Document:

srer_ex102.htm

EXHIBIT 10.2

 

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: $63,000.00	Issue Date: December 12, 2013
	Purchase Price: $63,000.00	  

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, SEARCHCORE, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $63,000.00 together with any interest as set forth herein, on September 16, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (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 twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-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 during the period beginning on the date which is one hundred eighty (180) days following the date of this Note 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 (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% 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 Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) 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.

(a) Calculation of Conversion Price. The Conversion Price shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (as defined herein) (subject, in each case, 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 58% multiplied by the Market Price (as defined herein) (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB 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 “pink sheets” by OTC Markets Group, Inc. 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 OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The “Fixed Conversion Price” shall mean $0.00005.

(b) 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.

  

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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 five 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 hereunder. 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.

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

1.4 Method of Conversion.

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time 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 6:00 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.

  

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(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.

(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 6:00 p.m., New York, New York time, on such date.

  

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

(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion 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 $1,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock through willful or deliberate hindrances on the part of the Borrower. 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(g) are justified.

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:

  

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“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.”

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 accepted by the Company 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 Company 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.

  

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(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.

(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) 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.

  

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

1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 9.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

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.

  

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1.9  Prepayment. Notwithstanding anything to the contrary contained in this is thirty (30) 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, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 109%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31) days following the issue date and ending on the date which is sixty (60) 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, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 114%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

  

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Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days following 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, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 120%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from the issue date and ending one hundred twenty (120) 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, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 124%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

  

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Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121) day from the issue date and ending 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, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

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

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, except for no consideration or as required by applicable law or regulations) 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.

  

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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 or financial institutions incurred in the ordinary course of business or (c) borrowings, 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 may be conditioned on a specified use of the proceeds of disposition.

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.

 

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 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, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

  

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3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

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

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

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

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange (including the OTCQB maintained by OTC Markets Group, Inc. (the “OTCQB”), the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (specifically the failure to file a 10-Q or 10-K); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

  

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

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

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

3.13 Financial Statement Restatement. The material 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.

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

 

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

 

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

 

  

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

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

  

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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, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, 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:

 

If to the Borrower, to:

SEARCHCORE, INC.

26497 Rancho Parkway South

Lake Forest, CA 92630

Attn: JAMES PAKULIS, Chief Executive Officer

facsimile:

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

The Lebrecht Group, APLC

Attn: Brian A. Lebrecht, Esq.

406 W. South Jordan Parkway, Suite 160

South Jordan, UT 84095

facsimile: (801) 983-4958

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

  

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

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

facsimile: 516-466-3555

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

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

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

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to 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 New York or in the federal courts located in the state and county of Nassau. 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 and Holder waive trial by jury. 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.

  

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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.

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.

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

  

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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this December 12, 2013.

 

	SEARCHCORE, INC.	 
	 	 
	
By:

	
/s/ JAMES PAKULIS

	 
	  	
JAMES PAKULIS

	 
	
 

	
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) 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 SEARCHCORE, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of December 12, 2013 (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 Agent Commission 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:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attention: Certificate Delivery

(516) 498-9890

	
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:

	
_______________

	
ASHER ENTERPRISES, INC.

	 
	  	  	 
	
By:

	 	 
	
Name:

	
Curt Kramer

	 
	
Title:

	
President

	 
	
Date:

	
______________________

	 
	
1 Linden Pl., Suite 207

	 
	
Great Neck, NY. 11021

	 

 

 

21FIRST AMENDMENT TO CREDIT AGREEMENT

 

This FIRST AMENDMENT TO CREDIT AGREEMENT (the
“Amendment”) is dated effective as of the 19th day of November, 2013, by and between WOWIO,
INC., a Texas corporation (the “Borrower”) and TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman
Islands limited partnership (the “Lender”).

 

RECITALS

 

WHEREAS, the Borrower and the Lender executed
that certain Credit Agreement dated as of August 31, 2012, but made effective as of September 21, 2012 (the “Credit
Agreement”); and

 

WHEREAS, pursuant to the Credit Agreement,
the Borrower executed and delivered to Lender that certain Revolving Note dated as of August 31, 2012, but made effective as of
September 21, 2012, evidencing a Revolving Loan under the Credit Agreement in the amount of Two Hundred Fifty Thousand Dollars
($250,000) (the “Revolving Note”); and

 

WHEREAS, in connection with the Credit Agreement
and the Revolving Note, the Borrower executed and delivered to the Lender various ancillary documents referred to in the Credit
Agreement as the “Loan Documents”; and

 

WHEREAS, the Borrower’s obligations under
the Credit Agreement and the Revolving Note are secured by the following, all of which are included within the Loan Documents:
(i) a Security Agreement dated as of August 31, 2012, but made effective as of September 21, 2012, from the Borrower in favor of
the Lender (the “Security Agreement”), pursuant to which the Lender has a continuing, perfected, first-priority
security interest encumbering all of the “Collateral” (as such term is defined in the Security Agreement) of the Borrower;
(ii) a Personal Guaranty dated as of August 31, 2012, but made effective as of September 21, 2012, from Brian Altounian (“Guarantor”)
in favor of Lender (the “Personal Guaranty”); (iii) a Validity Guaranty dated as of August 31, 2012,
but made effective as of September 21, 2012, from the Guarantor in favor of Lender (the “Validity Guaranty”);
and (iii) UCC-1 Financing Statement naming the Borrower, as debtor, and Lender, as secured party, filed with the Secretary of State
of the State of Texas under filing No. 12-0030478287 (the “UCC-1”), among other Loan Documents; and

 

WHEREAS, the Borrower is currently in default
of its obligations under the Credit Agreement and other Loan Documents for failing to pay certain sums required under the Credit
Agreement, among other defaults (these defaults, together any other default which may be existing as of the date hereof, the “Existing
Default”); and

 

WHEREAS, as a result of the Existing Default,
Lender commenced an action against Borrower and Guarantor styled TCA Global Credit Master Fund, LP v. Wowio, Inc., d/b/a Studio
W, and Brian K. Altounian, filed in the U.S. District Court for the Southern District of Florida under Case No. 0:13-cv-61319
(the “Pending Litigation”), and in connection with the Pending Litigation: (i) a Clerk’s default
was entered against the Defendants in the Pending Litigation; and (ii) the Lender has moved for entry of a Final Default Judgment
against the defendants in the Pending Litigation, which motion is currently outstanding; and

 

WHEREAS, Lender and Borrower desire to resolve
the Existing Default and the Pending Litigation, all as more specifically set forth in this Amendment; and

 

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WHEREAS, as part of the resolution of the Existing
Default and the Pending Litigation, the parties desire to terminate the revolving credit facility nature of the Credit Agreement
such that the Borrower shall have no further rights to borrow or request Revolving Loans thereunder, and to provide for the repayment
of all obligations due and owing by the Borrower to Lender as of the date hereof under the Credit Agreement and other Loan Documents,
including the Revolving Note, by aggregating all of such obligations into a newly issued promissory note in the form attached hereto
as Exhibit “A” (the “Amended and Restated Note”), which Amended and Restated
Note shall replace, amend and restate the Revolving Note in its entirety, and which Amended and Restated Note shall be for a principal
amount equal to the aggregate amount of all such obligations, all as more specifically set forth in this Amendment;

 

NOW, THEREFORE, in consideration
of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

 

1. Recitals. The
recitations set forth in the preamble of this Amendment are true and correct and incorporated herein by this reference.

 

2. Capitalized Terms.
All capitalized terms used in this Amendment shall have the same meaning ascribed to them in the Credit Agreement, except as otherwise
specifically set forth herein. In addition, the other definitional and interpretation provisions of Sections 1.2, 1.3 and 1.4 of
the Credit Agreement shall be deemed to apply to all terms and provisions of this Amendment, unless the express context otherwise
requires.

 

3. Conflicts. In
the event of any conflict or ambiguity by and between the terms and provisions of this Amendment and the terms and provisions of
the Credit Agreement, the terms and provisions of this Amendment shall control, but only to the extent of any such conflict or
ambiguity.

 

4. Outstanding Balance.
The Borrower acknowledges that the aggregate amount of all obligations currently due and owing under the Credit Agreement and other
Loan Documents (including the fees and other charges due and payable and to be included within the Amended and Restated Note pursuant
to Sections 7, 8 and 22(b) below), as of October 24, 2013, is $449,221.32 (the “Outstanding Balance”).
The Outstanding Balance is comprised of: (i) principal, accrued and unpaid interest and other charges due under the Credit Agreement
and Revolving Note as of October 24, 2013; (ii) certain amounts outstanding, due or owing in connection with the Warrants in accordance
with Section 7 below; (iii) the fee due pursuant to Section 8 below; and (iv) the legal fees and costs incurred by Lender in connection
with the Existing Default and the Pending Litigation outlined in Section 22(b) below. The Outstanding Balance shall be deemed and
is agreed upon as the outstanding principal balance of the Amended and Restated Note (as of October 24, 2013). Subject to the terms
and conditions of this Amendment, the Borrower shall and does hereby agree to issue to the Lender, simultaneously with the execution
of this Amendment, the Amended and Restated Note, which Amended and Restated Note shall be dated as of October 24, 2013. The Amended
and Restated Note amends, restates, replaces and supersedes, in its entirety, the Revolving Note. It is the intention of the Borrower
and Lender that while the Amended and Restated Note amends, restates, replaces and supersedes the Revolving Note, in its entirety,
it is not in payment or satisfaction of the Revolving Note, but rather is the substitute of one evidence of debt for another without
any intent to extinguish the old. This is not a novation.

 

5. Amendments to Credit
Agreement. Notwithstanding anything contained in the Credit Agreement or any other Loan Document to the contrary, the Borrower
acknowledges and agrees that from and after the date of this Amendment, the Credit Agreement is hereby amended to terminate all
ability on the part of the Borrower to borrow any additional funds thereunder. In that regard, the Revolving Loan Commitment is
hereby terminated, Lender shall have no obligation to make any Revolving Loans under the Credit Agreement from and after the date
of this Amendment, and the Credit Agreement shall remain in effect solely for the purpose of allowing Borrower to wind down the
Credit Agreement and allowing the Borrower to pay down all outstanding Obligations under the Credit Agreement and other Loan Documents.
Notwithstanding the termination of the Revolving Loan Commitment, any terms and provisions of the Credit Agreement not dealing
directly and specifically with the revolving nature of the Credit Agreement or the ability of Borrowers to borrow, pay and re-borrow
sums thereunder, shall remain in full force and effect, including, without limitation, Sections 2.1(c), 2.1(d), and 2.1(e) relating
to the manner in which funds shall be collected and paid through the Lock Box Account, all as set forth in the Credit Agreement.

 

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6. Payment of Certain
Sums. Borrower hereby represents and warrants that Donald Hateley, Esq. of the law firm of Hateley & Hampton (“Escrow
Agent”), is currently holding, in escrow on behalf of the Borrower, the aggregate sum of $65,631.03 (“Escrow
Funds”), which Escrow Funds are comprised of $35,631.03 of past due interest due and payable by Borrower to Lender
under the Credit Agreement as of October 24, 2013, plus $30,000.00 due and owing from Borrower to Lender under the first of the
three Warrants issued by Borrower to Lender under the Credit Agreement. Immediately upon Lender (or Lender’s counsel) delivering
to Borrower a copy of the “Motion to Vacate” (as hereinafter defined), filed in the Pending Litigation, Escrow Agent
shall immediately release the Escrow Funds by wire transfer directly to the Lender pursuant to wire instructions to be provided
by Lender. Borrower shall and does hereby authorize and instruct Escrow Agent to release such Escrow Funds as hereby contemplated
without any further direction or instruction from Borrower, which sums, when received by Lender, shall be applied in payment of
past due interest and in redemption of the first of the three Warrants in accordance with the Credit Agreement.

 

7. Remaining Warrants.
The two remaining Warrants issued by Borrower to Lender under the Credit Agreement (excluding the first Warrant which is being
redeemed with the Escrow Funds pursuant to Section 6 above), shall, upon execution of this Amendment, be deemed redeemed and the
redemption payments due in connection therewith in the aggregate amount of $60,000.00, shall be added and included within the Outstanding
Balance under the Amended and Restated Note, and payable by Borrower to Lender in accordance with the Amended and Restated Note.

 

8. Additional Consideration.
In consideration for Lender’s agreement to waive the Existing Default and enter into this Agreement, the Borrower hereby
agrees to pay to Lender the sum of $50,000.00, which sum shall be added and included within the Outstanding Balance under the Amended
and Restated Note, and payable by Borrower to Lender in accordance with the Amended and Restated Note.

 

9. Representations
and Warranties. The Borrower hereby confirms and affirms that all representations and warranties made by the Borrower under
the Credit Agreement and all other Loan Documents (specifically including under Section 7 of the Credit Agreement) are true, correct
and complete as of the date of the Credit Agreement, and hereby confirms and affirms that, except with respect to the Existing
Default and the Pending Litigation, all such representations and warranties remain true, correct and complete as of the date of
this Amendment, and by this reference, the Borrower does hereby re-make each and every one of such representations and warranties
herein as of the date of this Amendment, as if each and every one of such representations and warranties was set forth and re-made
in its entirety in this Amendment by the Borrower, as same may be qualified by revised disclosure schedules attached to this Amendment,
if any (if no revised disclosures are attached to this Amendment, then no such revised disclosure schedules shall be deemed to
exist or to qualify any of the representations and warranties hereby re-made).

 

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10. Affirmation.
The Borrower hereby affirms all of its Obligations to the Lender under all of the Loan Documents and agrees and affirms as follows:
(i) that as of the date hereof, except with respect to the Existing Default and the Pending Litigation, the Borrower has performed,
satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Loan Documents
to be performed, satisfied or complied with by the Borrower; (ii) that the Borrower shall continue to perform each and every covenant,
agreement and condition set forth in each of the Loan Documents and this Amendment, and continue to be bound by each and all of
the terms and provisions thereof and hereof; (iii) that as of the date hereof, except for the Existing Default and the Pending
Litigation, no default or Event of Default has occurred or is continuing under the Credit Agreement or any other Loan Documents,
and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event
of Default under the Credit Agreement or any other Loan Documents; and (iv) that as of the date hereof, no event, fact, or other
set of circumstances has occurred which could reasonably be expected to have, cause, or result in a Material Adverse Effect, except
for the Existing Default and the Pending Litigation.

 

11. Ratification.
The Borrower hereby acknowledges, represents, warrants and confirms to Lender that: (i) each of the Loan Documents executed by
the Borrower, including the Amended and Restated Note, are valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms; (ii) the Amended and Restated Note, and all other Obligations of the Borrower
under the Credit Agreement, all other Loan Documents and this Amendment, shall be and continue to be and remain secured by and
under the Loan Documents, including the Security Agreement, the Personal Guaranty, the Validity Guaranty and the UCC-1; (iii) there
are no defenses, setoffs, counterclaims, cross-actions or equities in favor of the Borrower, to or against the enforcement of any
of the Loan Documents, and to the extent the Borrower has any defenses, setoffs, counterclaims, cross-actions or equities against
Lender and/or against the enforceability of any of the Loan Documents, the Borrower acknowledges and agrees that same are hereby
fully and unconditionally waived by the Borrower; and (iv) no oral representations, statements, or inducements have been made by
Lender, or any agent or representative of Lender, with respect to the Credit Agreement, this Amendment or any other Loan Documents.

 

12. Additional
Confirmations. The Borrower hereby represents, warrants and covenants as follows: (i) that the Lender’s Liens and security
interests in all of the “Collateral” (as such term is defined in the Security Agreement), are and remain valid, perfected,
first-priority security interests in such Collateral, and the Borrower has not granted any other Liens or security interests of
any nature or kind in favor of any other Person affecting any of such Collateral.

 

13. Lender’s
Conduct. As of the date of this Amendment, the Borrower hereby acknowledges and admits that: (i) the Lender has acted in good
faith and has fulfilled and fully performed all of its obligations under or in connection with the Credit Agreement or any other
Loan Documents; and (ii) that there are no other promises, obligations, understandings or agreements with respect to the Credit
Agreement or the Loan Documents, except as expressly set forth herein, or in the Credit Agreement and other Loan Documents.

 

14. Redefined Terms.
The term “Loan Documents,” as defined in the Credit Agreement and as used in this Amendment, shall be deemed to refer
to and include this Amendment, the Amended and Restated Note, and all other documents or instruments executed in connection with
this Amendment.

 

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15. Representations
and Warranties of the Borrower. The Borrower hereby makes the following representations and warranties to the Lender:

 

(a) Authority and Approval
of Agreement; Binding Effect. The execution and delivery by the Borrower of the Amended and Restated Note, this Amendment,
and all other documents executed and delivered in connection herewith and therewith, and the performance by Borrower of all of
its Obligations hereunder and thereunder, have been duly and validly authorized and approved by the Borrower and its board of directors
pursuant to all applicable laws, and other than the corporate action or resolutions delivered by the Borrower in connection with
this Amendment, no other corporate action or consent on the part of the Borrower, its board of directors, stockholders or any other
Person is necessary or required by the Borrower to execute the Amended and Restated Note, this Amendment, and the documents executed
and delivered in connection herewith and therewith, to consummate the transactions contemplated herein and therein, or perform
all of the Borrower’s Obligations hereunder and thereunder. The Amended and Restated Note, this Amendment, and each of the
documents executed and delivered in connection herewith and therewith, have been duly and validly executed by the Borrower (and
the officer executing this Amendment and all such other documents for Borrower is duly authorized to act and execute same on behalf
of the Borrower) and constitute the valid and legally binding agreements of the Borrower, enforceable against the Borrower in accordance
with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

 

16. Indemnification.
The Borrower hereby indemnifies and holds the Lender Indemnitees and their respective successors and assigns, and each of them,
harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, Proceedings, suits,
claims, costs, expenses and distributions of any kind or nature payable by any of the Lender Indemnitees to any Person, including
reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and
interest thereon from the time such amounts are due at the highest non-usurious rate of interest permitted by applicable law, through
all negotiations, mediations, arbitrations, trial and appellate levels, as a result of, or arising out of, or relating to any matters
relating to this Amendment, the Credit Agreement or any other Loan Documents. The foregoing indemnification obligations shall survive
the termination of the Credit Agreement or any of the Loan Documents and repayment of the Obligations.

 

17. Release. As
a material inducement for Lender to enter into this Amendment, the Borrower does hereby release, waive, discharge, covenant not
to sue, acquit, satisfy and forever discharges each of the Lender Indemnitees and their respective successors and assigns, from
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, Proceedings, suits, claims, costs, expenses
and distributions of any kind or nature whatsoever in law or in equity which Borrower ever had, now has, or which any successor
or assign of Borrower hereafter can, shall or may have against any of the Lender Indemnitees, for, upon or by reason of any matter,
cause or thing whatsoever related to the Credit Agreement, this Amendment or any other Loan Documents, through the date hereof.
The Borrower further expressly agrees that the foregoing release and waiver agreement is intended to be as broad and inclusive
as permitted by the laws governing the Credit Agreement. In addition to, and without limiting the generality of foregoing, the
Borrower further covenants with and warrants unto the Lender and each of the other Lender Indemnitees, that as of the date hereof,
there exists no claims, counterclaims, defenses, objections, offsets or other claims against Lender or any other Lender Indemnitee,
or the obligation of the Borrower to comply with the terms and provisions of the Credit Agreement, this Amendment and all other
Loan Documents. The foregoing release shall survive the termination of the Credit Agreement or any of the Loan Documents and repayment
of the Obligations.

 

18. Waiver of Existing
Default; Vacation of Pending Litigation.

 

(a) Existing Default.
Upon execution of this Amendment and all other documents required or requested by Lender in connection herewith by the Borrower,
and payment by the Borrower of all sums and other fees required to be paid hereunder, the Existing Default shall be deemed waived
by Lender, subject to the terms of this Amendment; provided, however, this waiver shall only apply to the Existing Default, and
this Amendment shall not be deemed or construed in any manner as a waiver by Lender of any future defaults, “Events of Default,”
(as such term may be used or defined in any of the Loan Documents), breaches or misrepresentations by the Borrower under any Loan
Documents, or any of Lender’s rights or remedies in connection therewith, which may occur after the date hereof.

 

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(b) Pending Litigation.

 

(i) Upon execution of this Amendment and all
other documents required or requested by Lender in connection herewith by the Borrower, and payment by the Borrower of all sums
and other fees required to be paid hereunder, Lender shall, at the earliest practicable time as determined within Lender’s
sole discretion, but no later than November 27, 2013, cause to be filed with the U.S. District Court for the Southern District
of Florida, a Motion to Vacate the Clerk’s default entered in the Pending Litigation (the “Motion to Vacate”),
and the Lender, the Borrower and Guarantor agree execute (simultaneously with the execution of this Amendment), and to have Lender’s
counsel file, a Joint Stipulation of Dismissal Without Prejudice with respect to the Pending Litigation, substantially as in the
form attached hereto as Exhibit “B”, with an express reservation of jurisdiction to enforce the terms
of the Credit Agreement and other Loan Documents, including the Amended and Restated Note and this Amendment.

 

(ii) As a material inducement for Lender to
enter into this Amendment, Borrower hereby agrees that upon the occurrence of an Event of Default under the Credit Agreement or
any other Loan Documents, including under the Amended and Restated Note or this Amendment, Lender shall be entitled to immediately
accelerate all Obligations under the Credit Agreement or any other Loan Documents, including under the Amended and Restated Note
or this Amendment, in addition to all other rights and remedies available to Lender at law or in equity. Borrower agrees and does
hereby waive any and all defenses that Borrower could assert in the Pending Litigation (or in any other action by Lender against
Borrower resulting from any such Event of Default), and as a material inducement for Lender to enter into this Amendment, Borrower
agrees and consents that upon the occurrence of an Event of Default under the Credit Agreement or any other Loan Documents, including
under the Amended and Restated Note or this Amendment, Lender shall have the right to file for entry of a Final Consent Judgment,
substantially as in the form attached hereto as Exhibit “C”, pursuant to which Borrower and Guarantor
shall be jointly and severally liable for all Obligations under the Credit Agreement or any other Loan Documents, including under
the Amended and Restated Note or this Amendment, plus an additional amount equal to fifty percent (50%) of all such aggregate Obligations,
together with post-judgment interest at the maximum rate available under applicable law. Borrower hereby waives the making of any
findings of fact and conclusions of law in the Final Consent Judgment, and waives the right to appeal, or otherwise contest the
validity of the Final Consent Judgment.

 

19. Effect on Agreement
and Loan Documents. Except as expressly amended by this Amendment, all of the terms and provisions of the Credit Agreement
and the Loan Documents shall remain and continue in full force and effect after the execution of this Amendment, are hereby ratified
and confirmed, and incorporated herein by this reference.

 

20. Waiver. Except
as specifically set forth in Section 18 above with respect to the Existing Default and the Pending Litigation, this Amendment shall
not be deemed or construed in any manner as a waiver by the Lender of any claims, Proceedings, defaults, Events of Default, breaches
or misrepresentations by the Borrowers under the Credit Agreement, any other Loan Documents, or any of Lender’s rights or
remedies in connection therewith.

 

21. Execution.
This Amendment may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and
the same Amendment, and same shall become effective when counterparts have been signed by each party and each party has delivered
its signed counterpart to the other party. In the event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes
and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile
or “.pdf” signature page was an original thereof.

 

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22. Fees and Expenses.

 

(a) Document
Review and Legal Fees; Due Diligence. The Borrower agrees to pay to the Lender or its counsel a legal fee equal to Five Thousand
Five Hundred and No/100 Dollars ($5,500.00) for the preparation, negotiation and execution of this Amendment and all other documents
in connection herewith, together with costs of $550.00 associated with this transaction, all of which shall be due and payable
by the Borrower upon execution of this Amendment, and as a condition to the effectiveness hereof.

 

(b) Litigation
Fees and Costs. The Borrower agrees to pay to the Lender or its counsel for all legal fees and costs incurred by Lender in
connection with the Existing Default and the Pending Litigation. An estimate of such fees and costs as of the date hereof is in
the amount of $21,000.00, which estimate shall be added to the Outstanding Balance, provided, however, to the extent the fees and
costs incurred by Lender in connection with the Existing Default or the Pending Litigation exceed such estimate, Borrower shall
and does hereby agree to pay any such additional fees upon demand therefor. In addition, nothing contained herein shall amend or
modify Borrower’s obligations for other fees and costs incurred by Lender and for which Borrower is responsible under the
terms and provisions of the Credit Agreement.

 

23. Additional Agreements.

 

(a) Extension of Maturity
Date. The Borrower and Lender hereby agree and acknowledge that the Revolving Loan Maturity Date is hereby extended to May
19, 2014.

 

(b) Reconfirmation
of Lock Box Deposits. Borrower hereby re-confirms its obligation to insure that all Receipts, and all other checks, drafts,
instruments and other items of payment or proceeds of Collateral at any time received, due, owing, payable, or paid to Borrower
from a Customer, any other Person, or otherwise, shall be deposited directly into the Lock Box Account, and if not deposited directly
into the Lock Box Account, shall be immediately remitted or endorsed by Borrower to Lender into the Lock Box Account, and in that
regard, Borrower hereby re-confirms that it has, prior to the date hereof, affirmatively directed and instructed all of its Customers
to make all payments and remittances otherwise due to the Borrower directly to the Lock Box Account.

 

(c) Reporting
Status. The Borrower shall use its best efforts to, within fifteen (15) days after the Motion to Vacate is filed (and in
any event no later than 30 days after the Motion to Vacate is filed (the “Filing Date”), file an
amendment to its registration statement on Form S-1 (File No. 333- 184529) (the “Registration
Statement”), and file all other documents and instruments, and pay all required fees and costs, necessary or
required to have the Borrower become a full reporting company required to file periodic reports with the SEC under Section 13
or 15(d) of the Exchange Act, and have its Common Stock registered with the SEC under Section 12 of the Exchange Act, and
provide to Lender evidence acceptable to the Lender of compliance with each of the foregoing requirements by the Filing Date.
Borrower shall use its best efforts and diligently and in good faith pursue to completion the foregoing requirements, such
that the Registration Statement shall be declared effective by the SEC, and such that the Borrower shall be approved and
become a full reporting company required to file periodic reports with the SEC under the Exchange Act as soon as reasonably
practicable following the Filing Date. In addition, immediately after the Filing Date, the Borrower shall use its best
efforts and diligently and in

 

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good faith pursue approval for the listing and quotation of the Common Stock on the OTC
Bulletin Board, or another principal trading market approved by Lender (the “Principal Trading
Market”), and to have its Common Stock actively trading in such Principal Trading Market. In that regard, the
Borrower shall file all required applications, reports, statements and all other documents, and pay all required fees
and costs, necessary or required in order for the Borrower to accomplish the foregoing requirements. Once the Borrower
becomes a fully reporting company with the SEC, the Borrower shall: (i) file in a timely manner all reports required to be
filed under the Securities Act, the Exchange Act or any securities laws and regulations thereof applicable to the Borrower of
any state of the United States or any foreign jurisdiction, or by the rules and regulations of the Principal Trading Market,
and, to provide a copy thereof to the Lender promptly after such filing; (ii) not terminate its status as an issuer required
to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise
permit such termination; (iii) take all action under its control to maintain the continued listing, quotation and trading of
its Common Stock on the Principal Trading Market. The Borrower shall comply in all respects with the Borrower’s
reporting, filing and other obligations under the bylaws or rules of the Principal Trading Market, the Financial Industry
Regulatory Authority, Inc. and such other Governmental Authorities, as applicable. The Borrower shall promptly provide to
Lender copies of any notices it receives from the SEC, the Principal Trading Market, or any other Governmental Authority, to
the extent any such notices could in any way have or be reasonably expected to have a Material Adverse Effect, or otherwise
adversely affect the Borrower’s ability to raise capital using the public markets. In addition, until all Obligations
are paid and satisfied in full, the Borrower shall, at its sole expense, make, keep and ensure that adequate current public
information with respect to the Borrower, as required in accordance with Rule 144 under the Securities Act, is always
publicly available.

 

(d) Fund Raising Agreement.
Promptly after the Filing Date, the Borrower shall enter into an agreement with a qualified investment banking firm with experience
in raising capital for firms such as the Borrower, for the purpose of raising capital for the Borrower through the sale of debt
or equity securities of Borrower (the “IB Agreement”). A true, complete and correct copy of the IB Agreement
shall be provided by the Borrower to Lender immediately upon execution thereof by Borrower. The Borrower shall comply with, perform
and satisfy each and every term, condition or obligation on the part of the Borrower to be complied with, performed or satisfied
under the IB Agreement, and maintain and keep the IB Agreement in full force and effect until all Obligations due to Lender under
the Credit Agreement or any other Loan Documents are paid in full.

 

(e) Issuance of Securities.
The parties agree that Borrower may issue and sell its equity securities, including selling its Common Stock under the Registration
Statement, but only so long as any such issuance or sale will not result in a Change of Control. In addition, in connection with
any capital raising event undertaken and/or completed by the Borrower, whether through the IB Agreement, in connection with the
sale of its Common Stock under the Registration Statement, or the sale or issuance of any other debt, equity, convertible, or other
securities of the Borrower of any nature or kind (each a “Capital Event”), fifty percent (50%) of the
proceeds otherwise payable to the Borrower in connection with such Capital Event, shall be immediately payable directly to the
Lender, to be applied in accordance with the terms of the Credit Agreement.

 

[Signatures on the following page]

 

    	Page 8

    	 

    

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Amendment as of the day and year first above written.

 

	BORROWER: 	 
	 	 
	WOWIO, INC.	 
	 	 
	By:	/s/
    Brian Altounian	 
	Name:	Brian
    Altounian	 
	Title:	Chief
    Executive Officer	 
	 	(Principal
    Executive Officer and Principal Financial and	 
	 	Accounting
    Officer)	 

 

	LENDER:	 
	 	 
	TCA GLOBAL CREDIT MASTER FUND, LP	 
	 	 
	By: 	TCA Global Credit Fund GP, Ltd.	 
	Its: 	General Partner	 
	 	 	 
	By:	/s/
    Robert Press	 
	 	Robert Press, Director	 

 

    	Page 9

    	 

    

 

EXHIBIT “A”

 

AMENDED
AND RESTATED NOTE (SEE EXHIBIT 10.34)

 

    	 

    	 

    

 

EXHIBIT “B”

 

JOINT STIPULATION OF DISMISSAL WITHOUT PREJUDICE

 

IN
THE UNITED STATES DISTRICT COURT

FOR
THE SOUTHERN DISTRICT OF FLORIDA

 

Case
No. 0:13-cv-61319-DIMITROULEAS

 

TCA
GLOBAL CREDIT MASTER FUND, L.P.,

a
Cayman Islands limited partnership,

 

Plaintiff,

 

vs.

 

WOWIO,
INC. (d/b/a Studio W),

a
Texas corporation, and

BRIAN
K. ALTOUNIAN, an individual,

 

Defendants.

 

___________________________________________________________/

 

JOINT
STIPULATION OF DISMISSAL WITHOUT PREJUDICE

 

Pursuant
to Rule 41(a) of the Federal Rules of Civil Procedure, all of the parties (the “Parties”) in the above-captioned action
hereby jointly stipulate and agree as follows:

 

1.
The above-captioned action has been resolved by a FIRST AMENDMENT TO CREDIT AGREEMENT executed by the Parties.

 

2.
The Parties stipulate and agree that the Complaint in the above-filed action shall be dismissed without prejudice.

 

3.
The Parties request that this Court retain jurisdiction to enforce the terms of the FIRST AMENDMENT TO CREDIT AGREEMENT executed
by the Parties.

 

4.
The Parties agree to the entry of an Order of dismissal without prejudice of the above-captioned action in the form of proposed
Order attached hereto as Exhibit 1.

 

    	Exhibit B to First Amendment to Credit Agreement

    	 

    

  

IN
WITNESS WHEREOF, the Parties have entered into and executed this Stipulation as of November 18, 2013.

 

	 	TCA
    GLOBAL CREDIT MASTER FUND, L.P. 
	 	 
	 	By:	Trafalgar
    Capital Advisors, LLC
	 	 	Manager
    of the TCA Global Credit Master Fund, L.P.

  

	 	By:	/s/
    Robert D. Press
	 	 	Robert
    D. Press, As its Duly Authorized Agent

 

	STATE
    OF FLORIDA	)
	 	)
    ss:
	COUNTY
    OF MIAMI-DADE	)

 

Sworn
to and subscribed before me on this _______ day of November, 2013 by _____________ as the duly authorized agent of Trafalgar
Capital Advisors, LLC acting as the Manager of TCA GLOBAL CREDIT MASTER FUND, L.P., who is either personally known to me or
produced a driver’s license as identification, and who did take an oath.

  

	 	
	 	NOTARY
    PUBLIC
	 	 
	 	WOWIO,
    INC., d/b/a STUDIO W

 

	 	By:	
	 	 	BRIAN
                                         K. ALTOUNIAN, as its Duly Authorized Agent

        

 

	STATE
    OF CALIFORNIA	)
		)
    ss: 
	COUNTY
    OF Los Angeles	)

 

Sworn
to and subscribed before me on this 18 day of November, 2013 by BRIAN K. ALTOUNIAN, as the duly authorized agent
of WOWIO, INC., d/b/a STUDIO W who is either personally known to me or produced a driver’s license as identification,
and who did take an oath.

  

	 	
	 	NOTARY
    PUBLIC

 

  

		BRIAN
    K. ALTOUNIAN

 

		By:	
	 	 	BRIAN
                                         K. ALTOUNIAN

        

  

	STATE
    OF CALIFORNIA	)
		)
    ss: 
	COUNTY
    OF Los Angeles	)

 

    	Exhibit B to First Amendment to Credit Agreement

    	 

    

 

Sworn
to and subscribed before me on this 18 day of November, 2013 by BRIAN K. ALTOUNIAN, who is either personally known
to me or produced a driver’s license as identification, and who did take an oath.

 

	 	
	 	NOTARY
    PUBLIC

  

		

 

    	Exhibit B to First Amendment to Credit Agreement

    	 

    

 

IN
THE UNITED STATES DISTRICT COURT

 

FOR
THE SOUTHERN DISTRICT OF FLORIDA

 

Case
No. 0:13-cv-61319-DIMITROULEAS

 

TCA
GLOBAL CREDIT MASTER FUND, L.P., 

a
Cayman Islands limited partnership,

 

Plaintiff,

 

vs.

 

WOWIO,
INC. (d/b/a Studio W),

a
Texas corporation, and

BRIAN
K. ALTOUNIAN, an individual,

Defendants.

 

___________________________________________________________/

 

ORDER
DISMISSING ACTION WITHOUT PREJUDICE 

 

THIS
MATTER came before the Court upon the Joint Stipulation of Dismissal Without Prejudice entered into between the parties pursuant
to Rule 41(a)(1) of the Federal Rules of Civil Procedure, and the Court, after reviewing the Joint Stipulation and otherwise being
duly advised in the premises, it is hereby

 

ORDERED
that the Complaint filed by the Plaintiff is dismissed without prejudice, and

 

IT
IS FURTHER ORDERED that the Court will retain jurisdiction to enforce the terms of the First Amendment to Credit Agreement
executed by the Parties, though the Clerk shall close this case.

 

DONE
AND ORDERED in Chambers this 22nd day of November, 2013.

 

	 	/s/ WILLIAM
    P DIMITROULEAS
	 	WILLIAM
    P DIMITROULEAS
	 	United
    States District Judge

 

    	Exhibit B to First Amendment to Credit Agreement

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