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  EXHIBIT
10.1

 

SECURITIES PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as
of October 7, 2016, between Friendable, Inc., a Nevada corporation
(the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and permitted assigns, a “Purchaser” and
collectively, the “Purchasers”).

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement (the “Offering”).

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:

 

ARTICLE
I.

DEFINITIONS

1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Notes (as defined herein), and (b) the following
terms have the meanings set forth in this Section 1.1:

“Accredited Investor”
shall have the meaning ascribed to such term in Section
3.2(c).

“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.

“Action” shall have the
meaning ascribed to such term in Section 3.1(j).

“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

“Board of Directors” means
the board of directors of the Company.

“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are required by law or other
governmental action to close.

“Buy In” shall have the
meaning ascribed to such term in Section 4.1(h).

“Closing” means a closing of the purchase and sale of the
Securities pursuant to Section 2.1.

“Closing Date”
means the Business Day on which all of
the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers’ obligation to pay the Subscription Amount at such
Closing, and (ii) the Company’s obligations to deliver the
Securities to be issued and sold at such Closing, in each case,
have been satisfied or waived, but in no event later than the third
Business Day following the date hereof.

 

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“Commission” means the
United States Securities and Exchange Commission.

“Common Stock” means the
common stock of the Company, par value $0.0001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.

“Common Stock Equivalents”
means any securities of the Company or any Subsidiary which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

“Company Counsel” means,
Lucosky Brookman LLP, 101 Wood Avenue South, Woodbridge, NJ 08830,
Attn: Steven A. Lipstein, Esq., fax: (732) 395-4401.

“Conversion Price” shall
have the meaning ascribed to such term in the Notes.

“Disclosure Schedules”
means the schedules and exhibits of the Company delivered
concurrently herewith.

“Disqualification Event”
shall have the meaning ascribed to such term in Section
3.1(oo).

 “Escrow
Agent” means G&M.

“Escrow Agreement” means
the escrow agreement to be employed in connection with the sale of
the Securities, a copy of which is annexed hereto as Exhibit C.

“Equity Line of Credit”
shall have the meaning ascribed to such term in Section
4.13.

“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(r).

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

“Exempt Issuance” means
the issuance of (a) shares of Common Stock and options to officers,
directors, or employees of the Company after the Closing Date up to
the amounts and on the terms set forth on Schedule 3.1(g) consistent with
past practices pursuant to the Stock Option Plans, (b) securities
exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement,
provided that such securities and any term thereof have not been
amended since the date of this Agreement to increase the number of
such securities or to decrease the issue price, exercise price,
exchange price or conversion price of such securities and which
securities and the principal terms thereof are set forth on
Schedule 3.1(g),
and described in the SEC Reports, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Company and shall be intended to provide to the
Company substantial additional benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, (d) as set forth on Schedule 3.1(g), and (e)
securities issued or issuable to the Purchasers and their assigns
pursuant to this Agreement, the Notes or the Warrants and other
Transaction Documents including without limitation, Section 4.17
and Section 4.23 herein, or upon exercise, conversion or exchange
of any such securities.

 

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“Exercise Price” shall
have the meaning ascribed to such term in the
Warrants.

“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.

“FDA” shall have the
meaning ascribed to such term in Section 3.1(nn).

 

“Form 8-K” shall have the
meaning ascribed to such term in Section 4.6.

 

“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

 

“G&M” shall mean
Grushko & Mittman, P.C., with offices located at 515 Rockaway
Avenue, Valley Stream, New York 11581, Fax:
212-697-3575.

“Hang With Agreements”
shall mean: (i) the Series A Convertible Participating Preferred
Stock Purchase Agreement; (ii) the Software License Agreement; and
(iii) all of the schedules, exhibits and agreements delivered in
connection with the foregoing.

“Hang With Transaction”
shall mean the investment by the Company in Hang With, Inc.
pursuant to the unamended terms as set forth on (i) the Term Sheet
annexed hereto as Exhibit
G, and (ii) the Hang With Agreements annexed hereto as
Exhibit
H.

“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(z).

“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).

“Investor Questionnaire”
means the form of Accredited Investor Questionnaire annexed hereto
as Exhibit
E.

“Issuer Covered Person”
shall have the meaning ascribed to such term in Section
3.1(oo).

“Legal Opinion” shall have
the meaning ascribed to such term in Section
2.2(a)(ii).

“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(d).

“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“Listing Default” shall
have the meaning ascribed to such term in Section
4.11(c).

“Majority in Interest”
shall have the meaning ascribed to such term in Section
5.5.

“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).

“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).

 

3

 

 

“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.

“Money Laundering
Laws” shall have the
meaning ascribed to such term in Section
3.1(gg).

“Notes” means the
convertible notes issuable pursuant to this Agreement, in the form
of Exhibit A
hereto.

“OFAC” shall have the
meaning ascribed to such term in Section 3.1(ii).

“Participation Maximum”
shall have the meaning ascribed to such term in Section
4.17(a).

“Permitted Indebtedness”
means (a) any liabilities for borrowed money or amounts owed not in
excess of $100,000 in the aggregate (other than trade accounts
payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance
sheet (or the notes thereto) not affecting more than $100,000 in
the aggregate, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business; and (c) the present value of any
lease payments not in excess of $100,000 due under leases required
to be capitalized in accordance with GAAP.

“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Liens, and (c) Liens in
connection with Permitted Indebtedness under clauses (a), and (b)
thereunder, and Liens incurred in connection with Permitted
Indebtedness under clause (c) thereunder, provided that such Liens
are not secured by assets of the Company or its Subsidiaries other
than the assets so acquired or leased.

“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.

“Pre-Notice” shall have
the meaning ascribed to such term in Section 4.17(b).

“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.

“Pro-Rata Portion” shall
have the meaning ascribed to such term in Section
4.17(e).

“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.3(b).

 

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“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.3(b).

“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.

“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).

“Required Minimum” means,
as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable
upon exercise in full of all Warrants or conversion in full of all
Notes, ignoring any conversion or exercise limits set forth
therein, and assuming that any previously unconverted Notes will be
held until the third anniversary of the issue date of such
Notes.

“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.

“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the
Notes, the Warrants, and the Underlying Shares.

“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

“Short Sales” means
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and
similar arrangements (including on a total return basis) whether
such transactions are made through U.S. or non-U.S. broker dealers
or foreign regulated brokers. 

“Stock Option Plans” means
the Company’s 2011 Stock Option Plan and the Company’s
2014 Equity Incentive Plan, copies of which are included in the SEC
Reports.

“Subscription Amount”
means, as to each Purchaser, the
aggregate amount to be paid for
the Notes and Warrants purchased hereunder at the Closing as
specified below such Purchaser’s name on the signature page
of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.

“Subsequent Financing”
shall have the meaning ascribed to such term in Section
4.17(a).

“Subsequent Financing
Notice” shall have the meaning ascribed to such term
in Section 4.17(b).

“Subsidiary” means
with respect to any entity at any
date, any direct or indirect corporation, limited or general
partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than
30% of (i) the outstanding capital stock having (in the
absence of contingencies) ordinary voting power to elect a majority
of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership
or limited liability company or (iii) in the case of a trust,
estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity, or (B) is under the actual control of the
Company.

 

5

 

 

“Termination Date” shall
have the meaning ascribed to such term in Section 2.1.

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

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

“Transaction Documents”
means this Agreement, the Notes, the Warrants, the Escrow
Agreement, all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the
transactions contemplated hereunder.

“Transfer Agent” means
Nevada Agency and Transfer, 50 West Liberty Street, Suite 880,
Reno, NV 89501, and any successor transfer agent of the
Company.

“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Notes and upon exercise of the Warrants and issued and issuable
in lieu of the cash payment of interest on the Notes in accordance
with the terms of the Notes, and any other shares of Common Stock
issued or issuable to a Purchaser in connection with or pursuant to
the Securities or Transaction Documents.

“Unlegended Shares” shall
have the meaning ascribed to such term in Section
4.1(d).

“Variable Priced Equity Linked
Instruments” shall have the meaning ascribed to such
term in Section 4.13.

“Variable Rate
Transaction” shall have
the meaning ascribed to such term in Section
4.13.

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

“Warrants” means the
Common Stock purchase warrants delivered to the Purchasers at the
Closing in accordance with Section 2.2(a) hereof in the form of
Exhibit B
attached hereto.

 

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“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.

 

ARTICLE
II.

PURCHASE
AND SALE

2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
the Purchasers, severally and not jointly, agree to purchase, an
aggregate of up to $1,615,000 principal amount of Notes and
Warrants as determined pursuant to Section 2.2(a) and set forth on
Schedule 2.1 (each
such purchase and sale being a “Closing”). Each Purchaser
shall deliver to the Company such Purchaser’s Subscription
Amount, and the Company shall deliver to each Purchaser its
respective Note and Warrants, as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, subsequent Closings shall occur at the offices of
G&M or such other location as the parties shall mutually agree
on the third day of each month following the initial Closing but in
no event later than the last Business Day of each month following
the initial Closing, unless mutually extended by the parties.
Notwithstanding anything herein to the contrary, the initial
Closing must take place on or before October 7, 2016. The Closing
Date for the final Closing shall be as of the date the aggregate
Subscription Amount of $1,615,000 has been released from escrow to
or for the benefit of the Company (the “Termination Date”). With
respect to any Closing not held on or before the Termination Date,
the Company shall cause all subscription documents and funds, if
any, to be returned, without interest or deduction to each
prospective Purchaser. Notwithstanding of the date of any Closing
subsequent to the initial Closing, all time effective clauses in
the Transaction Documents shall commence on the initial Closing
Date and Transaction Documents will be deemed modified Mutatis Mutandum in connection with
such subsequent Closings, if any, that take place after the initial
Closing. The Maturity Date of the Notes issued at all Closings
subsequent to the initial Closing shall be the same as the Maturity
Date of the Notes issued at the initial Closing. The exercise
period of the Warrants issued at each of the Closings subsequent to
the initial Closing will commence on the date of each respective
subsequent Closings.

NO
MINIMUM NUMBER OF SHARES AND WARRANTS MUST BE SOLD IN ORDER FOR THE
COMPANY TO ACCEPT ANY SUBSCRIPTIONS, AND ALL NET PROCEEDS OF THE
OFFERING WILL BE IMMEDIATELY AVAILABLE FOR COMPANY
PURPOSES.

2.2 Deliveries.

(a) On or prior to each
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

(i) this Agreement duly
executed by the Company with the schedules and exhibits thereto
current as of each such Closing Date;

(ii) a
legal opinion of Company Counsel, substantially in the form of
Exhibit D attached
hereto;

(iii) a
Note with a principal amount equal to each Purchaser’s
Subscription Amount registered in the name of such
Purchaser;

(iv) Warrants
registered in the name of such Purchaser to purchase up to a number
of shares of Common Stock equal to 100% of such Purchaser’s
Subscription Amount divided by the Conversion Price in effect on
such Closing Date, having a per share Exercise Price as set forth
therein, subject to adjustment as provided herein and
therein;

 

7

 

 

(v) the Escrow
Agreement duly executed by the Company and Escrow Agent with
instructions by the Company to the Escrow Agent to deliver funds in
the amounts described on Schedule 4.9 directly to Hang
With, Inc.;

 

(vi) a
certificate of the Principal Executive Officer and Chief Executive
Officer (each as defined in the Exchange Act) of the Company, dated
as of each Closing Date, in which such officers shall certify that
the conditions set forth in Section 2.3(b) have been
fulfilled, and in connection with subsequent Closings following the
initial Closing, ratifying the terms of this Agreement as an
additional Closing under this Agreement and under the Transaction
Documents; and

 

(vii) Secretary’s
certificate containing (i) copies of the text of the resolutions by
which the corporate action on the part of the Company necessary to
approve this Agreement and the other Transaction Documents and the
transactions and actions contemplated hereby and thereby, which
shall be accompanied by a certificate of the corporate secretary or
assistant corporate secretary of Company dated as of the Closing
Date certifying to the Purchasers that such resolutions were duly
adopted and have not been amended or rescinded, (ii) an incumbency
certificate dated as of the Closing Date executed on behalf of
Company by its corporate secretary or one of its assistant
corporate secretaries certifying the office of each officer of
Company executing this Agreement, or any other agreement,
certificate or other instrument executed pursuant hereto, and (iii)
copies of (A) the Company’s Certificate of Incorporation and
bylaws in effect on the Closing Date, and (B) the certificate
evidencing the good standing of Company as of a day within five (5)
Business Days prior to the Closing Date.

(b) On or prior to each
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:

(i) this Agreement and the Escrow Agreement each duly
executed by such Purchaser;

(ii) such
Purchaser’s Subscription Amount by wire transfer or as
otherwise permitted under the Escrow Agreement, to the Escrow
Agent; and

(iii) Accredited
Investor Questionnaire duly executed by each
Purchaser.

(c)           Anything
to the contrary herein notwithstanding, any Purchaser may elect to
bypass the escrow arrangement described herein and arrange for its
Closing directly with the Company without employing the Escrow
Agent as an intermediary.

 

2.3 Closing
Conditions.

(a) The obligations of
the Company hereunder to effect a Closing are subject to the
following conditions being met:

(i) the accuracy in all
material respects (determined without
regard to any materiality, Material Adverse Effect or other similar
qualifiers therein) on the date of this Agreement and as of
each Closing Date of the representations and warranties of the
Purchasers contained herein (unless as of a specific date therein
in which case they shall be accurate as of such date);

 

8

 

 

(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed;

(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement; and

(iv) the
Escrow Agent shall have received executed signature pages to this
Agreement and the Escrow Agreement from at least one Purchaser
showing an agreement to purchase a Note and Warrants hereunder and
the Escrow Agent shall have received the corresponding Subscription
Amount from such Purchaser, in cash.

(b) The respective
obligations of a Purchaser hereunder to effect a Closing, unless
waived by such Purchaser, are subject to the following conditions
being met:

(i) the accuracy in all
material respects (determined without
regard to any materiality, Material Adverse Effect or other similar
qualifiers therein) on the date of this Agreement and as of
each Closing Date of the representations and warranties of the
Company contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);

(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to a Closing Date shall have been
performed;

(iii) the
Escrow Agent shall have received executed signature pages to this
Agreement and aggregate Subscription Amount of $465,000 with
respect to the initial Closing and the amounts set forth on
Schedule
2.1 with respect to subsequent
Closings from at least one Purchaser showing an agreement to
purchase a Note and Warrants hereunder and the Escrow Agent shall
have received the corresponding Subscription Amount from such
Purchaser in cash;

(iv) with
regard to the first three Closings only, the Company will have
closed or will be closing the Hang With Transaction, subject only,
with regard to the initial Closing, to the release of funds in the
amount and date set forth on Schedule 4.9
pursuant to the unamended terms
contained in the Hang With Agreements, and, with regard to
subsequent Closings, to the truthful and accurate agreement of each
of the Company and Hang With, Inc. that each party to the Hang With
Transaction has complied with the Hang With Agreements and to the
release of funds in the amounts and dates set forth on
Schedule
4.9 with respect to the second
and third closings with Hang With, Inc., each pursuant to the
unamended terms contained in the Hang With
Agreements;

(v) the delivery by the
Company of the items set forth in Section 2.2(a) of this
Agreement;

(vi) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof and as of each Closing;
and

 

9

 

 

(vii) from
the date hereof to each respective Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the
Company’s principal Trading Market, and, at any time prior to
the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing. 

2.4           Purchaser’s
Right To Terminate. Anything in any of the
Transaction Documents to the contrary notwithstanding, each
Purchaser has the right to demand and receive from the Escrow Agent
such Purchaser’s Subscription Amount at any time until a
Closing takes place in connection with such Subscription Amount.
The Company and each Purchaser acknowledges that the Escrow Agent
is acting as agent and representative for the Purchaser with
respect to the Purchaser’s Subscription Amount and at no time
is or will be holding any funds on behalf of Palladium Capital
Advisors LLC nor on behalf of the Company until a Closing.
UNDER NO CIRCUMSTANCES WILL THE
PURCHASER’S SUBSCRIPTION AMOUNT BE DELIVERED TO OR UNDER THE
CONTROL OR AUTHORITY OF ANY PLACEMENT AGENT OR BROKER INCLUDING BUT
NOT LIMITED TO PALLADIUM CAPITAL ADVISORS LLC. For the avoidance of doubt, the
Company shall not be required to pay the amounts to Hang With
listed on Schedule
5.2 until
the respective first three Closings occur.

 

 

ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES

3.1 Representations
and Warranties of the Company. Except as set forth in the SEC Reports or
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation made
herein only to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules. The Company
hereby makes the following representations and warranties to each
Purchaser:

(a) Subsidiaries. All of the direct
and indirect Subsidiaries of the Company and the Company’s
ownership interests therein are set forth on Schedule 3.1(a). The Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

(b) Organization and Qualification.
The Company and each Subsidiary is an entity duly incorporated or
otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and each Subsidiary is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not
reasonably be expected to result in: (i) a material adverse effect
on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of
operations, assets, business, or condition (financial or otherwise)
of the Company and each Subsidiary, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse
Effect”) and, no Proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to
revoke, limit or curtail such power and authority or
qualification.

 

10

 

 

(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents, the issuance and sale of the
Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party do not and
will not: (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration,
adjustment, exchange, reset, exercise or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt, equity or other instrument (evidencing Company or
Subsidiary equity, debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or
affected, or (iii) conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of clause (iii), such as would not reasonably be expected to
result in a Material Adverse Effect.

(e) Filings, Consents and
Approvals.  The Company is
not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with,
any court or other provincial or foreign or domestic federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) the
notice and/or application(s) to each applicable Trading Market for
the issuance and sale of the Securities and the listing of the
Underlying Shares for trading thereon in the time and manner
required thereby, all of which shall have been effectuated prior to
the Closing, and (iii) the
filing of a Form D with the Commission (collectively, the
“Required
Approvals”).

 

11

 

 

(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer arising pursuant to applicable securities laws. The
Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date
hereof.

(g) Capitalization. The
capitalization of the Company is as set forth on Schedule 3.1(g) included
in the SEC Reports. The Company has not issued any capital stock
since its most recently filed periodic
report. Except as set forth on Schedule 3.1(g), no Person has
any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as
disclosed in the SEC Reports or on Schedule 3.1(g), there are no
outstanding options, employee or incentive stock option plans,
warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents. Except as set forth on Schedule 3.1(g), the issuance
and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, have been issued in material
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
Except as contemplated by Section 3.1(e), no further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are
no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders. The
Company is not a party to any Variable Rate Transaction and as of
Closing, there will not be outstanding any Equity Line of Credit
nor Variable Priced Equity Linked Instruments.

(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Sections 12(b), 12(g), 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein filed not later than
ten (10) days prior to the date hereof, being collectively referred
to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities
Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with
United States generally accepted accounting principles
(“GAAP”) applied on a
consistent basis during the periods involved except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements included in
the SEC Reports may not contain all footnotes required by GAAP, and
fairly present in all material respects the financial position of
the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be in compliance with all its reporting
requirements under the Securities Act and Exchange
Act.

 

12

 

 

(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report or on
Schedule 3.1(i):
(i) there has been no event, occurrence or development that has had
or that would reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any material
liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant
to GAAP or disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company
has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate except pursuant to the Stock
Option Plans as set forth on Schedule 3.1(i). The Company
does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of
the Securities contemplated by this Agreement, or as set forth on
Schedule 3.1(i), no
event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least two
Trading Days prior to the date that this representation is
made.

(j) Litigation. Except as set forth
in the SEC Reports, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Except as set forth in the SEC Reports, neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty. Except as set forth in the SEC Reports,
there has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer
of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

 

13

 

 

(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company or any
Subsidiary, which would reasonably be expected to result in a
Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(l) Compliance.
To the Company’s knowledge, neither the Company nor any
Subsidiary, (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and
labor matters, except in each case as would not reasonably be
expected to result in a Material Adverse Effect.

(m) Regulatory Permits. The Company
and each Subsidiary possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports and as actually
conducted, except where the failure to possess such permits would
not reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

(n) Title to Assets. Except as
disclosed in the SEC Reports, the Company and each Subsidiary have
good and marketable title in fee simple to all real property (if
any) owned by them and good and marketable title in all personal
property owned by them that is material to the business of the
Company and each Subsidiary, in each case free and clear of all
Liens, except for Permitted Liens and (i) Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and each Subsidiary and (ii) Liens for the
payment of federal, state or other taxes, for which appropriate
reserves have been made in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and each
Subsidiary are held by them under valid, subsisting and enforceable
leases with which the Company and each Subsidiary are in
compliance.

 

14

 

 

(o) Intellectual Property. All of
the Company’s and Subsidiary’s material Intellectual
Property Rights are disclosed as required in the SEC
Reports.

(i) The term
“Intellectual
Property Rights” means:

1.

the name of the
Company and each Subsidiary, all fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications of the Company and each Subsidiary (collectively,
“Marks'');

2.

all patents and
patent applications of the Company and each Subsidiary
(collectively, “Patents'');

3.

all copyrights in
both published works and unpublished works of the Company and each
Subsidiary (collectively, “Copyrights”);

4.

all rights in mask
works of the Company and each Subsidiary (collectively,
“Rights in Mask
Works''); and

5.

all know-how, trade
secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings,
and blue prints (collectively, “Trade Secrets''); owned, used,
or licensed by the Company and each Subsidiary as licensee or
licensor.

(ii) Agreements.
Except as set forth in the SEC Reports, there are no outstanding
and, to Company’s knowledge, no threatened disputes or
disagreements with respect to any agreements relating to any
Intellectual Property Rights to which the Company is a party or by
which the Company is bound.

(iii) Know-How
Necessary for the Business. Except as set forth in the SEC
Reports, the Intellectual Property Rights are all those necessary
for the operation of the Company’s and Subsidiaries’
businesses as currently conducted or as represented to the
Purchaser to be conducted. Each of the Company and each Subsidiary
is the owner of all right, title, and interest in and to each of
their respective Intellectual Property Rights, free and clear of
all Liens, and adverse claims, and has the right to use all of the
Intellectual Property Rights. To the Company’s knowledge, no
employee of the Company or any Subsidiary has entered into any
contract that restricts or limits in any way the scope or type of
work in which the employee may be engaged or requires the employee
to transfer, assign, or disclose information concerning his work to
anyone other than the Company or a Subsidiary.

(iv) Patents.
Except as set forth in the SEC Reports, the Company and each
Subsidiary is the owner of all right, title and interest in and to
each of the Patents, free and clear of all Liens and adverse
claims. All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use),
are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the
Closing Date. No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding.
Except as set forth in the SEC Reports, to the Company’s
knowledge: (1) there is no potentially interfering patent or patent
application of any third party, and (2) no Patent is infringed or
has been challenged or threatened in any way. To the
Company’s knowledge, none of the products manufactured and
sold, nor any process or know-how used, by the Company or any
Subsidiary infringes or is alleged to infringe any patent or other
proprietary right of any other Person.

 

15

 

 

(v) Trademarks. The Company and
each Subsidiary is the owner of all right, title, and interest in
and to each of the Marks, free and clear of all Liens and adverse
claims. All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date. No Mark has been or is now involved in
any opposition, invalidation, or cancellation and, to the
Company’s knowledge, no such action is threatened with
respect to any of the Marks. To the Company’s knowledge: (1)
there is no potentially interfering trademark or trademark
application of any third party, and (2) no Mark is infringed or has
been challenged or threatened in any way. To the Company’s
knowledge, none of the Marks used by the Company and each
Subsidiary infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.

(vi) Copyrights.
The Company and each Subsidiary is the owner of all right, title,
and interest in and to each of the Copyrights, free and clear of
all Liens and adverse claims. All the Copyrights have been
registered and are currently in compliance with formal
requirements, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days
after the Closing Date. To the Company’s knowledge, no
Copyright is infringed or has been challenged or threatened in any
way. To the Company’s knowledge, none of the subject matter
of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the
work of a third party. All works encompassed by the Copyrights have
been marked with the proper copyright notice.

(vii) Trade
Secrets. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it and
to allow its full and proper use without reliance on the knowledge
or memory of any individual. The Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
its Trade Secrets. The Company and each Subsidiary has good title
and an absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public
knowledge or literature, and, to the Company’s knowledge,
have not been used, divulged, or appropriated either for the
benefit of any Person (other the Company and each Subsidiary) or to
the detriment of the Company and each Subsidiary. No Trade Secret
is subject to any adverse claim or has been challenged or
threatened in any way.

(p) Insurance. The Company and each
Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and each Subsidiary are engaged, including, but not limited to,
directors and officers insurance coverage. Neither the Company nor
any Subsidiary has any reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.

 

16

 

 

(q) Transactions With Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $50,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company or any
Subsidiary, and (iii) other employee benefits, including stock
option agreements under the Stock Option Plans or any other plan of
the Company except as disclosed on Schedule 3.1(g).

(r) Sarbanes-Oxley; Internal Accounting
Controls. The Company and each Subsidiary are in material
compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date. The Company and each Subsidiary maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and each Subsidiary have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and each Subsidiary and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and each Subsidiary as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its
Subsidiaries.

(s) Certain Fees. Except as set
forth on Schedule
3.1(s), no brokerage, finder’s fees, commissions or
due diligence fees are or will be payable by the Company or any
Subsidiary to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by the Transaction
Documents. The Purchasers shall have no obligation with respect to
any such fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section
3.1(s) that may be due in connection with the transactions
contemplated by the Transaction Documents.

 

17

 

 

(t) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.

(u) Registration Rights. Except as
set forth and described on Schedule 3.1(u), no Person has
any right to cause the Company or any Subsidiary to effect the
registration under the Securities Act of any securities of the
Company or any Subsidiary, except for the Purchasers.

(v) Reporting Company/Shell
Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Sections 12(g), 13 and 15(d) of
the Exchange Act. Pursuant to the provisions of the Exchange Act,
the Company has timely filed all reports and other materials
required to be filed by the Company thereunder with the SEC during
the twelve months preceding the date of this Agreement. The Company
has no reason to believe that it will not in the year following the
Closing continue to be in compliance with all listing and reporting
requirements applicable to the Company as of each of the Closing
Dates and thereafter. As of the date of this Agreement and the
Closing Date, the Company is not a “shell company” nor
a former “shell company” (as defined in Rule 405 of the
Securities Act).

(w) Application of Takeover
Protections. The Company and the Board of Directors has
taken all necessary action in order to render inapplicable any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

(x) Disclosure. Except with respect
to the material terms and conditions of the Offering as set forth
in the Transaction Documents together with the exhibits and
schedules thereto, the Company confirms that neither it nor any
other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that it
believes constitutes or might constitute material, non-public
information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting
transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Purchasers
regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, when taken together as a
whole, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

 

18

 

 

(y) No Integrated Offering. Except
as set forth on Schedule
3.1(y), assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither
the Company, nor any of its Affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause the Offering of the Securities
to be integrated with prior offerings by the Company for purposes
of: (i) the Securities Act which would require the registration of
any such securities under the Securities Act, or (ii) any
applicable shareholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or
designated.

(z) Solvency. Based on the
consolidated financial condition of the Company and Subsidiaries as
of each Closing Date, and the Company’s good faith estimate
of the fair market value of its assets, after giving effect to the
receipt by the Company of the proceeds from the sale of the
Securities hereunder: (i) the fair saleable value of the
Company’s assets exceeds the amount that will be required to
be paid on or in respect of the Company’s existing debts and
other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now
conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of
the business conducted by the Company, consolidated and projected
capital requirements and capital availability thereof, and (iii)
the current cash flow of the Company, together with the proceeds
the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one
year from the Closing Date. The SEC Reports discloses, as of the
date hereof all outstanding secured and unsecured Indebtedness of
the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$100,000 in the aggregate (other than trade accounts payable
incurred in the ordinary course of business), (y) all guaranties,
endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be
reflected in the Company’s consolidated balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business; and (z) the present value of any
lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.

(aa) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim.

 

19

 

 

(bb) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary,
has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.

(cc) Accountants
and Lawyers. The Company’s accounting firm is set
forth on Schedule
3.1(cc) of the Disclosure Schedules. To the knowledge and
belief of the Company, such accounting firm: (i) is a registered
public accounting firm as required by the Exchange Act and (ii)
shall express its opinion with respect to the financial statements
to be included in the Company’s Annual Report for the fiscal
year ending December 31, 2016. There
are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and such
accountants.

(dd) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.

(ee) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding (except for Section 4.16 hereof),
it is understood and acknowledged by the Company that: (i) none of
the Purchasers has been asked by the Company to agree, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (ii) past or future open market
or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of
the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative”
transactions to which any such Purchaser is a party, directly or
indirectly, may presently have a “short” position in
the Common Stock and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) one or
more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the
Underlying Shares deliverable with respect to Securities are being
determined, and (z) such hedging activities (if any) could reduce
the value of the existing stockholders' equity interests in the
Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned
hedging activities do not constitute a breach of any of the
Transaction Documents. The Company
acknowledges that anything to the contrary in the Transaction
Documents notwithstanding, Purchaser may sell long any Underlying
Shares it anticipates receiving after conversion of any part of a
Note or exercise of a Warrant.

 

20

 

 

(ff) Regulation
M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company.

(gg) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.

(hh) Stock
Option Plans. Each stock option and similar security granted
by the Company was granted (i) in accordance with the terms of such
any applicable stock option plans and (ii) with an exercise price
at least equal to the fair market value of the Common Stock on the
date such stock option would be considered granted under GAAP and
applicable law. No stock option granted under any stock option plan
has been backdated. The Company has not knowingly granted, and
there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate
the grant of stock options with, the release or other public
announcement of material information regarding the Company or its
Subsidiaries or their financial results or prospects.

(ii) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).

(jj) Private
Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the
Trading Market.

(kk) No
General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other Accredited
Investors.

(ll) Indebtedness
and Seniority. As of the date hereof, all Indebtedness and
Liens of the Company and the principal terms thereof are set forth
in the SEC Reports. Except as set forth on Schedule 3.1(ll), as of the
Closing Date, no Indebtedness or other equity of the Company is or
will be pari passu or
senior to the Notes in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property
covered thereby).

 

21

 

 

(mm) Listing
and Maintenance Requirements.
The Common Stock is listed on the OTC Pink Marketplace maintained
by the OTC Markets Group, Inc. under the symbol FDBL. Except as
disclosed in the Reports, the Company has not, in the twenty-four
(24) months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading
Market.

(nn) FDA.
The Company has no applications pending before the jurisdiction of
the U.S. Food and Drug Administration (“FDA”).

(oo) No
Disqualification Events. With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder.

(pp) Hang
With Transaction Representations and Warranties. All of the
Company’s representations and warranties contained in the
Hang With Transaction documents are incorporated by reference
herein for the benefit of the Purchasers.

(qq) Other
Covered Persons. Except as set forth on Schedule 3.1(s) or to attorneys
for legal services, the Company is not aware of any person that has
been or will be paid (directly or indirectly) remuneration in
connection with the sale of any Regulation D Securities pursuant to
this Agreement.

(rr) No
Outstanding Variable Priced Equity Linked Instruments. As of
the Closing Date and for so long as Notes or Warrants are
outstanding, the Company will not have outstanding nor issuable any
Variable Priced Equity Linked Instruments, nor any debt or equity
with anti-dilution, ratchet or reset rights, except as set forth
and described on Schedule
3.1(rr).

(ss)           Securities
may be purchased by Affiliates of the Company or other parties with
a financial interest in the Offering. Purchaser acknowledges that Securities may be
purchased by Affiliates of the Company or by other persons who will
receive fees or other compensation or gain which is dependent upon
the success of the Offering. Such purchases may be made at any
time, and will be counted in determining whether the level of
purchases has been met for a Closing of the Offering. Purchasers
acknowledges that the sale of Securities to any Person does not
indicate that such sales have been made to Purchasers who have no
financial or other interest in the Offering, or who otherwise are
exercising independent investment discretion.

(tt)           Survival.
The foregoing representations and warranties shall survive the
Closing.

 

22

 

 

3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein):

(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.

(b) Understandings or Arrangements.
Such Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to any
registration statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.

(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it exercises any
Warrants or converts any Notes it will be either: (i) an Accredited
Investor as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the
Securities Act. Such Purchaser is not required to be registered as
a broker-dealer under Section 15 of the Exchange Act. Such
Purchaser has the authority and is duly and legally qualified to
purchase and own the Securities. Such Purchaser is able to bear the
risk of such investment for an indefinite period and to afford a
complete loss thereof. Such Purchaser has provided the information
in the Accredited Investor Questionnaire attached hereto as
Exhibit E (the
“Investor
Questionnaire”). The information set forth on the
signature pages hereto and the Investor Questionnaire regarding
such Purchaser is true and complete in all respects. Except as
disclosed in the Investor Questionnaire, such Purchaser has had no
position, office or other material relationship within the past
three years with the Company or Persons (as defined below) known to
such Purchaser to be affiliates of the Company, and is not a member
of the Financial Industry Regulatory Authority or an
“associated person” (as such term is defined under the
FINRA Membership and Registration Rules Section 1011).

 

23

 

 

(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.

(e) Information on Company. Such
Purchaser has been furnished with or has had access to the SEC
Reports. Purchasers are not deemed to have any knowledge of any
information not included in the SEC Reports unless such information
is delivered in the manner described in the next
sentence.  In addition, such Purchaser may have received
in writing from the Company such other information concerning its
operations, financial condition and other matters as such Purchaser
has requested, identified thereon as OTHER WRITTEN INFORMATION
(such other information is collectively, the “Other Written
Information”), and considered all factors such
Purchaser deems material in deciding on the advisability of
investing in the Securities.  Such Purchaser was afforded (i)
the opportunity to ask such questions as such Purchaser deemed
necessary of, and to receive answers from, representatives of the
Company concerning the merits and risks of acquiring the
Securities; (ii) the right of access to information about the
Company and its financial condition, results of operations,
business, properties, management and prospects sufficient to enable
such Purchaser to evaluate the Securities; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to acquiring the Securities.

(f) Compliance with Securities Act;
Reliance on Exemptions. Such Purchaser understands and
agrees that the Securities have not been registered under the 1933
Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under
the 1933 Act, and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or
any applicable state securities laws or is exempt from such
registration. Such Purchaser understands and agrees that the
Securities are being offered and sold to such Purchaser in reliance
on specific exemptions from the registration requirements of United
States federal and state securities laws and regulations and that
the Company is relying in part upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such
Purchaser set forth herein in order to determine the availability
of such exemptions and the eligibility of such Purchaser to acquire
the Securities.

(g) Communication of Offer. Such
Purchaser is not purchasing the Securities as a result of any
“general solicitation” or “general
advertising,” as such terms are defined in Regulation D,
which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or on the internet or
broadcast over television, radio or the internet or presented at
any seminar or any other general solicitation or general
advertisement.

(h) No Governmental Review. Such
Purchaser understands that no United States federal or state agency
or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability
of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the Offering.

 

24

 

 

(i) No Conflicts. The execution,
delivery and performance of this Agreement and performance under
the other Transaction Documents and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or
relating hereto or thereto do not and will not (i) result in a
violation of such Purchaser’s charter documents, bylaws or
other organizational documents, if applicable, (ii) conflict with
nor constitute a default (or an event which with notice or lapse of
time or both would become a default) under any agreement to which
such Purchaser is a party, nor (iii) result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to such Purchaser or its
properties (except for such conflicts, defaults and violations as
would not, individually or in the aggregate, have a material
adverse effect on such Purchaser). Such Purchaser is not required
to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations
under this Agreement or perform under the other Transaction
Documents nor to purchase the Securities in accordance with the
terms hereof, provided that for purposes of the representation made
in this sentence, such Purchaser is assuming and relying upon the
accuracy of the relevant representations and agreements of the
Company herein.

(j)           Certain
Transactions and Confidentiality. Other than consummating
the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with Purchaser, executed any
purchases or sales, including Short Sales, of the securities of the
Company during the period commencing as of the time that such
Purchaser first received a written term sheet from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereby and ending
immediately prior to the execution hereof.

(k)           The
sale of Securities does not indicate Purchaser’s investment
decision is shared by other unaffiliated
Purchasers. Because
there may be substantial purchases by Affiliates of the Company, or
other Persons who will receive fees or other compensation or gain
dependent upon the success of the Offering, Purchaser acknowledges
that such Purchaser is not placing any reliance on such sales as an
indication of the merits of the Offering.

 

(l)           Survival.
The foregoing representations and warranties shall survive the
Closing.

The
Company acknowledges and agrees that the representations contained
in Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 

 

ARTICLE
IV.

OTHER
AGREEMENTS OF THE PARTIES

4.1            (a)            Transfer
Restrictions. The Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than: (i) pursuant to an
effective registration statement, (ii) pursuant to Rule 144, (iii)
a transfer to the Company, (iv) a transfer to an Affiliate of a
Purchaser, or (v) in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to
provide to the Company, at the Company’s expense, an opinion
of counsel selected by the transferor and reasonably acceptable to
the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and the Registration Rights Agreement and shall
have the rights and obligations of a Purchaser under this Agreement
and the other Transaction Documents.

 

25

 

 

(b)           Legend.
The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on any of the Securities in the
following form:

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

(c)           Pledge.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
Accredited Investor and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledge or secure
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to a registration rights
agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend
the list of selling stockholders thereunder.

(d)           Legend
Removal. Certificates evidencing the Underlying Shares shall
not contain any legend (“Unlegended
Shares”) (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the effective date of
a registration statement if required by the Transfer Agent to
effect the removal of the legend hereunder. If all or any Notes are
converted or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following such time as such legend
is no longer required under this Section 4.1(d), it will, no later
than five Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such fifth Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and
other legends (however, the Corporation shall use reasonable best
efforts to deliver such shares within three (3) Trading Days). The
Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser.

 

26

 

 

(e)           Legend
Removal Default. In addition to such Purchaser’s other
available remedies, provided the conditions for legend removal set
forth in Section 4.1(d) exist, the Company shall pay to a
Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Underlying Shares (based on the higher
of the actual purchase price or VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(d), $10 per Trading Day for each Trading Day after the Legend
Removal Date (increasing to $20 per Trading Day after the fifth
Trading Day) until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief.

(f)           DWAC.
In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of a Purchaser, so long as the
certificates therefor do not bear a legend and the Purchaser is not
obligated to return such certificate for the placement of a legend
thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the
account of Purchaser’s prime broker with the Depository Trust
Company through its Deposit Withdrawal At Custodian system,
provided that the Company’s Common Stock is DTC eligible and
the Company’s transfer agent participates in the Deposit
Withdrawal at Custodian system. Such delivery must be made on or
before the Legend Removal Date.

(g)           Injunction.
In the event a Purchaser shall request delivery of Unlegended
Shares as described in this Section 4.1 and the Company is required
to deliver such Unlegended Shares, the Company may not refuse to
deliver Unlegended Shares based on any claim that such Purchaser or
anyone associated or affiliated with such Purchaser has not
complied with Purchaser’s obligations under the Transaction
Documents, or for any other reason, unless, an injunction or
temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares shall have been
sought and obtained by the Company and the Company has posted a
surety bond for the benefit of such Purchaser in the amount of the
greater of (i) 120% of the amount of the aggregate purchase price
of the Underlying Shares to be subject to the injunction or
temporary restraining order, or (ii) the VWAP of the Common Stock
on the trading day before the issue date of the injunction
multiplied by the number of Unlegended Shares to be subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent Purchaser obtains
judgment in Purchaser’s favor.

 

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(h)           Buy-In.
In addition to any other rights available to Purchaser,
if the Company fails to deliver to a
Purchaser Unlegended Shares as required pursuant to this Agreement
and after the Legend Removal Date the Purchaser, or a broker on the
Purchaser’s behalf, purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by such Purchaser of the shares of Common Stock which the
Purchaser was entitled to receive in unlegended form from the
Company (a “Buy-In”),
then the Company shall promptly pay in cash to the Purchaser (in
addition to any remedies available to or elected by the Purchaser)
the amount, if any, by which (A) the Purchaser’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate
purchase price of the shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares together with interest
thereon at a rate of 15% per annum accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if a
Purchaser purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase price of Underlying Shares delivered to the Company for
reissuance as Unlegended Shares, the Company shall be required to
pay the Purchaser $1,000, plus interest, if any. The Purchaser
shall provide the Company written notice indicating the amounts
payable to the Purchaser in respect of the
Buy-In.

(i)           Plan
of Distribution. Each Purchaser, severally and not jointly
with the other Purchasers, agrees with the Company that such
Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a
registration statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.

4.2           Acknowledgment
of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain
market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without
limitation, its obligation to issue the Underlying Shares pursuant
to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any
claim the Company may have against any Purchaser and regardless of
the dilutive effect that such issuance may have on the ownership of
the other stockholders of the Company.

4.3            Furnishing
of Information; Public Information.

(a) Until the earliest
of the time that (i) no Purchaser owns Securities or (ii) the
Warrants have expired, the Company covenants to file all periodic
reports with the Commission pursuant to the Exchange Act and
maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act after such time as the Company
initially becomes subject to such requirements and to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act and
timely file all reports that would be required to be filed by an
issuer subject to Section 12(b) or 12(g) of the Exchange Act even
if the Company is not then subject to the reporting requirements of
the Exchange Act.

 

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(b) At any time
commencing on the Closing Date and ending at such time that all of
the Securities may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company
shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash,
as partial liquidated damages and not as a penalty, by reason of
any such delay in or impairment of its ability to sell the
Securities, an amount in cash equal to 2.0% of the aggregate
principal amount of Notes and accrued interest thereon, and
aggregate Exercise Price of Warrant Shares held by such Purchaser
on the day of a Public Information Failure and on every thirtieth
(30th) day (pro-rated for periods totaling less than thirty days)
thereafter until the earlier of (a) the date such Public
Information Failure is cured and (b) such time that such public
information is no longer required for the Purchasers to transfer
the Underlying Shares pursuant to Rule 144. The payments to which a
Purchaser shall be entitled pursuant to this Section 4.3(b) are
referred to herein as “Public Information Failure
Payments.” Public Information Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred
and (ii) the third (3rd) Business Day after the event or failure
giving rise to the Public Information Failure Payments is cured. In
the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Nothing herein
shall limit such Purchaser’s right to pursue actual damages
for the Public Information Failure, and such Purchaser shall have
the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief.

4.4           Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction or to effectuate such other
transaction unless shareholder approval is obtained before the
earlier of the closing of such subsequent transaction or
effectuation of such other transaction.

4.5           Conversion
and Exercise Procedures. Each of the form of Notice of
Exercise included in the Warrants and the form of Notice of
Conversion included in the Notes set forth the totality of the
procedures required of the Purchasers in order to exercise the
Warrants or convert the Notes. No additional legal opinion, other
information or instructions shall be required of the Purchasers to
exercise their Warrants or convert their Notes. The Company shall
honor exercises of the Warrants and conversions of the Notes and
shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.

4.6           Securities
Laws Disclosure; Publicity. The Company shall on or before
the fourth Trading Day following the Closing Date, file a Current
Report on Form 8-K including the Transaction Documents and all of
the documents in connection with the Hang With Transaction as
exhibits thereto with the Commission (“Form 8-K”). A form of the
Form 8-K is annexed hereto as Exhibit F. Such Exhibit F will be identical to
the Form 8-K which will be filed with the Commission except for the
omission of signatures thereto by the Company. From and after the
filing of the Form 8-K, the Company represents to the Purchasers
that it shall have publicly disclosed all material, non-public
information delivered to any of the Purchasers by the Company or
any Subsidiary, or any of their respective officers, directors,
employees or agents in connection with the transactions
contemplated by the Transaction Documents including but not limited
to all of the terms of the Hang With Transaction. The Company and
each Purchaser shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any press release
nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure
is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market unless the name of such
Purchaser is already included in the body of the Transaction
Documents, without the prior written consent of such Purchaser,
except: (a) as required by federal securities law in connection
with the filing of final Transaction Documents with the Commission
and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under
this clause (b). The Company may file a Form 10-Q in lieu of the
Form 8-K provided such filing contains the content required to be
included in the Form 8-K and the Form 10-Q is filed not later than
the Trading Day after the Closing Date.

 

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4.7           Shareholder
Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.

4.8           Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor
any other Person acting on its behalf, will provide any Purchaser
or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement
with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

4.9           Use
of Proceeds. Of the scheduled Closings listed on
Schedule 2.1, a
portion of the gross proceeds of each Closing will be used by the
Company for its purchase of the Series A Convertible Participating
Preferred Stock of Hang With, Inc. for an aggregate purchase price
of up to $750,000 as set forth on Schedule 4.9. The Company will
use the net proceeds of the Closings following an aggregate of
$750,000 of payments to Hang With (up to $865,000 in the aggregate)
for working capital purposes. For the avoidance of doubt, if any of
the Closings by the Purchasers is for a lesser amount than the
Closing amount detailed on Schedule 2.1, the purchase of
the Series A Convertible Participating Preferred Stock of Hang
With, Inc. shall be pro rata as to the amount of the
Closing.

4.10           Indemnification
of Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or
(z) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s
breach of its material representations, warranties or covenants
under the Transaction Documents. The indemnification required by
this Section 4.10 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.

 

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4.11           Reservation
and Listing of Securities.

(a) The Company shall
maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount
as may then be required to fulfill its obligations in full under
the Transaction Documents, but not less than the Required
Minimum.

(b) If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall amend the Company’s
certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event
not later than the 60th day after such
date.

(c) The Company shall
prior to the Closing, if applicable: (i) in the time and manner
required by the principal Trading Market, prepare and file with
such Trading Market an additional shares listing application
covering a number of shares of Common Stock at least equal to the
Required Minimum on the date of such application, (ii) take all
steps necessary to cause such shares of Common Stock to be approved
for listing or quotation on such Trading Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such
listing or quotation and (iv) maintain the listing or quotation of
such Common Stock on any date at least equal to the Required
Minimum on such date on such Trading Market or another Trading
Market. The Company will take all
action necessary to continue the listing or quotation and trading
of its Common Stock on a Trading Market until the later of (i) at
least six (6) years after the Closing Date, and (ii) for so long as
the Notes or Warrants are outstanding, and will comply in all
respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
In the event the aforedescribed listing is not continuously
maintained for six (6) years after the Closing Date and for so long
as Notes or Warrants are outstanding (a “Listing Default”), then
in addition to any other rights the Purchasers may have hereunder
or under applicable law, on the first day of a Listing Default and
on each monthly anniversary of each such Listing Default date (if
the applicable Listing Default shall not have been cured by such
date) until the applicable Listing Default is cured, the Company
shall pay to each Purchaser an amount in cash, as partial
liquidated damages and not as a penalty, equal to 2.0% of the
aggregate Subscription Amount of Notes, conversion price of
Conversion Shares and purchase price of Warrant Shares held by such
Purchaser or which may be acquired upon exercise of Warrants on the
day of a Listing Default and on every thirtieth day (pro-rated for
periods less than thirty days) thereafter until the date such
Listing Default is cured. If the Company fails to pay any
liquidated damages pursuant to this Section in a timely manner, the
Company will pay interest thereon at a rate of 1.5% per month
(pro-rated for partial months) to the Purchaser.

 

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4.12           Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at a
Closing under applicable securities or “Blue Sky” laws
of the states of the United States, and shall provide evidence of
such actions promptly upon request of any Purchaser.

4.13           Subsequent
Equity Sales. From the date hereof until the Notes are no
longer outstanding, the Company will not, without the consent of a
Majority in Interest, enter into any Equity Line of Credit or
similar agreement, issue or agree to issue floating or Variable
Priced Equity Linked Instruments nor issue or agree to issue any of
the foregoing or equity with price reset rights (subject to
adjustment for stock splits, distributions, dividends,
recapitalizations and the like) (collectively, a
“Variable Rate
Transaction”). For purposes hereof,
“Equity Line of
Credit” shall include any transaction involving a
written agreement between the Company and an investor or
underwriter whereby the Company has the right to “put”
its securities to the investor or underwriter over an agreed period
of time and at an agreed price or price formula, and
“Variable Priced
Equity Linked Instruments” shall include: (A) any debt
or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares
of Common Stock or Common Stock Equivalents or any of the foregoing
at a price that can be reduced either (1) at any conversion,
exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for Common Stock at
any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date at any
time after the initial issuance of such debt or equity security due
to a change in the market price of the Company’s Common Stock
since date of initial issuance, or upon the issuance of any debt,
equity or Common Stock Equivalent, and (B) any amortizing
convertible security which amortizes prior to its maturity date,
where the Company is required or has the option to (or any investor
in such transaction has the option to require the Company to) make
such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security (whether or not
such payments in stock are subject to certain equity conditions).
 For purposes of determining the total consideration for a
convertible instrument (including a right to purchase equity of the
Company) issued, subject to an original issue or similar discount
or which principal amount is directly or indirectly increased after
issuance, the consideration will be deemed to be the actual net
cash amount received by the Company in consideration of the
original issuance of such convertible instrument. For so long as
the Notes or Warrants are outstanding, the Company will not,
without the consent of a Majority in Interest, issue any Common
Stock or Common Stock Equivalents to officers, directors, and
employees of the Company unless such issuance is an Exempt Issuance
or in the amounts and on the terms set forth on Schedule 4.13. For so long as
any Notes and Warrants are outstanding, the Company will not amend
the terms of any securities or Common Stock Equivalents or of any
agreement outstanding or in effect as of the date of this Agreement
pursuant to which same were or may be acquired without the consent
of a Majority in Interest, if the result of such amendment would be
at an effective price per share of Common Stock less than the
higher of the Conversion Price or Warrant Exercise Price in effect
at the time of such amendment. Except for Exempt Issuances for so
long as the Notes are outstanding, the Company will not issue any
Common Stock or Common Stock Equivalents, without the consent of a
Majority in Interest. The restrictions and limitations in this
Section 4.13 are in addition to and shall apply whether or not a
Purchaser exercises its rights pursuant to Section 4.17 and Section
4.23.

 

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4.14           Equal
Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of
any provision of any of this Agreement unless the same
consideration is also offered on a ratable basis to all of the
parties to this Agreement. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by
the Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in
concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

4.15           Capital
Changes. Until the one (1) year anniversary of the Closing
Date, the Company shall not undertake a reverse or forward stock
split or reclassification of the Common Stock without ten (10) days
prior written notice to the Purchasers. In no event will the
Company reduce the par value of the Common Stock to an amount less
than the lesser of (i) the Per Share Purchase Price, and (ii) the
then in effect purchase price of a Warrant Share.

4.16           Certain
Transactions and Confidentiality. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on such Purchaser’s behalf or
pursuant to any understanding with such Purchaser will execute any
purchases or sales, including Short Sales, of any of the
Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to a press release or Form 8-K as described in
Section 4.6.  Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to a press release or Form 8-K as described
in Section 4.6, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information
included in the Transaction Documents and the Disclosure Schedules.
Further, each Purchaser severally and not jointly with the other
Purchasers covenants that neither it, nor any of its Affiliates
will engage in any Short Sale transactions at any time while it
beneficially owns any Securities. Notwithstanding the foregoing,
and notwithstanding anything contained in this Agreement to the
contrary, the Company expressly acknowledges and agrees that (i) no
Purchaser makes any representation, warranty or covenant hereby
that it will not engage in effecting transactions in any securities
of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to a press
release or Form 8-K as described in Section 4.6, (ii) no Purchaser
shall be restricted or prohibited from effecting any transactions
in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to a press release or Form 8-K, and (iii) no Purchaser
shall have any duty of confidentiality to the Company or its
Subsidiaries after the filing of the Form 8-K. 
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the covenant set forth
above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement.

 

33

 

 

4.17           Participation
in Future Financing.

(a) From the date
hereof and until the later of (i) eighteen (18) months after the
final Closing Date, or (ii) the Notes are no longer outstanding,
upon any proposed issuance by the Company or any of its
Subsidiaries of Common Stock, Common Stock Equivalents for cash
consideration, Indebtedness or a combination thereof, other than
(i) a rights offering to all holders of Common Stock (which may
include extending such rights offering to holders of Notes), or
(ii) an Exempt Issuance (each a “Subsequent Financing”),
the Purchasers shall have the right to participate in up to an
amount of the Subsequent Financing equal to 100% of the Subsequent
Financing (the “Participation Maximum”)
pro rata to each other in proportion to their Subscription Amounts
on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is an
underwritten public offering, in which case the Company shall
notify each Purchaser of such public offering when it is lawful for
the Company to do so, but no Purchaser shall be entitled to
purchase any particular amount of such public offering without the
approval of the lead underwriter of such underwritten public
offering.

(b) At least ten (10)
Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the
details of such financing (such additional notice, a
“Subsequent
Financing Notice”). Upon the request of a Purchaser,
and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser. The requesting Purchaser shall be deemed
to have acknowledged that the Subsequent Financing Notice may
contain material non-public information. The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of
such Subsequent Financing, the amount of proceeds intended to be
raised thereunder and the Person or Persons through or with whom
such Subsequent Financing is proposed to be effected and shall
include a term sheet or similar document relating thereto as an
attachment.

(c) Any Purchaser
desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York
City time) on the tenth (10th) Trading Day after
all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing,
the amount of such Purchaser’s participation, and
representing and warranting that such Purchaser has such funds
ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice. If the Company receives no such
notice from a Purchaser as of such tenth (10th) Trading Day, such
Purchaser shall be deemed to have notified the Company that it does
not elect to participate.

(d) If by 5:30 p.m.
(New York City time) on the tenth (10th ) Trading Day after
all of the Purchasers have received the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the Subsequent
Financing, then the Company may affect the remaining portion of
such Subsequent Financing on the terms and with the Persons set
forth in the Subsequent Financing Notice and the Purchasers shall
simultaneously affect their portion of such Subsequent Financing as
set forth in their notifications to the Company consistent with the
terms set forth in the Subsequent Financing Notice.

(e) If by 5:30 p.m.
(New York City time) on the fifteenth (15th) Trading Day after
all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to
purchase its Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” means
the ratio of (x) the principal amount of Notes purchased hereunder
by a Purchaser participating under this Section 4.17 and (y) the
sum of the aggregate principal amounts of Notes purchased hereunder
by all Purchasers participating under this Section
4.17.

 

34

 

 

(f) The Company must
provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set
forth above in this Section 4.18, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such
Subsequent Financing Notice within sixty (60) Trading Days after
the date of the initial Subsequent Financing Notice.

(g) The
Company and each Purchaser agree that if any Purchaser elects to
participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or
provision whereby such Purchaser shall be required to agree to any
restrictions on trading as to any of the Securities purchased
hereunder (for avoidance of doubt, the securities purchased in the
Subsequent Financing shall not be considered securities purchased
hereunder) or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or
in connection with, this Agreement, without the prior written
consent of such Purchaser.

(h) Notwithstanding anything to the contrary in this
Section 4.17 and unless otherwise agreed to by such Purchaser, the
Company shall either confirm in writing to such Purchaser that the
transaction with respect to the Subsequent Financing has been
abandoned or shall publicly disclose its intention to issue the
securities in the Subsequent Financing, in either case in such a
manner such that such Purchaser will not be in possession of any
material, non-public information, by the seventeenth
(17th)
Business Day following delivery of the Subsequent Financing Notice.
If by such seventeenth (17th)
Business Day, no public disclosure regarding a transaction with
respect to the Subsequent Financing has been made, and no notice
regarding the abandonment of such transaction has been received by
such Purchaser, such transaction shall be deemed to have been
abandoned and such Purchaser shall not be deemed to be in
possession of any material, non-public information with respect to
the Company or any of its Subsidiaries.

 

4.18           Purchaser’s
Exercise Limitations. The Company shall not effect exercise
of the rights granted in Sections 4.17 and 4.23 of this Agreement,
and a Purchaser shall not have the right to exercise any portion of
such rights granted in Sections 4.17 and 4.23 only to the extent
that after giving effect to such exercise, the Purchaser, would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined in the Note), applied in the manner set forth in the
Note. In such event the right by Purchaser to benefit from such
rights or receive shares in excess of the Beneficial Ownership
Limitation shall be held in abeyance until such times as such
excess shares shall not exceed the Beneficial Ownership Limitation,
provided the Purchaser complies with the Purchaser’s other
obligations in connection with the exercise by Purchaser of its
rights pursuant to Sections 4.17 and 4.23.

4.19           Maintenance
of Property. The Company shall and cause each Subsidiary to
keep all of its property, which is necessary or useful to the
conduct of its business, in good working order and condition,
ordinary wear and tear excepted.

4.20           Preservation
of Corporate Existence. The Company shall preserve and
maintain its corporate existence, rights, privileges and franchises
in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which
such qualification is necessary in view of its business or
operations and where the failure to qualify or remain qualified
might reasonably have a Material Adverse Effect upon the financial
condition, business or operations of the Company taken as a
whole.

4.21           DTC
Program. At all times that
Notes or Warrants are outstanding, the Company shall employ as the
transfer agent for its Common Stock and Underlying Shares a
participant in the Depository Trust Company Automated Securities
Transfer Program and cause the Common Stock and Underlying Shares
to be transferable pursuant to such program.

 

35

 

 

 

4.22           Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding
by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such
action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any
such Affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf
of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

 

4.23           Most
Favored Nation Provision. From the date hereof and for so
long as a Purchaser holds any Securities, in the event that the
Company issues or sells any Common Stock or Common Stock
Equivalents, if a Purchaser then holding outstanding Securities
reasonably believes that any of the terms and conditions
appurtenant to such issuance or sale are more favorable to such
investors than are the terms and conditions granted to the
Purchasers hereunder, upon notice to the Company by such Purchaser
within five (5) Trading Days after disclosure of such issuance or
sale, the Company shall amend the terms of this transaction as to
such Purchaser only so as to give such Purchaser the benefit of
such more favorable terms or conditions. This Section 4.23 shall
not apply with respect to an Exempt Issuance. The Company shall
provide each Purchaser with notice of any such issuance or sale not
later than ten (10) Trading Days before such issuance or
sale.

 

4.24           Indebtedness.
For so long as a majority in original principal amount of the Notes
is outstanding, the Company will not incur any Indebtedness other
than Permitted Indebtedness, without the consent of the Majority in
Interest.

 

4.25           Further
Registration Statements. From the date hereof until
twenty-four (24) months after the final Closing Date, the Company
will not, without the consent of a Majority in Interest, file with
the Commission or with state regulatory authorities any
registration statements, shares reserved for outside securities
counsel, or amend any already filed registration statement to
increase the amount of Common Stock registered therein, or reduce
the price of which such company securities are registered therein,
until the expiration of the “Exclusion Period,” which
shall be defined as the sooner of (i) the date all the Underlying
Shares have been registered in an effective registration statement
that has been effective for not less than six months, or (ii) until
all the Underlying Shares may be resold by the Subscribers pursuant
to a registration statement or Rule 144b(l)(i), with regard to
volume limitations for a period of not less than six months. The
Exclusion Period will be tolled or reinstated, as the case may be,
during the pendency of an Event of Default as defined in the
Note.

 

4.26           Notice
of Disqualification Events. The Company will notify the
Purchasers in writing, prior to the Closing Date of (i) any
Disqualification Event relating to any Issuer Covered Person and
(ii) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered Person not
otherwise disclosed herein or in the SEC Reports.

 

4.27           Duration
of Undertakings. Unless otherwise stated in this Article IV,
all of the Company’s undertakings, obligations and
responsibilities set forth in Article IV of this Agreement shall
remain in effect for so long as any Securities remain
outstanding.

 

 

36

 

 

4.28           Consent
to Offering and Waiver of Rights. Solely in connection with
this Offering, Alpha Capital Anstalt and Palladium Capital Advisors
LLC each consents to this Offering, waives the prohibitions against
the Company contained in Section 4.13 of the Securities Purchase
Agreement, the rights and protections granted to each of Alpha
Capital Anstalt and Palladium Capital Advisors LLC pursuant to
Section 4.21 of the Securities Purchase Agreement, Section 5(e) of
the Notes and Section 3 of the Warrants, each dated August 5, 2015,
January 27, 2016 and March 8, 2016, respectively, and the rights
and protections granted to each of Alpha Capital Anstalt and
Palladium Capital Advisors LLC pursuant to Section 5(e) of the
Notes as amended pursuant to Allonges and Section 3 of the Warrants
each dated May 17, 2016, May 22, 2016, June 3, 2016, June 16, 2016,
July 8, 2016, August 14, 2016, August 15, 2016 and September 12,
2016.

 

4.29           Consummation
of Hang With Transaction. The Company undertakes to
consummate the Hang With Transaction, the terms of which, including
but not limited to those terms set forth on Schedule 4.9, may not be
modified or amended without the consent of a Majority in Interest
of the Purchasers. The Company further undertakes to enforce all of
its rights and to timely comply with its obligations and
responsibilities in connection with the Hang With Transaction and
as further described on Schedule 4.9.

 

4.30           Acknowledgement
by Company of Purchaser’s Inducement. The Company
acknowledges that, as to the first three Closings, the inducement
for Purchasers is the timely consummation by the Company of the
Hang With Transaction as further set forth on Schedule 4.9.

 

 

ARTICLE
V.

MISCELLANEOUS

5.1 Termination.  This
Agreement may be terminated by any Purchaser only, as to such
Purchaser’s obligations hereunder and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice given at any time to the Company and
Escrow Agent at any time until such Purchaser’s Subscription
Amount has been released from escrow to or for the benefit of the
Company or returned to such Purchaser; provided, however, that such termination
will not affect the right of any party to sue for any breach by any
other party (or parties). Until the Escrow Agent actually releases
a Purchaser’s Subscription Amount in connection with a
Closing, each Purchaser has the absolute right to demand back and
receive from the Escrow Agent such Purchaser’s Subscription
Amount.

5.2 Fees and Expenses. Of the
scheduled Closings listed on Schedule 2.1, a portion of the
gross proceeds of each Closing will be used by the Company to pay
G&M for the legal fees in connection with G&M’s
representation of Alpha Capital Anstalt (and no other Purchasers
except pursuant to the Escrow Agreement) in the aggregate amount of
$25,000 as set forth on Schedule 5.2. Except as
expressly set forth in the Transaction Documents and on
Schedule 3.1(s),
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or
exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any
Securities to the Purchasers. The Company shall be responsible for
all wire fees incurred by the Escrow Agent for the receipt and
disbursement of Subscription Amounts. Such fees may be disbursed by
the Escrow Agent from any funds deliverable to or for the benefit
of the Company. All of the Purchasers acknowledge that they have
been advised to seek the advice of their own
attorneys.

 

37

 

 

5.3 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.

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

5.5 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchasers holding at least a
majority in interest of the Securities then outstanding (the
“Majority in
Interest”), or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought.
Whenever the term “consent of the Purchasers” or a
similar term is employed herein, it shall mean the consent of a
Majority in Interest. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right.

5.6 Headings. The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

5.7 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by
merger). Following a Closing, any Purchaser may assign any or all
of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”

 

38

 

 

5.8 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, except as otherwise set forth in Section
4.10.

5.9 Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
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. If either party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company under Section 4.10, the prevailing party in such action,
suit or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.

5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.

5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.

5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

39

 

 

5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may, at any time prior to the Company’s performance
of such obligations, rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to
its future actions and rights; provided, however, that in the case of a
rescission of a conversion of a Note or exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded conversion or exercise
notice concurrently with the return to such Purchaser of the
aggregate Exercise Price paid to the Company for such shares and
the restoration of such Purchaser’s right to acquire such
shares pursuant to such Purchaser’s Warrant (including,
issuance of a replacement warrant certificate evidencing such
restored right).

5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.

5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

5.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under applicable law (the
“Maximum
Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest
that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the
Closing Date thereof forward, unless such application is precluded
by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to
the Company, the manner of handling such excess to be at such
Purchaser’s election.

 

40

 

 

5.18 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to
communicate with the Company through G&M. The Company has
elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by any of the
Purchasers. It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not
between the Company and the Purchasers collectively and not between
and among the Purchasers.

5.19 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.

5.20 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.

5.21 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.

5.22 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

 

41

 

 

5.23 Equitable
Adjustment. Trading volume amounts, price/volume amounts,
the amount of Warrants, the amount of shares of Common Stock
identified in this Agreement, Conversion Price, Exercise Price,
Underlying Shares and similar figures in the Transaction Documents
shall be equitably adjusted (but without duplication) to offset the
effect of stock splits, similar events and as otherwise described
in this Agreement, Note and Warrants.

 

(Signature Pages Follow)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.

	

FRIENDABLE, INC.

 

 

	

Address for Notice:

 

125
East Campbell Avenue

Campbell,
CA 95008

Fax:
(408) 547-0110

	

By:

/s/Robert
Rositano__________________________________________

    Name:
Robert A. Rositano, Jr.

   Title: Chief Executive Officer

 

	
 

	

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

 

Lucosky
Brookman LLP

101
Wood Avenue South

Woodbridge,
NJ 08830

Attn:
Steven A. Lipstein, Esq.

Fax:
(732) 395-4401

	
 

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR
PURCHASER FOLLOWS]

 

 

 

 

 

 

 

 

 

 

 

43

 

 

[PURCHASER
SIGNATURE PAGE TO FRIENDABLE, INC.

SECURITIES PURCHASE
AGREEMENT]

 

IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.

Name of
Purchaser:
________________________________________________________

 

Signature of Authorized Signatory of
Purchaser: __________________________________

 

Name of
Authorized Signatory:
____________________________________________________

 

Title
of Authorized Signatory:
_____________________________________________________

 

Email
Address of Authorized Signatory:
_____________________________________________

 

Facsimile Number of
Authorized Signatory:
__________________________________________

 

State
of Residence of Purchaser:
_________________________________________________

 

Address
for Notice to Purchaser:

 

 

 

Address
for Delivery of Securities to Purchaser (if not same as address for
notice):

 

 

 

Subscription
Amount: US$________________

 

Note
principal amount: ___________________

 

Warrants:
___________________

 

EIN
Number, if applicable, will be provided under separate cover:
________________________

 

Date:
___________________________

 

 

 

[SIGNATURE
PAGES CONTINUE]

 

 

44

 

 

EXHIBITS AND SCHEDULES

 

	

Exhibit A

	

Form of Note

	

Exhibit B

	

Form of Warrant

	

Exhibit C

	

Escrow Agreement

	

Exhibit D

	

Form of Legal Opinion

	

Exhibit E

	

Form of Investor Questionnaire and

	
 

	

Rule 506 Bad Actor Disqualification Questionnaire

	

Exhibit F

	

Form of Form 8-K

	

Exhibit G

	

Term Sheet in connection with Hang With Transaction

	

Exhibit H

	

Hang With Agreements

 

Schedule
2.1

Schedule
2.2(a)(vii)

Schedule
3.1(a)

Schedule
3.1(g)

Schedule
3.1(i)

Schedule
3.1(s)

Schedule
3.1(u)

Schedule
3.1(y)

Schedule
3.1(z)

Schedule
3.1(cc)

Schedule
3.1(ll)

Schedule
3.1(rr)

Schedule
4.9

Schedule
4.13

Schedule
5.2

 

Exhibits and
Schedules Index

 

 

 

FRIENDABLE, INC. DISCLOSURE SCHEDULES

 

 

These
Disclosure Schedule are made and given pursuant to Section 3.1 of
the Securities Purchase Agreement, dated as
of September 30, 2016 (the “Agreement”), between
Friendable, Inc., a Nevada corporation (the
“Company”) and the Purchasers listed thereto. All
capitalized terms used but not defined herein shall have
the meanings as defined in the Agreement, unless otherwise
provided. The section numbers below
correspond to the section numbers of the representations and
warranties in the Agreement.

 

Nothing
in this Disclosure Schedule is intended to broaden the scope of any
representation or warranty contained in the
Agreement or to create any covenant. Inclusion of any item in this
Disclosure Schedule (1) does not
represent a determination that such item is material or establish a
standard of materiality, (2) does not represent
a determination that such item did not arise in the ordinary course
of business, (3) does not represent a
determination that the transactions contemplated by the Agreement
require the consent of third parties, and
(4) shall not constitute, or deemed to be, an admission to any
third party concerning such item. This
Disclosure Schedule may include brief descriptions or summaries of
certain agreements and instruments,
copies of which are available upon reasonable request.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE 2.1

 

 

$1,615,000
to be funded as follows:

 

$465,000.00
on the initial Closing Date

 

$375,000.00
on November 3, 2016

 

$375,000.00
on December 5, 2016

 

$375,000.00
on January 4, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule
2.1

 

 

SCHEDULE 2.2(a)(vii)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 2.2(a)(viii)

 

 

SCHEDULE 3.1(a)

 

iHoopkup
Social, Inc., a Delaware corporation, is a wholly owned subsidiary
of the Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(a)

 

 

SCHEDULE 3.1(g)

 

See
attached.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(g)

 

 

Schedule 3.1(g)

Capitalization

 

As of September 29, 2016 the Company's capitalization is as
follows:

 

	

Common
Stock

	
 
 

 

	
 

	
 

	
 
 

 

	
 

	

Total:

	
  775,541,236 

	
 

	
 

	
    

	
 

	

Preferred Stock 1

	
    

	
 

	
Copper
Creek

	
  15,581 

	
 

	
Robert
Rositano Jr

	
  2,256 

	
 

	
Dean
Rositano

	
  2,256 

	
 

	
Checkmate
Mobile, Inc.

	
  503 

	
 

	
Frank
Garcia

	
  750 

	
 

	
Integrity

	
  275 

	
 

	
Olvia
Santiago

	
  150 

	
 

	

Total:

	
  21,771

	
 b)

 

	

Warrants to purchase
common stock

	
 
 

 

	
Coventry
Enterprises

	
  51,000,000 

	
  a),
2 

	
Alpha
Capital

	
  500,205,128 

	
  4
 

	
Palladium

	
  5,130,629 

	
  4
 

	

Total:

	
  556,335,757 

	
    

 

	

Convertible Notes

	
 
 

 

	
 
 

 

	
Coventry
Enterprises

	
  2,094,299 

	
  3
 

	
Alpha
Capital

	
  1,930,000 

	
  4
 

	
Palladium

	
  60,500 

	
  4
 

	
EMA

	
  106,500 

	
  5
 

	

Total:

	
  4,191,299 

	
    

 

a)
Common Stock Purchase Warrant (the “Warrant”) which
entitles Coventry to subscribe for and purchase from the
Company, up to
15,000,000 shares of common stock of the Company at exercise prices
between $0.003 and $0.05 for a period of five
years. The exercise price is subject to adjustments as provided in
the Warrant. Under certain circumstances, the
Holder is also permitted a cashless exercise.

 

b) The
Series A Preferred Stock is convertible into nine (9) times the
number of common stock outstanding until the closing of a
Qualified Financing (i.e. the sale and issuance of the
Company’s equity securities that results in gross
proceeds in excess
of $2,500,000). The number of shares of common stock issued on
conversion of preferred stock is based on the ratio
of the number of shares of preferred stock converted to the total
number of shares of preferred stock outstanding
at the date of conversion multiplied by nine (9) times the number
of common stock outstanding at the date of
conversion.

 

Schedule 3.1(h)

 

SEC Reports; Financial Statements

[1]  Please see Annex A
of the Company’s Definitive Schedule 14C filed on April 30,
2014.

 

[2]  Please see the Company’s Form 10Q Quarterly
Report for the periods ended March 31, 2015, June 30, 2015,
September 30, 2015 and March 31,
2016.

 

[3]  Please see the Company’s Form 10Q Quarterly
Report for the period ended March 31, 2015, and Form 8K’s
filed on January 22, 2015, March 6, 2015,
March 27, 2015, April 3, 2015, June 9, 2015, June 26, 2015, August
11, 2015, May 13, 2016, June 3, 2016, June 23, 2016,
July
13, 2016, August 10, 2016, August 25, 2016, and September 16,
2016.

 

[4]  Please see the Company’s Form 8K's filed on
August 11, 2015, July 13, 2016, August 10, 2016, August 25, 2016,
and September 16, 2016 and Form 8K(A)
filed on September 1, 2015.

 

[5]   Please see the Company’s Form 8K filed
on April 22, 2016.

 

 Schedule
3.1(g)

 

 

SCHEDULE 3.1(i)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule
3.1(i)

 

 

SCHEDULE 3.1(s)

 

The
Company is obligated to pay Palladium Capital Advisors, LLC upon
each Closing the following compensation:

 

$
amount divided by conversion price x4%

 

First
Closing $360,000 divided by .0025 x4%= 5,760,000
shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(s)

 

 

SCHEDULE 3.1(u)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(u)

 

 

SCHEDULE
3.1(y)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(y)

 

 

SCHEDULE 3.1(z)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(z)

 

 

SCHEDULE 3.1(cc)

 

Manning
Elliot LLP

Ryan
Ayre, CPA, CA, CPA (Washington)

Partner

Phone:
604-714-3672

Fax:
604-714-3669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(cc)

 

 

SCHEDULE 3.1(ll)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(ll)

 

 

SCHEDULE 3.1(rr)

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 3.1(rr)

 

 

SCHEDULE 4.9

 

$750,000
to be funded to Hang With as follows:

 

$225,000
on the initial Closing Date payment out of gross Subscription
Amount of $465,000

 

$175,000
following the November 2016 payment out of gross Subscription
Amount of $375,000

 

$175,000
following the December 2016 payment out of gross Subscription
Amount of $375,000

 

$175,000
following the January 2017 payment out of gross Subscription Amount
of $375,000

 

The
Company will use the net proceeds of the Closings following an
aggregate of $750,000 of payments to Hang With (up to $865,000 in
the aggregate) for working capital purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule
4.9

 

 

SCHEDULE 4.13

 

On
November 22, 2011, the Board of Directors of Titan Iron Ore Corp.
(see Note 1) approved a stock option plan (“2011
Stock Option Plan”), the purpose of which is to
enhance the Company’s stockholder value and financial
performance by
attracting, retaining and motivating the Company’s officers,
directors, key employees, consultants and its affiliates
and to encourage stock ownership by such individuals by providing
them with a means to acquire a proprietary
interest in the Company’s success through stock ownership.
Under the 2011 Stock Option Plan, officers, directors,
employees and consultants who provide services to the Company may
be granted options to acquire common shares of
the Company. The aggregate number of options authorized by the plan
shall not exceed 4,974 common shares of
the Company.

 

The
following table summarizes the options outstanding and exercisable
under the 2011 Stock Option Plan as of December 31,
2015:

 

	
 

	
 
Option
Price

 

	
 
 

 

	
Expiry
Date

	
 

Per Share

 

	
 

Number

 

	
December 21, 2021

	
  1,680 

	
  1,725 

	
June
21, 2022

	
  400 

	
  500 

	
June
25, 2023

	
  134 

	
  850 

	
 

	
 $1,044 

	
  3,075 

 

The
Board of Directors and the stockholders holding a majority of the
voting power approved a 2014 Equity Incentive Plan (the
“2014
Plan”) on February 28, 2014, with a to be determined
effective date. The purpose of the 2014 Plan is to
assist the Company and its affiliates in attracting, retaining and
providing incentives to employees, directors,
consultants and independent contractors who serve the Company and
its affiliates by offering them the opportunity to
acquire or increase their proprietary interest in the Company and
to promote the identification of their interests with
those of the stockholders of the Company. The 2014 Plan will also
be used to make grants to further reward and
incentivize current employees and others.

 

There
are 120,679 shares of common stock reserved for issuance under the
2014 Plan. The Board shall have the power and authority
to make grants of stock options to employees, directors,
consultants and independent contractors who
serve the Company and its affiliates. Any stock options granted
under the 2014 Plan shall have an exercise price
equal to or greater than the fair market value of the
Company’s shares of common stock. Unless otherwise
determined by the Board of Directors, stock options shall vest over
a four year period with 25% being vested after the
end of one (1) year of service and the remainder vesting equally
over a 36 month period. The Board may award options
that may vest based upon the achievement of certain performance
milestones. As of December 31, 2015, no
options have been awarded under the 2014 Plan.

 

 

 

 

 

 

 

 

 

Schedule 4.13

 

 

The following table summarizes the Company’s stock options
outstanding and exercisable:

 

	
 

	
 

Number of Options

 

	
 

Weighted Average Exercise Price

$

 

	
 

Weighted-Average Remaining Contractual Term (years)

 

	
 

Aggregate Intrinsic Value

$

 

	
Stock
options of the Company outstanding and exercisable at the
Merger

	
  3,075 

	
  1,044 

	
  7.57 

	
  - 

	
Outstanding,
December 31, 2015 and 2014

	
  3,075 

	
  1,044 

	
  7.57 

	
  - 

	
Exercisable,
December 31, 2015 and 2014

	
  3,075 

	
  1,044 

	
  7.57 

	
  - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 4.13

 

 

SCHEDULE 5.2

 

$25,000
to be funded as follows:

 

$10,000
following the initial Closing Date payment of $465,000

 

$5,000
following the November 2016 payment of $375,000

 

$5,000
following the December 2016 payment of $375,000

 

$5,000
following the January 2017 payment of $375,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule
5.2

 

 

EXHIBIT E

 

ACCREDITED INVESTOR QUESTIONNAIRE

IN CONNECTION WITH INVESTMENT IN CONVERTIBLE NOTE

FRIENDABLE, INC.,

A NEVADA CORPORATION

PURSUANT TO SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER ___,
2016

 

 

TO :

Palladium Capital
Advisors LLC

 

10
Rockefeller Plaza, Suite 909 

 

New
York, NY 10020

INSTRUCTIONS

PLEASE
ANSWER ALL QUESTIONS. If the appropriate answer is
“None” or “Not Applicable”, so state.
Please print or type your answers to all questions. Attach
additional sheets if necessary to complete your answers to any
item.

Your
answers will be kept strictly confidential at all times. However,
Palladium Capital Advisors LLC (the “Company”) may
present this Questionnaire to such parties as it deems appropriate
in order to assure itself that the offer and sale of securities of
the Company will not result in a violation of the registration
provisions of the Securities Act of 1933, as amended, or a
violation of the securities laws of any state.

1.            Please
provide the following information:

Name:
_______________________________________________________________________________________________________________________

Name of
additional purchaser:
____________________________________________________________________________________________________

 (Please complete
information in Question 5)

 

Date of
birth, or if other than an individual, year of organization or
incorporation:

 

_____________________________________________________________________________________________________________________________

 

______________________________________________________________________________________________________________________________

2.            Residence
address, or if other than an individual, principal office
address:

 

_____________________________________________________________________________________________________________________________

 

_____________________________________________________________________________________________________________________________

 

_____________________________________________________________________________________________________________________________

Telephone
number:  
_____________________________________________________________________________________________________________

Social
Security Number:
_________________________________________________________________________________________________________ 

 

Exhibit E

 

Taxpayer
Identification Number:
___________________________________________________________________________________________________

3.          
Business address:
_____________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________

Business telephone
number:
_______________________________________________________________________________________________________

4.          
Send mail
to:                                            Residence
______                                                       Business
_______

5.            With
respect to tenants in common, joint tenants and tenants by the
entirety, complete only if information differs from that
above:

Residence address:
______________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________

Telephone number:
_______________________________________________________________________________________________________________

Social
Security Number:
__________________________________________________________________________________________________________

Taxpayer
Identification Number:
____________________________________________________________________________________________________

Business address:
________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________

Business telephone
number:
________________________________________________________________________________________________________

Send
Mail
to:                                            Residence
_______                                                       Business
_______

6.            Please
describe your present or most recent business or occupation and
indicate such information as the nature of your employment, how
long you have been employed there, the principal business of your
employer, the principal activities under your management or
supervision and the scope (e.g. dollar volume, industry rank, etc.)
of such activities:

_______________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________

 

Exhibit E

 

7.            Please
state whether you (i) are associated with or affiliated with a
member of the Financial Industry Regulatory Association, Inc.
(“FINRA”), (ii) are an owner of stock or other
securities of FINRA member (other than stock or other securities
purchased on the open market), or (iii) have made a subordinated
loan to any FINRA member:

 

	
_______

	
_______

	
Yes

	
No

If you
answered yes to any of (i) – (iii) above, please indicate the
applicable answer and briefly describe the facts
below:

 

______________________________________________________________________________________________________________________________

 

______________________________________________________________________________________________________________________________

 

______________________________________________________________________________________________________________________________

8A.            Applicable
to Individuals ONLY. Please answer the following questions
concerning your financial condition as an Accredited Investor
(within the meaning of Rule 501 of Regulation D). If the purchaser
is more than one individual, each individual must initial an answer
where the question indicates a “yes” or
“no” response and must answer any other question fully,
indicating to which individual such answer applies. If the
purchaser is purchasing jointly with his or her spouse, one answer
may be indicated for the couple as a whole:

 

8.1            Does
your net worth* (or joint net worth with your spouse) exceed
$1,000,000?

 

	
_______

	
_______

	
Yes

	
No

8.2            Did
you have an individual income** in excess of $200,000 or joint
income together with your spouse in excess of $300,000 in each of
the two most recent years and do you reasonably expect to reach the
same income level in the current year?

 

	
_______

	
_______

	
Yes

	
No

8.3            Are
you an executive officer of the Company?

 

	
_______

	
_______

	
Yes

	
No

* For
purposes hereof, net worth shall be deemed to include ALL of your
assets, liquid or illiquid MINUS any liabilities.

** For
purposes hereof, the term “income” is not limited to
“adjusted gross income” as that term is defined for
federal income tax purposes, but rather includes certain items of
income which are deducted in computing “adjusted gross
income”. For investors who are salaried employees, the gross
salary of such investor, minus any significant expenses personally
incurred by such investor in connection with earning the salary,
plus any income from any other source including unearned income, is
a fair measure of “income” for purposes hereof. For
investors who are self-employed, “income” is generally
construed to mean total revenues received during the calendar year
minus significant expenses incurred in connection with earning such
revenues.

 

Exhibit E

 

8.B            Applicable
to Corporations, Partnerships, Trusts, Limited Liability Companies
and other Entities ONLY:

The
purchaser is an Accredited Investor because the purchaser falls
within at least one of the following categories (Check all
appropriate lines):

___ (i) a bank
as defined in Section 3(a)(2) of the Act or a savings and loan
association or other institution as defined in Section 3(a)(5)(A)
of the Act whether acting in its individual or fiduciary
capacity;

___ (ii) a
broker-dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended;

___ (iii) an
insurance company as defined in Section 2(13) of the
Act;

___ (iv) an
investment company registered under the Investment Company Act of
1940, as amended (the “Investment Act”) or a business
development company as defined in Section 2(a)(48) of the
Investment Act;

___ (v) a
Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended;

___ (vi) a
plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, where
such plan has total assets in excess of $5,000,000;

___ (vii) an
employee benefit plan within the meaning of Title 1 of the Employee
Retirement Income Security Act of 1974, as amended (the
“Employee Act”), where the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of the Employee
Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or an employee
benefit plan that has total assets in excess of $5,000,000, or a
self-directed plan the investment decisions of which are made
solely by persons that are Accredited Investors;

___ (viii) a
private business development company, as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as
amended;

___  (ix) an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, a Massachusetts or similar business trust, or
a partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000;

___ (x) a
trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a “sophisticated” person, as
described in Rule 506(b)(2)(ii) promulgated under the Act, who has
such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of the
prospective investment;

 

Exhibit E

 

___ (xi) an
entity in which all of the equity investors are persons or entities
described above (“Accredited Investors”). ALL EQUITY
OWNERS MUST COMPLETE “EXHIBIT A” ATTACHED
HERETO.

9.A            Do
you have sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and
risks associated with investing in the Company?

	
_______

	
_______

	
Yes

	
No

ANSWER
QUESTION 9B ONLY IF THE ANSWER TO QUESTION 9A WAS
“NO.”

9.B            If
the answer to Question 9A was “NO,” do you have a
financial or investment adviser (a) that is acting in the capacity
as a purchaser representative and (b) who has sufficient knowledge
and experience in financial and business matters so as to be
capable of evaluating the merits and risks associated with
investing in the Company?

 

	
_______

	
_______

	
Yes

	
No

If you
have a financial or investment adviser(s), please identify each
such person and indicate his or her business address and telephone
number in the space below. (Each such person must complete, and you
must review and acknowledge, a separate Purchaser Representative
Questionnaire which will be supplied at your request).

 

__________________________________________________________________________________________________________________________________

 

__________________________________________________________________________________________________________________________________

10.            You
have the right, will be afforded an opportunity, and are encouraged
to investigate the Company and review relevant factors and
documents pertaining to the officers of the Company, and the
Company and its business and to ask questions of a qualified
representative of the Company regarding this investment and the
properties, operations, and methods of doing business of the
Company.

Have
you or has your purchaser representative, if any, conducted any
such investigation, sought such documents or asked questions of a
qualified representative of the Company regarding this investment
and the properties, operations, and methods of doing business of
the Company?

	
_______

	
_______

	
Yes

	
No

If so,
briefly describe:
________________________________________________________________________________________________________________
          

 

__________________________________________________________________________________________________________________________________

If so,
have you completed your investigation and/or received satisfactory
answers to your questions?

	
_______

	
_______

	
Yes

	
No

11.            Do
you understand the nature of an investment in the Company and the
risks associated with such an investment?

 

Exhibit E

 

 

 

	
_______

	
_______

	
Yes

	
No

12.            Do
you understand that there is no guarantee of any financial return
on this investment and that you will be exposed to the risk of
losing your entire investment?

 

	
_______

	
_______

	
Yes

	
No

13.            Do
you understand that this investment is not liquid?

 

	
_______

	
_______

	
Yes

	
No

14.            Do
you have adequate means of providing for your current needs and
personal contingencies in view of the fact that this is not a
liquid investment?

 

	
_______

	
_______

	
Yes

	
No

15.            Are
you aware of the Company’s business affairs and financial
condition, and have you acquired all such information about the
Company as you deem necessary and appropriate to enable you to
reach an informed and knowledgeable decision to acquire the
Interests?  

	
_______

	
_______

	
Yes

	
No

16.            Do
you have a “pre-existing relationship” with the Company
or any of the officers of the Company?

	
_______

	
_______

	
Yes

	
No

(For purposes
hereof, “pre-existing relationship” means any
relationship consisting of personal or business contacts of a
nature and duration such as would enable a reasonably prudent
investor to be aware of the character, business acumen, and general
business and financial circumstances of the person with whom such
relationship exists.)

If so,
please name the individual or other person with whom you have a
pre-existing relationship and describe the
relationship:

________________________________________________________________________________________________________________________________

________________________________________________________________________________________________________________________________

 

Exhibit E

 

17.      
Exceptions to the representations and warranties made in Section
3.2 of the Securities Purchase Agreement (if no exceptions, write
“none” – if left blank, the response will be
deemed to be “none”):
___________________________________________________

___________________________________________________________________________________________________________________________

Dated:
__________________, 2016

If
purchaser is one or more individuals (all individuals must
sign):

________________________________________________________________________________________________________________________________

(Type
or print name of prospective purchaser)

 

________________________________________________________________________________________________________________________________

Signature of
prospective purchaser

 

________________________________________________________________________________________________________________________________

Social
Security Number

 

________________________________________________________________________________________________________________________________

(Type
or print name of additional purchaser)

 

________________________________________________________________________________________________________________________________

Signature of
spouse, joint tenant, tenant in common or other signature, if
required

 

________________________________________________________________________________________________________________________________

Social
Security Number

 

 Exhibit E

 

 

Annex A

Definition
of Accredited Investor

The
securities will only be sold to investors who represent in writing
in the Securities Purchase Agreement that they are Accredited
Investors, as defined in Regulation D, Rule 501 under the Act which
definition is set forth below:

1.            A
natural person whose net worth, or joint net worth with spouse, at
the time of purchase exceeds $1 million (excluding home);
or

2.            A
natural person whose individual gross income exceeded $200,000 or
whose joint income with that person’s spouse exceeded
$300,000 in each of the last two years, and who reasonably expects
to exceed such income level in the current year; or

3.            A
trust with total assets in excess of $5 million, not formed for the
specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person described in
Regulation D; or

4.            A
director or executive officer of the Company; or

5.            The
investor is an entity, all of the owners of which are Accredited
Investors; or

6.            (a)
bank as defined in Section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in Section
3(a)(5)(A) of the Act, (b) any broker or dealer registered pursuant
to Section 15 of the Securities Exchange Act of 1934, (c) an
insurance Company as defined in Section 2(13) of the Act, (d) an
investment Company registered under the Investment Company Act of
1940 or a business development Company as defined in Section
2(a)(48) of such Act, (e) a Small Business Investment Company
licensed by the United States Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958,
(f) an employee benefit plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, if such plan has total assets
in excess of $5 million, (g) an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Securities Act
of 1974, and the employee benefit plan has assets in excess of $5
million, or the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, that is either a bank,
savings and loan institution, insurance Company, or registered
investment advisor, or, if a self-directed plan, with an investment
decisions made solely by persons that are Accredited Investors, (h)
a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, or (i) an
organization described in Section 501(c)(3) of the Internal Revenue
code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with assets in excess of $5
million.

 

 

 

 Exhibit
E

 

EXHIBIT
“A” TO ACCREDITED INVESTOR QUESTIONNAIRE

 

ACCREDITED
CORPORATIONS, PARTNERSHIPS, LIMITED LIABILITY COMPANIES, TRUSTS OR
OTHER ENTITIES INITIALING QUESTION 8B(xi) MUST PROVIDE THE
FOLLOWING INFORMATION.

I
hereby certify that set forth below is a complete list of all
equity owners in __________________ [NAME OF ENTITY], a
  [TYPE OF
ENTITY] formed pursuant to the laws of the State of . I also certify that
EACH SUCH OWNER HAS
INITIALED THE SPACE OPPOSITE HIS OR HER NAME and that each
such owner understands that by initialing that space he or she is
representing that he or she is an accredited individual investor
satisfying the test for accredited individual investors indicated
under “Type of Accredited Investor.”

	
 

	
 

	
 

	
signature
of authorized corporate officer, general partner or
trustee

Name of Equity
Owner                                                                           Type
of Accredited Investor1

 

1.
________________________________________________________________________________________________________________________________

2.
________________________________________________________________________________________________________________________________

3.
________________________________________________________________________________________________________________________________

4.
________________________________________________________________________________________________________________________________

5.
________________________________________________________________________________________________________________________________

6.
________________________________________________________________________________________________________________________________

7.
________________________________________________________________________________________________________________________________

8.
________________________________________________________________________________________________________________________________

9.
________________________________________________________________________________________________________________________________

10.
_______________________________________________________________________________________________________________________________

 

 

1            Indicate
which Subparagraph of 8.1 - 8.3 the equity owner
satisfies.

 

  Exhibit E

 

 

RULE 506 BAD ACTOR DISQUALIFICATION QUESTIONNAIRE

 

	

_______________________________________

	
______________
___, 2016

	
Name

	
 

 

Friendable, Inc.
(the “Company”) is about to close a private placement
of convertible Notes and warrants pursuant to the terms of a
Securities Purchase Agreement. Under an SEC Rule effective
September 23, 2013, the Company is requesting each director and
executive officer to complete and execute this questionnaire.
Please answer yes or no to all questions listed below.

 

	

DEFINITION OF PROMOTERS

 

Under
the Securities Act of 1933 (the “Act”) Rule 405 defines
a promoter as any person—individual or legal
entity—that either alone or with others, directly or
indirectly takes initiative in founding the business or enterprise
of the issuer, or, in connection with such founding or
organization, directly or indirectly receives 10% or more of any
class of issuer securities or 10% or more of the proceeds from the
sale of any class of issuer securities (other than securities
received solely as underwriting commissions or solely in exchange
for property).  The test considers activities “alone or
together with others, directly or indirectly”; therefore, the
result does not change if there are other legal entities (which may
themselves be promoters) in the chain between that person and the
issuer.

 

DEFINITION OF INVESTMENT MANAGERS AND PRINCIPALS OF POOLED
INVESTMENT FUND ISSUERS

 

For
issuers that are pooled investment funds, the rule covers
investment advisers and other investment managers of the fund; the
directors, general partners, managing members, executive officers
and other officers participating in the offering of such investment
managers; and the directors, executive officers and other officers
participating in the offering of the investment managers’
general partners or managing members.

 

DEFINITION OF COMPENSATED SOLICITORS

 

Persons
compensated for soliciting investors as well as their directors,
general partners, managing members, executive officers and officers
participating in the offering.  This category covers any
persons compensated for soliciting investors but will typically
involve broker-dealers and other intermediaries.

 

DEFINITION OF DIRECTORS, GENERAL PARTNERS AND MANAGING MEMBERS OF
THE ISSUER

 

Members
of the Board of Directors (for issuers that are corporations),
general partners (for issuers that are partnerships) and managing
members (for issuers that are limited liability
companies).

 

DEFINITION OF EXECUTIVE OFFICERS AND PARTICIPATING OFFICERS OF THE
ISSUER

 

The
term “executive officer” means a company’s
president, any vice president in charge of a principal business
unit, division or function (such as sales, administration or
finance), any other officer who performs a policy-making function
or any other person who performs similar policy-making functions.
The term “officer” means a president, vice president,
secretary, treasurer or principal financial officer, comptroller or
principal accounting officer, as well as any person who routinely
performs corresponding functions.  Participation in an
offering would have to be more than transitory or incidental
involvement, and could include activities such as participation or
involvement in due diligence activities, involvement in the
preparation of disclosure documents, and communication with the
issuer, prospective investors or other offering
participants.

 

DEFINITION OF 20% BENEFICIAL OWNERS OF THE ISSUER

 

Beneficial
owners of 20% or more of the issuer’s outstanding equity
securities, calculated on the basis of total voting power rather
than on the basis of ownership of any single class of
securities.

 

NOTE ON REFERENCES TO THE COMPANY

 

All
references to the Company made herein include its predecessors and
affiliated issuers.

 

 Exhibit
E

 

 

1.           Criminal
Convictions: Within the past 10 years (or five years, in the
of case the Company), have you or the Company been convicted of any
felony or misdemeanor

(a)           In
connection with the purchase or sale of a security

YES ___
         NO ___
        

(b)           Involving
the making of a false filing with the Securities and Exchange
Commission (the “SEC”)

YES ___
         NO ___
        

(c)           Arising
out of the conduct of the business of an underwriter, broker,
dealer, municipal securities dealer, investment adviser or paid
solicitor of purchasers of securities.

YES___
          NO ___
        

 

2.           Court
injunctions and restraining orders: Within the past five
years, have you or the
Company been the subject of a court injunction or restraining
order

(a)           In
connection with the purchase or sale of a security

YES ___
         NO ___
        

(b)           Involving
the making of a false filing with the SEC

YES ___
         NO ___
        

(c)           Arising
out of the conduct of the business of an underwriter, broker,
dealer, municipal securities dealer, investment adviser or paid
solicitor of purchasers of securities.

YES ___
         NO ___
        

 

3.           Final
orders of certain state and federal regulators: Have you or
the Company been the subject of any final orders of state
regulators of securities, insurance, banking, savings associations
or credit unions; federal banking agencies; the Commodity Futures
Trading Commission and the National Credit Union Administration
that

(a)           Bar
you or the Company from associating with a regulated entity,
engaging in the business of securities, insurance or banking, or
engaging in savings association or credit union activities
or

YES ___
         NO ___
        

 

  Exhibit E

 

 

(b) Are
based on a violation of a law or regulation that prohibits
fraudulent, manipulative, or deceptive conduct and were issued
within the last 10 years

 

YES ___
         NO ___
        

 

4.           SEC
disciplinary orders: Are you or the Company currently the subject
of any SEC disciplinary orders relating to brokers, dealers,
municipal securities dealers, investment companies, and investment
advisers and their associated persons under Section 15(b) or 15B(c)
of the Securities Exchange Act of 1934, or Section 203(e) or (f) of
the Investment Advisers Act that

 

(a)
Suspends or revokes your or the Company’s registration as a
broker, dealer, municipal securities dealer or investment
adviser

 

YES ___
         NO ___
        

(1)
Places limitations on your or the Company’s activities,
functions or operations

 

YES ___
         NO ___
    

   

(2)
Bars you or the Company from being associated with any entity or
from participating in the offering of any penny stock

 

YES ___
         NO ___
        

 

5.           SEC
cease-and-desist orders: Within the last five years, have you or
the Company been the subject of SEC orders to cease and
desist from committing or causing a violation or future violations
of

(a) The
scienter-based anti-fraud provisions of the federal securities
laws

YES ___
         NO ___
        

(b)
Section 5 of the Act

YES ___
         NO ___
        

 

6.           Suspension
or expulsion from membership in an SRO or from association with an
SRO member: Have you or the Company been suspended or
expelled from membership in, or suspended or barred from
association with a member of, a securities self-regulatory
organization or “SRO” (i.e., a registered national securities
exchange or national securities association, such as FINRA) for any
act or omission to act constituting conduct inconsistent with just
and equitable principles of trade.

 

YES ___          NO ___
        

 

7.           SEC
stop orders:

(a)
Within the last five years, have you, as an officer or director of
an issuer, or the Company filed a registration statement or
Regulation A offering statement that was the subject of a SEC
refusal order, stop order or order suspending the Regulation A
exemption, or are you now the subject of an investigation or
proceeding to determine whether such an order should be
issued.

YES ___
         NO ___
        

 

 Exhibit
E

 

 

(b)
Within the last five years, have you or the Company been, or been
named as, an underwriter of securities under a registration
statement or Regulation A offering statement that was the subject
of a Commission refusal order, stop order or order suspending the
Regulation A exemption, or are you now the subject of an
investigation or proceeding to determine whether such an order
should be issued.

YES ___
         NO ___
        

 

8.           U.S.
Postal Service false representation orders: Within the last
five years have you or the Company been subject to a U. S Postal
Service false representation order, temporary restraining order or
preliminary injunction with respect to conduct alleged by the U.S.
Postal Service to constitute a scheme or device for obtaining money
or property through the mail by means of false
representations.

 

YES ___
         NO ___
        

 

The
foregoing answers are true and correct in all respects. I
understand that a “yes” answer will disqualify the
issuer from relying on exemption under Rule 506 under the
Securities Act of 1933.

 

 

	
Dated: _______________,
201_

	
___________________________________

	
 

	
Signature

 

 

 

 

 

 

 

 

 

 

Exhibit EBlueprint

  EXHIBIT
10.2

 

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

 

Original
Issue Date: October 7,
2016

 

Principal Amount: $465,000.00

 

Original Conversion Price (subject to adjustment herein):
$0.0025

 

 

CONVERTIBLE NOTE

DUE APRIL 7, 2018

 

THIS
CONVERTIBLE NOTE is one of a series of duly authorized and validly
issued Notes of FRIENDABLE,
INC., a Nevada corporation, (the “Borrower”), having its
principal place of business at 125 East Campbell Avenue,
2nd Floor,
Campbell CA 95008, due
April 7, 2018 (this note,
the “Note” and, collectively
with the other notes of such series, the “Notes”).

 

FOR
VALUE RECEIVED, Borrower promises to pay to [Recipient] or its
registered assigns (the “Holder”), with an address
at: [Recipient Address], or shall have paid pursuant to the terms
hereunder, the principal sum of Four Hundred and Sixty-Five Thousand
Dollars ($465,000.00)
on April 7, 2018 (the
“Maturity
Date”) or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay
interest, if any, to the Holder on the aggregate unconverted and
then outstanding principal amount of this Note in accordance with
the provisions hereof.

 

This
Note is subject to the following additional
provisions:

 

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

 

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

 

 

 

1

 

 

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

 

“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 4(d).

 

“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are required by law or other
governmental action to close.

 

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

 

“Change of Control
Transaction” means, other than by means of conversion
or exercise of the Notes and the Securities issued together with
the Notes, the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of Borrower,
by contract or otherwise) of in excess of 50% of the voting
securities of Borrower, (b) Borrower merges into or consolidates
with any other Person, or any Person merges into or consolidates
with Borrower and, after giving effect to such transaction, the
stockholders of Borrower immediately prior to such transaction own
less than 50% of the aggregate voting power of Borrower or the
successor entity of such transaction, (c) Borrower sells or
transfers all or substantially all of its assets to another Person
and the stockholders of Borrower immediately prior to such
transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a
replacement at one time or within a three year period of more than
one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by Borrower of an
agreement to which Borrower is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.

 

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

 

 

2

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

3

 

 

 

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

 

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

 

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

 

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

 

“Optional Redemption”
shall have the meaning set forth in Section 6.

 

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

 

“Other Holders” means
holders of Other Notes.

 

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

 

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

 

“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of Borrower) have been established in accordance
with GAAP, (b) Liens imposed by law which were incurred in the
ordinary course of Borrower’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of Borrower’s business, and which (x)
do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use
thereof in the operation of the business of Borrower and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, and (c) Liens incurred
prior to the Closing Date in connection with Permitted Indebtedness
under clauses (a) and (b) thereunder, and Liens incurred in
connection with Permitted Indebtedness under clause (c) thereunder,
provided that such Liens are not secured by assets of Borrower or
its Subsidiaries other than the assets so acquired or
leased.

 

 

4

 

 

 

“Purchase Agreement” means
the Securities Purchase Agreement, dated as of October 7, 2016
among Borrower and the original Holders, as amended, modified or
supplemented from time to time in accordance with its
terms.

 

“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

“Share Delivery Date”
shall have the meaning set forth in Section 4(c)(ii).

 

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

 

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

 

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

 

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

 

Section
2.       
 Interest.

 

a)           Interest.
Simple interest payable on the interest bearing portion of this
Note shall accrue at the annual rate of seven percent (7%) and in
arrears on the six month anniversary of the Original Issue Date and
on the Maturity Date (each an “Interest Payment Date”)
(if any Interest Payment Date is not a Trading Day, the applicable
payment should be made on the next succeeding Trading Day).
Interest shall be payable in duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock (the amount to be
paid in shares of Common Stock, the “Interest Share Amount”).
The Interest Share Amount will be determined by dividing the amount
of interest on the subject Interest Payment Date by the lesser of
(i) Conversion Price in effect on such date (ii) or the average of
the closing price for the Common Stock for the 5 Trading Days prior
to the Interest Payment Date as reported by Bloomberg L.P. on the
Trading Market on which the Common Stock is then listed or quoted.
The Holders shall have the same rights and remedies with respect to
the delivery of any such shares as if such shares were being issued
pursuant to Section 4. Borrower may not pay interest by delivery of
Common Stock without the consent of the Holder in the event that
the Equity Conditions are not in effect on each day from the
relevant Interest Payment Date through the date the Interest Share
Amount is delivered to the Holder. Borrower may not pay any
Interest Share Amount in excess of the Beneficial Ownership
Limitation when applicable, unless waived by Holder. Following the
occurrence and during the continuance of an Event of Default, then
from the first date of such occurrence, the annual interest rate on
this Note shall be eighteen percent (18%). Such interest shall be
due and payable on the Maturity Date, whether by acceleration or
otherwise.

 

 

5

 

 

 

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

 

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

 

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

 

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

 

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

 

Section
3.       
   Registration of Transfers and
Exchanges.

 

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

 

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

 

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

 

 

6

 

 

 

Section
4.     
     Conversion.

 

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

 

b)
         Conversion Price. The
conversion price for the principal and interest, if any, in
connection with voluntary conversions by the Holder shall be equal
to $0.0025, subject to
adjustment herein (the “Conversion
Price”).

 

c)
         Mechanics of
Conversion.

 

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

 

ii.         Delivery
of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the “Share Delivery Date”),
Borrower shall deliver, or cause to be delivered, to the Holder a
certificate or certificates representing the Conversion Shares
which, on or after the earlier of (i) the six month anniversary of
the Original Issue Date or (ii) the Effective Date, shall be free
of restrictive legends and trading restrictions (other than those
which may then be required by the Purchase Agreement) representing
the number of Conversion Shares being acquired upon the conversion
of this Note. Borrower shall use its best efforts to deliver any
certificate or certificates required to be delivered by Borrower
under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing
similar functions.

 

iii.         Failure
to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date,
the Holder shall be entitled to elect by written notice to Borrower
at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event Borrower
shall promptly return to the Holder any original Note delivered to
Borrower and the Holder shall promptly return to Borrower the
Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.

 

 

7

 

 

 

iv.         Obligation
Absolute; Partial Liquidated Damages. Borrower’s
obligations to issue and deliver the Conversion Shares upon
conversion of this Note in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to Borrower or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of
Borrower to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by Borrower of any such action
Borrower may have against the Holder. In the event the Holder of
this Note shall elect to convert any or all of the outstanding
principal amount hereof, Borrower may not refuse conversion based
on any claim that the Holder or anyone associated or affiliated
with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and or enjoining conversion of all or
part of this Note shall have been sought and obtained, and Borrower
posts a surety bond for the benefit of the Holder in the amount of
150% of the outstanding principal amount of this Note, which is
subject to the injunction, which bond shall remain in effect until
the completion of arbitration/litigation of the underlying dispute
and the proceeds of which shall be payable to the Holder to the
extent it obtains judgment. In the absence of such injunction,
Borrower shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If Borrower fails for any
reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(c)(ii) by the Share Delivery Date, Borrower
shall pay to the Holder, in cash, as liquidated damages and not as
a penalty, for each $1,000 of principal amount being converted, $10
per Trading Day (increasing to $20 per Trading Day on the fifth
(5th)
Trading Day after such liquidated damages being to accrue) for each
Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 8 hereof for
Borrower’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.

 

v.           Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the
Holder, if Borrower fails for any reason to deliver to the Holder
such certificate or certificates by the Share Delivery Date
pursuant to Section 4(c)(ii), and if after such Share Delivery Date
the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder or
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a
“Buy-In”), then Borrower
shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any,
by which (x) the Holder’s total purchase price (including any
brokerage commissions) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of Common
Stock that the Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed
(including any brokerage commissions) and (B) at the option of the
Holder, either reissue (if surrendered) this Note in a principal
amount equal to the principal amount of the attempted conversion
(in which case such conversion shall be deemed rescinded) or
deliver to the Holder the number of shares of Common Stock that
would have been issued if Borrower had timely complied with its
delivery requirements under Section 4(c)(ii). For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion
of this Note with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, Borrower shall be required
to pay the Holder $1,000. The Holder shall provide Borrower written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of Borrower, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to
Borrower’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.

 

 

8

 

 

 

vi.         Reservation
of Shares Issuable Upon Conversion. Borrower covenants that
it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose
of issuance upon conversion of this Note as herein provided, free
from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of
the Notes), not less than such aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion
of the then outstanding principal amount of this Note and interest
which has accrued and would accrue on such principal amount,
assuming such principal amount was not converted through the
Maturity Date. Borrower covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.

 

vii.         Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Note.
As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, Borrower shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.

 

viii.         Transfer
Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of this Note shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, Borrower shall not be
required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder
of this Note so converted and Borrower shall not be required to
issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to Borrower
the amount of such tax or shall have established to the
satisfaction of Borrower that such tax has been paid. Borrower
shall pay all Transfer Agent fees required for same-day processing
of any Notice of Conversion.

 

 

9

 

 

 

d)
          Holder’s
Conversion Limitations. Borrower shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined
below).  For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Note with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted principal amount of this Note beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of Borrower subject to a limitation on conversion or
exercise analogous to the limitation contained herein (including,
without limitation, any other Notes or the Warrants) beneficially
owned by the Holder or any of its Affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 4(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d) applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this
Note is convertible shall be in the sole discretion of the Holder,
and the submission of a Notice of Conversion shall be deemed to be
the Holder’s determination of whether this Note may be
converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this
Note is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to Borrower each time it
delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and
Borrower shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) Borrower’s
most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by
Borrower, or (iii) a more recent written notice by Borrower or
Borrower’s transfer agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request
of a Holder, Borrower shall within two Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock
then outstanding.  In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of Borrower, including
this Note, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this
Note held by the Holder. The Holder may decrease the Beneficial
Ownership Limitation at any time and the Holder, upon not less than
61 days’ prior notice to Borrower, and may increase the
Beneficial Ownership Limitation provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon conversion of
this Note held by the Holder and the Beneficial Ownership
Limitation provisions of this Section 4(d) shall continue to apply.
Any such increase will not be effective until the 61st day after such
notice is delivered to Borrower. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this
Note.

 

 

10

 

 

 

Section 5.       
   Certain
Adjustments.

 

a)
         Stock Dividends and Stock
Splits. If Borrower, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by Borrower upon conversion of the Notes), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of Borrower, then the
Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of Borrower) outstanding immediately before
such event, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or
re-classification.

 

b)
         Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a) above, if at any time Borrower grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

 

c)           Pro
Rata Distributions. During such time as this Note is
outstanding, if Borrower shall declare or make any dividend whether
or not permitted, or makes any other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any
time after the issuance of this Note, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the
same extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Note (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

 

 

11

 

 

 

d)
         Fundamental Transaction. If, at
any time while this Note is outstanding, (i) Borrower, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of Borrower with or into another Person, (ii)
Borrower, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by Borrower or another Person) is
completed pursuant to which holders of Common Stock are permitted
to sell, tender or exchange their shares for other securities, cash
or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) Borrower, directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, (v) Borrower, directly or indirectly,
in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other
Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other
Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion
of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of Borrower, if it is the
surviving corporation, and any additional consideration (the
“Alternate
Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation
in Section 4(d) on the conversion of this Note). For purposes of
any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one (1) share of Common Stock in such
Fundamental Transaction, and Borrower shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
conversion of this Note following such Fundamental Transaction.
Borrower shall cause any successor entity in a Fundamental
Transaction in which Borrower is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of Borrower under this Note and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the
provisions of this Section 5(d) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of
this Note, deliver to the Holder in exchange for this Note a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Note which is
convertible for a corresponding number of shares of capital stock
of such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
this Note (without regard to any limitations on the conversion of
this Note) prior to such Fundamental Transaction, and with a
conversion price which applies the conversion price hereunder to
such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being
for the purpose of protecting the economic value of this Note
immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note and the other
Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every
right and power of Borrower and shall assume all of the obligations
of Borrower under this Note and the other Transaction Documents
with the same effect as if such Successor Entity had been named as
Borrower herein.

 

 

12

 

 

 

e)           Adjustment
Upon Issuance of Shares of Common Stock. If and whenever on
or after the date hereof, the Company issues or sells, or in
accordance with this Section 5 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the
Company, but excluding any Exempt Issuance issued or sold or deemed
to have been issued or sold) for a consideration per share (the
“New Issuance
Price”) less than a price equal to the Conversion
Price in effect immediately prior to such issue or sale or deemed
issuance or sale (such Conversion Price then in effect is referred
to as the “Applicable Price”) (the
foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to the New Issuance Price. For all
purposes of the foregoing (including, without limitation,
determining the adjusted Conversion Price and consideration per
share under this Section 5(e)), the following shall be
applicable:

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

 

13

 

 

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

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

 

14

 

 

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

 

f)         Calculations.
All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding any treasury
shares of Borrower) issued and outstanding.

 

g)
         Notice to the
Holder.

 

i.            Adjustment
to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, Borrower
shall promptly deliver to each Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

 

ii.       
  Notice to
Allow Conversion by Holder. If (A) Borrower shall declare a
dividend (or any other distribution in whatever form) on the Common
Stock, (B) Borrower shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C) Borrower shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of Borrower shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which Borrower is a party, any sale or transfer of all or
substantially all of the assets of Borrower, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property or (E) Borrower shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of Borrower, then, in each case, Borrower shall cause to be filed
at each office or agency maintained for the purpose of conversion
of this Note, and shall cause to be delivered to the Holder at its
last address as it shall appear upon the Note Register, at least
twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure
to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding Borrower or any of the
Subsidiaries, Borrower shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert this Note during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.

 

 

15

 

 

 

Section
6.         
Optional
Redemption. Commencing on the original Issue Date of this
Note, the Borrower will have the
option of prepaying the outstanding Principal amount of this Note
(“Optional
Redemption”), in whole or
in part, by paying to the Holder a sum of money in cash equal to
one hundred and twenty-five percent (125%) of the Principal amount
to be redeemed, together with accrued but unpaid interest thereon
and any and all other sums due, accrued or payable to the Holder
arising under this Note through the Redemption Payment Date, as
defined below (the “Redemption
Amount”).
Borrower’s election to exercise its right to prepay must be
by notice in writing (“Notice of
Redemption”). The Notice
of Redemption shall specify the date for such Optional Redemption
(the “Redemption Payment
Date”), which date shall
be a date certain not sooner than thirty (30) Trading Days after
the date of the Notice of Redemption (the
“Redemption
Period”). A Notice of
Redemption, if given, may be given on the first Trading Day
following ten (10) consecutive Trading Days (the
“Lookback
Period”) during which all of the Equity Conditions
have been in effect. A Notice of
Redemption shall not be effective with respect to any portion of
the Principal Amount or interest for which the Holder has
previously delivered an election to convert, or for conversions
initiated or made by the Holder during the Redemption Period. A
Notice of Redemption may be given only in connection with an amount
of Common Stock that would not exceed the Beneficial Ownership
Limitation. On the Redemption Payment Date, the Redemption Amount,
less any portion of the Redemption Amount against which the Holder
has permissibly exercised its conversion rights, shall be paid in
good funds to the Holder. If during the Redemption Period, Borrower
announces or engages in a Fundamental Transaction, the Holder may
elect, at Holder’s option, to exercise its rights under
Section 5(d) herein. In the event the Borrower fails to pay the
Redemption Amount on the Redemption Payment Date as set forth
herein, then (i) such Notice of Redemption will be null and void,
and (ii) Borrower will have no right to deliver another Notice of
Redemption. In the event the Equity Conditions cease to be in
effect prior to the payment of the Redemption Amount, the Holder
may cancel the Notice of Redemption.

 

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

 

a)           other
than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;

 

b)           other
than Permitted Liens, enter into, create, incur, assume or suffer
to exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;

 

c)           amend
its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the
Holder;

 

 

16

 

 

 

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

 

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

 

f)           declare
or make any dividend or other distribution of its assets or rights
to acquire its assets to holders of shares of Common Stock, by way
of return of capital or otherwise including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar
transaction;

 

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

 

h)           enter
into any transaction with any Affiliate of Borrower which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
Borrower (even if less than a quorum otherwise required for board
approval); or

 

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

 

Section
8.          
  Events of
Default.

 

a)
         
“Event of
Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative
or governmental body):

 

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

 

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

 

 

17

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

18

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

xxiii.        
the failure by Borrower to comply with its obligations under the
terms of the Hang With Transaction pursuant to the Transaction
Documents and the Hang With Agreements (for the avoidance of doubt,
the mere existence of a dispute between the Borrower and Hang With,
Inc. as to whether Hang With, Inc. has complied with its
obligations under the terms of the Hang With Transaction shall not,
in and of itself, constitute an Event of Default); or

 

 

19

 

 

 

xxiv.        
any default, failure or breach by Borrower relating to the Hang
With Transaction as further described in the Transaction Documents
and in the Hang With Agreements (for the avoidance of doubt, the
mere existence of a dispute between the Borrower and Hang With,
Inc. as to whether Hang With, Inc. has defaulted, failed, or
breached its obligations related to the Hang With Transaction shall
not, in and of itself, constitute an Event of
Default).

 

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

 

b)
         Remedies Upon Event of Default,
Fundamental Transaction and Change of Control Transaction.
If any Event of Default or a Fundamental Transaction or a Change of
Control Transaction occurs, the outstanding principal amount of
this Note, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount. Commencing on the Maturity Date and also
five (5) days after the occurrence of any Event of Default interest
on this Note shall accrue at an interest rate equal to the lesser
of 18% per annum or the maximum rate permitted under applicable
law. Upon the payment in full of the Mandatory Default Amount, the
Holder shall promptly surrender this Note to or as directed by
Borrower. In connection with such acceleration described herein,
the Holder need not provide, and Borrower hereby waives, any
presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as
a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 8(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.

 

Section
9.                      Miscellaneous.

 

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

 

 

20

 

 

 

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

 

c)
         Lost or Mutilated Note. If this
Note shall be mutilated, lost, stolen or destroyed, Borrower shall
execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed, but
only upon receipt of evidence of such loss, theft or destruction of
such Note, and of the ownership hereof, reasonably satisfactory to
Borrower.

 

d)
         Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and
expenses incurred in the investigation, preparation and prosecution
of such action or proceeding. This
Note shall be deemed an unconditional obligation of Borrower for
the payment of money and, without limitation to any other remedies
of Holder, may be enforced against Borrower by summary proceeding
pursuant to New York Civil Procedure Law and Rules Section 3213 or
any similar rule or statute in the jurisdiction where enforcement
is sought. For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which
Borrower delivered to Holder, which may be convenient or necessary
to determine Holder’s rights hereunder or Borrower’s
obligations to Holder are deemed a part of this Note, whether or
not such other document or agreement was delivered together
herewith or was executed apart from this Note.

 

 

21

 

 

 

e)
         Waiver. Any waiver by Borrower
or the Holder of a breach of any provision of this Note shall not
operate as or be construed to be a waiver of any other breach of
such provision or of any breach of any other provision of this
Note. The failure of Borrower or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall
not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Note on any other occasion. Any waiver by
Borrower or the Holder must be in writing.

 

f)         Severability.
If any provision of this Note is invalid, illegal or unenforceable,
the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and
circumstances.

 

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

 

h)
       Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.

 

i)         Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.

 

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

 

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

 

 

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

 

(Signature Pages Follow)

 

 

22

 

 

IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by an authorized officer as of
the 7th day of October, 2016.

 

 

	

 

	
FRIENDABLE,
INC.

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	

/s/ Robert Rositano

	

 

	

 

	

 

	
Name:
Robert Rositano

	

 

	

 

	

 

	

Title:
CEO

	

 

 

WITNESS:

 

 

 

______________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert principal under the
Convertible Note Due April 7, 2018 of Friendable, Inc., a Nevada
corporation (the “Company”), into shares of
common stock (the “Common Stock”), of
Borrower according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
Borrower in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.

 

By the
delivery of this Notice of Conversion the undersigned represents
and warrants to Borrower that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this Note,
as determined in accordance with Section 13(d) of the Exchange
Act.

 

The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common
Stock.

 

Conversion
calculations:

	
 

	

Date to
Effect Conversion: ____________________________

	
 

	
 

	
 

	

Principal
Amount of Note to be Converted: $__________________

	
 

	
 

	
 

	

Accrued
Interest to be Converted: $______________

	
 

	
 

	
 

	

Number
of shares of Common Stock to be issued: ______________

	
 

	
 

	
 

	

Signature:
_________________________________________

	
 

	
 

	
 

	

Name:
____________________________________________

	
 

	
 

	
 

	

Address
for Delivery of Common Stock Certificates: __________

	
 

	

_____________________________________________________ 

	
 

	

_____________________________________________________

	
 

	
 

	
 

	

Or

	
 

	
 

	
 

	

DWAC
Instructions: _________________________________

	
 

	
 

	
 

	

Broker
No:_____________

	
 

	

Account
No: _______________

  

 

 

 

 

 

24

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