securities of the Parent registered with the SEC or any other governmental
authority that have not been satisfied.

SECTION
4.24.  Foreign Corrupt Practices. Neither the Parent, nor to the Parent’s knowledge, any director, officer,
agent, employee or other person acting on behalf of the Parent has, in the course of its actions for, or on behalf of, the Parent
(a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee.

    	 	14	 

    	 	 	 

    

ARTICLE
V

Deliveries

SECTION
5.01.  Deliveries of the Shareholder.

(a)              
Concurrently herewith the Shareholder is delivering to the Parent this Agreement executed by the Shareholder.

(b)              
At or prior to the Closing, the Shareholder shall deliver to the Parent:

		(i)	certificates
                                         representing its Company Shares; and

		(ii)	a
                                         duly executed share transfer power for transfer by the Shareholder of the Company Shares
                                         to the Parent; and

SECTION
5.02.  Deliveries of the Parent.

(a)              
Concurrently herewith, the Parent is delivering to the Shareholder and to the Company, a copy of this Agreement executed by the
Parent.

(b)              
At or prior to the Closing, the Parent shall deliver to the Company:

		(i)	a
                                         certificate from the Parent, signed by its Secretary or Assistant Secretary certifying
                                         that the attached copies of the Parent Charter, Parent Bylaws and resolutions of the
                                         Board of Directors of the Parent and of the stockholders of the Parent approving this
                                         Agreement and the transactions contemplated hereunder, are all true, complete and correct
                                         and remain in full force and effect;

(c)              
Promptly following the Closing, the Parent shall deliver to the Shareholder, certificates representing the Parent Shares.

SECTION
5.03.  Deliveries of the Company.

(a)              
Concurrently herewith, the Company is delivering to the Parent this Agreement executed by the Company.

(b)              
At or prior to the Closing, the Company shall deliver to the Parent a certificate from the Company, signed by its authorized officer
certifying that the attached copies of the Company Constituent Instruments and resolutions of the Board of Directors and Shareholders
of the Company approving the Agreement and the Transactions are all true, complete and correct and remain in full force and effect.

    	 	15	 

    	 	 	 

    

ARTICLE
VI

Conditions to Closing

SECTION
6.01.  Shareholder and Company Conditions Precedent. The obligations of the Shareholder and the Company to enter into
and complete the Closing is subject, at the option of the Shareholder and the Company, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by the Shareholder and the Company in writing.

(a)              
Representations and Covenants. The representations and warranties of the Parent contained in this Agreement shall be true
in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing
Date. The Parent shall have performed and complied in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by the Parent on or prior to the Closing Date. The Parent shall have delivered to the
Shareholder and the Company, a certificate, dated the Closing Date, to the foregoing effect.

(b)              
Litigation. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body
or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions
or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion
of the Company or the Shareholder, a materially adverse effect on the assets, properties, business, operations or condition (financial
or otherwise) of the Parent or the Company.

(c)              
Deliveries. The deliveries specified in Section 5.02 shall have been made by the Parent.

SECTION
6.02.  Parent Conditions Precedent. The obligations of the Parent to enter into and complete the Closing are subject,
at the option of the Parent, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Parent in writing.

(a)              
Representations and Covenants. The representations and warranties of the Shareholder and the Company contained in this
Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date. The Shareholder and the Company shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied with by the Shareholder and the Company on or
prior to the Closing Date. The Company shall have delivered to the Parent, if requested, a certificate, dated the Closing Date,
to the foregoing effect.

(b)              
Litigation. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body
or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions
or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion
of the Parent, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise)
of the Parent.

    	 	16	 

    	 	 	 

    

(c)              
No Material Adverse Change. There shall not have been any occurrence, event, incident, action, failure to act, or transaction
which has had or is reasonably likely to cause a Company Material Adverse Effect.

(d)              
Deliveries. The deliveries specified in Section 5.01 and Section 5.03 shall have been made by the Shareholder and the Company,
respectively.

ARTICLE
VII 

Product
Funding and Development

 

SECTION
7.01.  Funding to be Provided by the Parent After Closing. After the Closing the Parent shall provide a total of $300,000
in payments to the Company (the “Funding Payments”), each for use as mutually agreed by the Parties for the further
development and roll-out of the Spot & Pay Mobile Payment Platform (the “Product”):

(a)              
$50,000 previously paid by the Parent, the Company’s prior receipt of which is hereby acknowledged; and

(b)              
$250,000, which may be paid in one or more tranches, but all of which must be paid on before 180 days after the execution of this
Agreement.

SECTION
7.02.  Cooperation and Use of Funding Payments. At all times prior to the Closing, the parties shall meet and confer
regularly regarding the development of the Product, and the Funding Payments shall be applied by the Company according to a development
budget to be mutually agreed upon by the parties.

SECTION
7.03.  Best Efforts. For so long as the Parent has timely made all Funding Payments, the Shareholder shall use his
best professional efforts to develop the Products, in consultation and cooperation with the Parent.

SECTION
7.04.  Ownership of Intellectual Property and Improvements. The Product as developed by the Company on or after the
date of this Agreement shall be considered a work for hire commissioned by the Parent. All right, title and interest in and to
the Product as developed by the Company on or after the date of this Agreement shall vest in the Parent, including any patents,
copyrights, trademarks, trade secrets, methods of processing, design and structure of individual programs and their interaction
and programming techniques employed therein. All revenue, if any, generated from the commercial exploitation of the Product on
or after the date of this Agreement shall be the property of the Parent.

SECTION
7.05.  Non-Competition. Except as provided below, during the period commencing on the date of this Agreement and ending
two (2) years after the termination of the Shareholder’s active efforts in the development or exploitation of the Products
on behalf of the Parent and/or the Company, (the “Restrictive Period”), the Shareholder shall not, in any county,
state, country or other jurisdiction in which the Parent or the Company do business or are planning to do business as of the date
of this Agreement, alone, with and/or through others, be, become or function as an officer, director, employee, owner, corporate
affiliate, salesperson, co-owner, partner, trustee, promoter, founder, technician, engineer, analyst, employee, agent, representative,
distributor, re-seller, sublicensor, supplier, investor or lender, consultant, advisor or manager of or to, or otherwise acquire
or hold any interest in or otherwise engage in the provision of services to, any person or entity that engages in a business that
is Directly Competitive (as defined herein); provided, however, that Shareholder may work exclusively for a division, entity or
subgroup of such a business if the division, entity or subgroup is not Directly Competitive. For purposes of this Agreement, “Directly
Competitive” means developing, manufacturing, providing, marketing, distributing or otherwise commercially exploiting
any products, services or technology that compete with the Parent or the Company’s products, services or technology in existence
as of the date of this Agreement, or such products, services or technology as such may be developed, enhanced or modified by the
Parent or the Company after the date of this Agreement.

    	 	17	 

    	 	 	 

    

SECTION
7.06.  Confidentiality. Shareholder hereby covenants and agrees that, during the period commencing on the date of
this Agreement and ending five (5) years after the termination of the Shareholder’s active efforts in the development or
exploitation of the Products on behalf of the Parent and/or the Company, the Shareholder will not communicate, disclose or otherwise
make available to any person or entity (other than the Parent or the Company), or use for his own account or for the benefit of
any other person or entity, any information or materials proprietary to the Parent or the Company that relate to the Parent or
the Company’s business or affairs which is of a confidential nature, including, but not limited to, trade secrets, information
or materials relating to existing or proposed products (in all and various stages of development), “know-how”, marketing
techniques and materials, marketing and development plans, customer lists and other customer information (including current prospects),
price lists, pricing policies, personnel information and financial information (collectively, “Proprietary Information”).
Proprietary Information includes any and all such information and materials, whether or not obtained by the Shareholder with the
knowledge and permission of the Parent or the Company, whether or not developed, devised or otherwise created in whole or in part
by the Shareholder’s efforts, and whether or not a matter of public knowledge unless as a result of authorized disclosure.

SECTION
7.07.  Procedure and Remedies For Under-funding. In the event that the full $250,000 in new Funding Payments are not
timely delivered by the Parent as specified in Section 7.01, the following remedies shall be effected:

(a)              
The Shareholder shall return to the Parent for cancellation the number of Parent Shares determined by the following formula:

Less
than $50,000 in funding received– No Parent Shares returned to parent. Parent shall return 100% of Company Shares to Shareholder.

$50,000
to $100,000 in funding received– Shareholder returns 250,000 shares to parent. Parent shall return 90% of Company Shares
to Shareholder.

$101,000
to 150,000 in funding received– Shareholder returns 300,000 shares to parent. Parent shall return 75% of Company Shares
to Shareholder.

$151,000
to $200,000 in funding received– Sharsholder returns 400,000 shares to Parent. Parent shall return 55% of Company Shares
to Shareholder.

    	 	18	 

    	 	 	 

    

ARTICLE
VIII

Other Covenants

SECTION
8.01.  Public Announcements. Prior to the Closing, the Parent and the Company will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any press releases or other public statements with
respect to the Agreement and the Transactions and shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement
with any national securities exchanges.

SECTION
8.02.  Fees and Expenses. All fees and expenses incurred in connection with this Agreement shall be paid by the Party
incurring such fees or expenses, whether or not this Agreement is consummated.

SECTION
8.03.  Continued Efforts. Each Party shall use commercially reasonable efforts to (a) take all action reasonably
necessary to consummate the Transactions, and (b) take such steps and do such acts as may be necessary to keep all of its
representations and warranties true and correct as of the Closing Date with the same effect as if the same had been made, and
this Agreement had been dated, as of the Closing Date.

SECTION
8.04.  Exclusivity. Each of the Parent and the Company shall not (and shall not cause or permit any of their affiliates
to) engage in any discussions or negotiations with any person or take any action that would be inconsistent with the Transactions
and that has the effect of avoiding the Closing contemplated hereby. Each of the Parent and the Company shall notify each other
immediately if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.

    	 	19	 

    	 	 	 

    

SECTION
8.05.  Access. Each Party shall permit representatives of any other Party to have full access to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of or pertaining to such Party.

SECTION
8.06.  Preservation of Business. From the date of this Agreement until the Closing Date, the Company and the Parent
shall operate only in the ordinary and usual course of business consistent with their respective past practices (provided, however,
that Parent shall not issue any securities without the prior written consent of the Company), and shall use reasonable commercial
efforts to (a) preserve intact their respective business organizations, (b) preserve the good will and advantageous relationships
with customers, suppliers, independent contractors, employees and other persons material to the operation of their respective
businesses, and (c) not permit any action or omission that would cause any of their respective representations or warranties contained
herein to become inaccurate or any of their respective covenants to be breached in any material respect.

ARTICLE
IX

Miscellaneous

SECTION
9.01.  Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing
and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall
be specified by like notice):

If
to the Parent, to:

 

SocialPlay
USA, Inc.

8275
S. Eastern Avenue, Suite 200

Las
Vegas, NV 89123

Attention:
Robert Rosner

 

If
to the Company or the Shareholder, to:

 

Spot
and Pay, Inc.

2831
St. Rose Parkway, Suite 200

Henderson,
NV 89052

Attention:
Karthikeyan Mani

SECTION
9.02.  Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except
in a written instrument signed by the Company, Parent and the Shareholder. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise
any right hereunder in any manner impair the exercise of any such right.

SECTION
9.03.  Replacement of Securities. If any certificate or instrument evidencing any Parent Shares is mutilated, lost,
stolen or destroyed, the Parent shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof,
or in lieu of and substitution therefore, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Parent of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance
of such replacement Parent Shares. If a replacement certificate or instrument evidencing any Parent Shares is requested due to
a mutilation thereof, the Parent may require delivery of such mutilated certificate or instrument as a condition precedent to
any issuance of a replacement.

    	 	20	 

    	 	 	 

    

SECTION
9.04.  Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including
recovery of damages, the Shareholder, the Parent and the Company will be entitled to specific performance under this Agreement.
The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

SECTION
9.05.  Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section
of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

SECTION
9.06.  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced
by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the Transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of
being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that Transactions contemplated hereby are fulfilled to the extent
possible.

SECTION
9.07.  Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each
of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding
for all purposes.

SECTION
9.08.  Entire Agreement; Third Party Beneficiaries. This Agreement is intended to: (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Transactions
and (b) is not intended to confer upon any person other than the Parties any rights or remedies.

SECTION
9.09.  Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of
the State of Nevada, without reference to principles of conflicts of laws. Any action or proceeding brought for the purpose of
enforcement of any term or provision of this Agreement shall be brought only in the federal or state courts sitting in Las Vegas,
Nevada, and the parties hereby waive any and all rights to trial by jury.

SECTION
9.10.  Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall
be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of
the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

[Signature
Page Follows]

 

    	 	21	 

    	 	 	 

    

 

IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Share Exchange Agreement as of the date first above written.

 

	The
Parent:	SOCIALPLAY USA, INC.
	 	 

         
By:
                                         /s/ Robert Rosner

                                                             Name:
Robert Rosner

                                                             Title: President and CEO

	 	 
	The
Company:	SPOT AND PAY, INC.
	 	 

         

        By:
        /s/ Karthikeyan Mani

Name:
Karthikeyan Mani

Title:
President

	 	 
	The
Shareholder:	/s/ Karthikeyan Mani
	 	

  

    	 	22	 

    	 	 	 

    

 

Schedule
3.13 – Company Intellectual Property Rights

 

    	 	23	 

    	 	 	 

    

 

Schedule
4.02 – Parent Subsidiaries

 

    	 	24sfiv_ex41.htm

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: $350,000.00	
 Issue Date: April 16, 2018 

	
Purchase Price: $350,000.00
	
 

  

FORM OF CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, SECTOR 5, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of AUCTUS FUND, LLC, a Delaware limited liability company, or registered assigns (the “Holder”) the sum of $350,000.00 together with any interest as set forth herein, on January 16, 2019 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid (the “Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 360-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) 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 dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

  

	  
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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 from time to time, and at any time following the Issue Date, and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of 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 (as defined below) 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 4.99% 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 Regulations 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 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 6:00 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) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash 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) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

   
	   
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1.2 Conversion Price.

 

Calculation of Conversion Price. Subject to the adjustments described herein, the conversion price (the “Conversion Price”) shall equal the lesser of: (i) the average of the two (2) lowest Trading Prices (as defined below) during the previous twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%), provided, however, that the Conversion Price shall not be less than $0.17 prior to the 180th calendar day after the Issue Date. “Market Price” means the average of the two (2) lowest Trading Prices (as defined below) for the Common Stock during the twenty-five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of: (i) the lowest trade price on the OTC Pink, OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTC Pink is not the principal trading market for such security, the trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the OTC Pink, or (ii) the closing bid price on the OTC Pink, OTCQB or applicable trading market as reported by a Reporting Service designated by the Holder or, if the OTC Pink is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid 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 OTC Pink. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. Furthermore, the Conversion Price may be adjusted downward if, within three (3) business days of the transmittal of the Notice of Conversion to the Borrower, the Common Stock has a closing bid which is 5% or lower than that set forth in the Notice of Conversion. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Borrower, the Notice of Conversion may be rescinded. At any time after the Closing Date, if in the case that the Borrower’s Common Stock is not deliverable by DWAC (including if the Borrower’s transfer agent has a policy prohibiting or limiting delivery of shares of the Borrower’s Common Stock specified in a Notice of Conversion), an additional 10% discount will apply for all future conversions under all Notes. If in the case that the Borrower’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 10% discount shall apply for all future conversions under all Notes while the “chill” is in effect. If in the case of both of the above, an additional cumulative 10% discount shall apply. Additionally, if the Borrower ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after one hundred eighty-one (181) days from the Issue Date, an additional 10% discount will be attributed to the Conversion Price. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC Pink, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. Holder shall be entitled to deduct $500.00 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion.

 
	 
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(a) Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

(b) Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 4.13.

 

1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will 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 of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six (6) times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 3(d) of the Purchase Agreement. 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 the Notes 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 the outstanding Notes. 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. 

 
	 
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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 from time to time after the Issue Date, by (A) 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 5:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower. 

 

(b) Surrender of Note 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, 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 (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.

 
	 
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(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, 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, 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 5:00 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 commercially reasonable best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.

 

(g) DTC Eligibility & Market Loss. If the Borrower fails to maintain its status as “DTC Eligible” for any reason, or, if the Conversion Price is less than $0.01, the principal amount of the Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000) (under Holder’s and Borrower’s expectation that any principal amount increase will tack back to the Issue Date). In addition, the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied by the Market Price, subject to adjustment as provided in this Note.

 

(h) Failure to Deliver Common Stock Prior to Delivery 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 of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $500 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder’s balance account with OTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any Conversion Amount (under Holder’s and Borrower’s expectation that any damages will tack back to the Issue Date).. 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 (by written notice to the Borrower by the first day of the month following the month in which it has accrued), 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 is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(h) are justified.

 
	 
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(i) Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets changes the Borrower’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion (“Rescindment”) with a “Notice of Rescindment.”

 

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion 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). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered 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, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

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

 
	 
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The legend set forth above 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, in 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 accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock 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. In the event that the Borrower does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

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.

 

(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 the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) 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.

 
	 
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(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.

 

(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

Notwithstanding anything in this Agreement, no adjustment will be made in respect of an Exempt Issuance (as defined below).

 
	 
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“Exempt Issuance” means the issuance of (a) securities to employees, officers or directors of the Borrower, pursuant to any stock or option plan duly adopted for such purpose, or upon approval by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Borrower, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder, and/or other any securities of the Borrower which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock, issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than automatically pursuant to their terms, or in connection with stock splits or combinations) or to extend the term of such securities, (c) securities issued pursuant to any purchase money equipment loan or capital leasing arrangement approved by a purchasing agent or debt financing from a commercial bank or similar financial institution, (d) securities in full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of all or substantially all of the securities or assets of a corporation or other entity, so long as such issuance is not for the primary purpose of raising capital by the Borrower; (e) securities in connection with a bona fide strategic license agreement, OEM agreement, marketing or distribution agreement, or other bona fide partnering arrangement, so long as such issuance is not for the primary purpose of raising capital by the Borrower; (f) securities to a bank or other financial institution pursuant to a bona fide commercial debt financing or to equipment lessor pursuant to a bona fide equipment leasing agreement; and (g) securities upon a stock split, stock dividend or subdivision of the Common Stock.

 

(e) 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.

 

(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.

 
	 
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1.7 [Intentionally Omitted].

 

1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

 

1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:

 

(a) At any time during the period beginning on the Issue Date and ending on the date which is ninety (90) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 135%, 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 plus (y) Default Interest, if any. 

 

(b) At any time during the period beginning the day which is ninety one (91) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, 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 plus (y) Default Interest, if any. 

 

(c) After the expiration of one hundred eighty (180) days following the date of the Note, the Borrower shall have no right of prepayment.

 
	 
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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. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, 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, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, 50% of the proceeds of which shall be used to repay this Note.

 

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 shall be conditioned on a specified use of the proceeds towards the repayment of this Note.

 

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 (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

 

2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars $15,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

 
	 
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2.7 Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

2.8 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

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 (i) fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) 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, (iii) 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, (iv) fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion, (v) fails to remain current in its obligations to its transfer agent, (vi) causes a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent, (vii) fails to repay Holder, within forty eight (48) hours of a demand from the Holder, any amount of funds advanced by Holder to Borrower’s transfer agent in order to process a conversion, and/or (viii) fails to reserve sufficient amount of shares of common stock to satisfy the Reserved Amount at all times.

 
	 
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3.3 Failure to Deliver Transaction Expense Amount. The Borrower fails to deliver the Transaction Expense Amount (as defined in the Purchase Agreement) to the Holder within three (3) business days of the date such amount is due.

 

3.4 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 ten (10) business days after written notice thereof to the Borrower from the Holder.

 

3.5 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.

 

3.6 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors or commence proceedings for its dissolution, 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 for the Borrower or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment.

 

3.7 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 $350,0000, 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.

 

3.8 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, or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under international, federal or state laws as applicable.

 

3.9 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq Global Market, Nasdaq Capital Market, New York Stock Exchange, NYSE American, or an equivalent replacement exchange or market.

 
	 
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3.10 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

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

 

3.12 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.

 

3.13 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future), or any disposition or conveyance of any material asset of the Borrower.

 

3.14 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. 

 

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

 

3.16 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.

 

3.17 Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq Global Market, Nasdaq Capital Market, New York Stock Exchange, NYSE American, or an equivalent replacement exchange, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.

 

3.18 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 (as defined herein), 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) or any other third party evidencing the indebtedness of the Borrower for amounts exceeding $350,000 in outstanding principal amount, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the agreements and instruments defined as the Documents. 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.

 
	 
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3.19 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).

 

3.20 OTC Markets Designation. OTC Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).

 

3.21 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates 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.

 

3.22 Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account

 

Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), 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 (i) 150% (EXCEPT THAT 150% SHALL BE REPLACED WITH 200% WITH RESPECT TO SECTION 3.2 AND/OR 3.22) 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) at the option of the Holder, 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 Trading 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. 

 
	 
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The Holder shall have the right at any time, 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, pursuant to the terms of this Note (including but not limited to any beneficial ownership limitations contained herein).

 

If the Holder or Borrower shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then the party that prevails in such action shall be reimbursed for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

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, electronic mail, 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 electronic mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: 

 
	 
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If to the Borrower, to:

 

Sector 5, Inc.

200 Duke Street, Suite 110

Alexandria, VA 22314

Attn: Erick Kuvshinikov

E-mail: contact@sector-five.com

 

With a copy to (which copy shall not constitute notice):

 

Olshan Frome Wolosky LLP

1325 Avenue of the Americas, 15th Floor

New York, NY 10019

Attn: Spencer G. Feldman, Esq.

E-mail: sfeldman@olshanlaw.com

 

If to the Holder:

 

Auctus Fund, LLC

177 Huntington Avenue, 17th Floor

Boston, MA 02115

Attn: Lou Posner 

Facsimile: (617) 532-6420

 

With a copy to (which copy shall not constitute notice):

 

Chad Friend, Esq., LL.M.

Legal & Compliance, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

E-mail: CFriend@LegalandCompliance.com

 

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. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. 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. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that 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.

 
	 
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4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable 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 Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Massachusetts or in the federal courts located in the Commonwealth of Massachusetts. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. 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 or any other agreement delivered in connection herewith 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 enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

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.

 
	 
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4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

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 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.

 

4.10 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.

 

4.11 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. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 
	 
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4.12 Severability. 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 provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

4.13 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.

 

4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.

 

4.15 Piggyback Registration Rights. The Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand and No/100 United States Dollars ($15,000), being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note. 

 

4.16 Future Raises; Repayment from Proceeds. The Borrower shall not consummate any capital raising transactions involving the issuance of debt securities during the initial one hundred twenty (120) days after the Issue Date. Until the Note is satisfied in full, if the Borrower receives cash proceeds from the issuance of equity and/or debt securities, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply up to 50% of such proceeds to repay all or any portion of this Note. Failure of the Borrower to comply with this Section 4.16 shall constitute an Event of Default under Section 3.4 of the Note and the cure period in Section 3.4 of the Note shall not apply. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.

 

[signature page follows]

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

 

 

	 	SECTOR 5, INC.	
	 	   	 	 
		By:		
	
 
	
Name:
	Erick Kuvshinikov 	 
	 	Title:	Chief Executive Officer	 

  
	 
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EXHIBIT A

NOTICE OF CONVERSION 

 

The undersigned hereby elects to convert $_________________principal amount of the Note (defined below) together with $________________ of accrued and unpaid interest thereto, totaling $_____________ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Sector 5, Inc., a Nevada corporation (the “Borrower”), according to the conditions of the convertible note of the Borrower dated as of April 16, 2018 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. 

 

Box Checked as to applicable instructions:

 

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

	
 
		Name of DTC Prime Broker:
	
 
		Account Number: 
	
 
	
   
	
 

	
 
	o	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
	
 
	
    
	
 

	
 
	
 
	
Name: [NAME]

Address: [ADDRESS]

    

	
 
	
Date of Conversion: 
		
 

	
 
	
Applicable Conversion Price:
	
$
	
 

	
 
	
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: 
		
 

	
 
	
Amount of Principal Balance Due remaining Under the Note after this conversion: 
		
 

	
 
	
Accrued and unpaid interest remaining
		

  

	 	[HOLDER]	
	 	   	 	 
		By:		
	
 
	
Name:
	[NAME]	 
	 	Title: 	[TITLE]	 
	 	Date: 	[DATE]	 

 

  

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