UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
March 15, 2017
Date of
Report (Date of earliest event reported)
Friendable, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
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000-52917
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98-0546715
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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1821 S Bascom Ave., Suite 353, Campbell, California
95008
(Address
of principal executive offices) (Zip Code)
(855) 473-7473
Registrant’s
telephone number, including area code
Check
the appropriate box below if the Form 8-K is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On
March 15, 2017, Friendable, Inc. (the “
Company
”) entered into a
Securities Purchase Agreement, (the “
EMA SPA
”) with EMA Financial, LLC
(“
EMA
”), to
issue and sell a 8% Convertible Note in the principal amount of
$96,000 (the “
EMA
Note
”) with a maturity date of March 15, 2018 (the
“
EMA Maturity
Date
”). The EMA Note was funded on March 15,
2017.
On
March 16, 2017, the Company entered into a Securities Purchase
Agreement, dated March 13, 2017 (the
“Coventry SPA”
) with
Coventry Enterprises, LLC (
“Coventry”
), to issue and
sell a 8% Convertible Redeemable Note in the principal amount of
$32,000 (the “
Coventry
Note
”) with a maturity date of March 13, 2018 (the
“
Coventry Maturity
Date
”). The Coventry Note was funded on March 16,
2017. In this Report, the following are referred to respectively,
as, the “
SPAs
”,
the “
Notes
”, and
the “
Maturity
Dates
”: (i) the EMA SPA and Coventry SPA; (ii) the EMA
Note and Coventry Note; and (iii) the EMA Maturity Date and the
Coventry Maturity Date.
Interest
accrues daily on the outstanding principal amount of each of the
Notes at a rate per annum equal to 8% on the basis of a 365-day
year. The principal amount of the Notes and interest are payable on
the Maturity Dates. The Notes are convertible into common stock,
subject to Rule 144, at any time after the issue date: (A) for the
EMA Note, at the lower of (i) the closing sale price of the common
stock on the on the trading day immediately preceding the closing
date, and (ii) 50% of the lowest sale price for the common stock
during the twenty-five (25) consecutive trading days immediately
preceding the conversion date; and (B) for the Coventry Note at 50%
of the lowest sale price for the common stock during the twenty
(20) consecutive trading days immediately preceding the conversion
date. If the shares due to EMA are not delivered to EMA within
three business days of the Company’s receipt of the
conversion notice, the Company will pay EMA a penalty of $1,000 per
day for each day that the Company fails to deliver such common
stock through willful acts designed to hinder the delivery of
common stock to EMA. EMA does not have the right to convert the
note, to the extent that it would beneficially own in excess of
4.9% of our outstanding common stock (the ownership limitation of
Coventry is 9.9%). The Company shall have the right, exercisable on
not less than five (5) trading days’ prior written notice to
EMA, to prepay the outstanding balance on the EMA Note for (i) 135%
of all unpaid principal and interest if paid within 90 days of the
issue date and (ii) 150% of all unpaid principal and interest
starting on the 91st day following the issue date. The Coventry
Note cannot be prepaid. In the event of default, the amount of
principal and interest not paid when due bear default interest at
the rate of 24% per annum and the Notes becomes immediately due and
payable. In connection with the Notes, the Company paid EMA $6,500
and paid Coventry $2,000 for each of their legal fees and
expenses.
The
Notes are long-term debt obligations that are material to the
Company. The Notes also contains certain representations,
warranties, covenants and events of default including if the
Company is delinquent in its periodic report filings with the SEC,
and increases in the amount of the principal and interest rates
under the Notes in the event of such defaults. In the event of
default, at the option of the lenders and at their sole discretion,
the lenders may consider the Notes immediately due and
payable.
The
foregoing description of the terms of the SPAs and Notes, do not
purport to be complete and is qualified in its entirety by the
complete text of the documents attached as, respectively, Exhibits
4.1, 4.2, 10.1, and 10.2 to this Current Report on Form
8-K.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant
The information set forth in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item
2.03.
Item 3.02 Unregistered Sales of Equity Securities
The information set forth in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item
3.02.
The issuance of the securities whose information is set forth in
Item 1.01 of this Current Report on Form 8-K were not registered
under the Securities Act of 1933, as amended (the “Securities
Act”), but qualified for exemption under Section 4(a)(2) of
the Securities Act. The securities were exempt from registration
under Section 4(a)(2) of the Securities Act because the issuance of
such securities by the Company did not involve a “public
offering,” as defined in Section 4(a)(2) of the Securities
Act, due to the insubstantial number of persons involved in the
transaction, size of the offering, manner of the offering and
number of securities offered. The Company did not undertake an
offering in which it sold a high number of securities to a high
number of investors. In addition, these investors had the necessary
investment intent as required by Section 4(a)(2) of the Securities
Act since they agreed to, and will receive, share certificates
bearing a legend stating that such securities are restricted
pursuant to Rule 144 of the Securities Act. This restriction
ensures that these securities would not be immediately
redistributed into the market and therefore not be part of a
“public offering.” Based on an analysis of the above
factors, we have met the requirements to qualify for exemption
under Section 4(a)(2) of the Securities Act.
Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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Friendable, Inc.
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Date: March
22 2017
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By:
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/s/ Robert Rositano
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Robert
Rositano
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CEO
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NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Principal Amount: $159,750.00
|
Issue Date: February 2, 2017
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8%
CONVERTIBLE NOTE
FOR VALUE RECEIVED
,
FRIENDABLE, INC.,
a
Nevada corporation (“Borrower” or
“Company”), hereby promises to pay to the order
of
EMA FINANCIAL, LLC,
a
Delaware limited liability company, or its registered assigns (the
“Holder”), on February 2, 2018, (subject to extension
as set forth below, the “Maturity Date”), the sum of
$159,750.00 as set forth herein, together with interest on the
unpaid principal balance hereof at the rate of eight (8%) per annum
(the “Interest Rate”) from the date of issuance hereof
until this Note plus any and all amounts due hereunder are paid in
full, and any additional amounts set forth herein, including
without limitation any Additional Principal (as defined herein).
Interest shall be computed on the basis of a 365-day year and the
actual number of days elapsed. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the
rate of twenty-four (24%) per annum from the due date thereof until
the same is paid (“Default Interest”). All payments due
hereunder shall be made in lawful money of the United States of
America. All payments shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in
accordance with the provisions of this Note. Whenever any amount
expressed to be due by the terms of this Note is due on any day
which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any
interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in that
certain Securities Purchase Agreement entered into by and between
the Company and Holder dated on or about the date hereof, pursuant
to which this Note was originally issued (the “Purchase
Agreement”). The Holder may, by written notice to the
Borrower at least five (5) days before the Maturity Date (as may
have been previously extended), extend the Maturity Date to up to
one (1) year following the date of the original Maturity Date
hereunder.
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
The
following terms shall apply to this Note:
ARTICLE
I. CONVERSION RIGHTS
1.1.
Conversion
Right
. The Holder shall have the right, in its sole and
absolute discretion, at any time from time to time, to convert all
or any part of the outstanding amount due under this Note into
fully paid and non-assessable shares of Common Stock, as such
Common Stock exists on the Issue Date, or any shares of capital
stock or other securities of the Borrower into which such Common
Stock shall hereafter be changed or reclassified at the conversion
price (the “Conversion Price”) determined as provided
herein (a “Conversion”);
provided
,
however
, that in no event shall
the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations
contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with
respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso,
provided
,
further
,
however
, that the limitations
on conversion may be waived by the Holder upon, at the election of
the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall
continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver). The number of shares of Common Stock to be issued upon
each Conversion of this Note (“Conversion Shares”)
shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the
date specified in the notice of conversion, in the form attached
hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section
1.4 below; provided that the Notice of Conversion is submitted by
facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower before 11:59 p.m.,
New York, New York time on such conversion date (the
“Conversion Date”). The term “Conversion
Amount” means, with respect to any Conversion of this Note,
the sum of (1) the principal amount of this Note to be converted in
such Conversion,
plus
(2) accrued and
unpaid interest, if any, on such principal amount being converted
at the interest rates provided in this Note to the Conversion Date,
plus
(3) at
the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or
(2),
plus
(4)
any
Additional Principal for such Conversion,
plus
(5) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.2(c) and 1.4(g) hereof.
1.2.
Conversion
Price
.
a)
Calculation of Conversion
Price
. The conversion price hereunder (the
“Conversion Price”) shall equal the lower of: (i) the
closing sale price of the Common Stock on the Principal Market on
the Trading Day immediately preceding the Closing Date, and (ii)
50% of either the lowest sale price for the Common Stock on the
Principal Market during the twenty five (25) consecutive Trading
Days immediately preceding the Conversion Date or the closing bid
price, whichever is lower,
provided, however
, if the
Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the
Conversion Price may, in the Holder’s sole and absolute
discretion, be reduced to a fixed conversion price of 0.00001 (if
lower than the conversion price otherwise),
and provided,
that if on the date of
delivery of the Conversion Shares to the Holder, or any date
thereafter while Conversion Shares are held by the Holder, the
closing bid price per share of Common Stock on the Principal Market
on the Trading Day on which the Common Shares are traded is less
than the sale price per share of Common Stock on the Principal
Market on the Trading Day used to calculate the Conversion Price
hereunder, then such Conversion Price shall be automatically
reduced such that the Conversion Price shall be recalculated using
the new low closing bid price (“Adjusted Conversion
Price”) and shall replace the Conversion Price above, and
Holder shall be issued a number of additional shares such that the
aggregate number of shares Holder receives is based upon the
Adjusted Conversion Price, and
provided, further
, that the Conversion
Price shall be subject to Section 1.2(b) below. For the purpose of
clarity, any shares required to be issued as a result of an
Adjusted Conversion Price shall be deemed to be “Conversion
Shares” under this Note.
If an
Event of Default under Section 3.9 of the Note has occurred,
Holder, in its sole discretion, may elect to use a Conversion Price
which shall equal the lower of: (i) the closing sale price of the
Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date; (ii) 50% of either the lowest sale
price
or the closing bid price, whichever is lower
for the Common Stock on the Principal
Market during any Trading Day in which the Event of Default has not
been cured.
If such Common Stock is not traded on the OTCBB,
OTCQB, OTC Pink, NASDAQ or NYSE, then such sale price shall be the
sale price of such security on the principal securities exchange or
trading market where such security is listed or traded or, if no
sale price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets”
by the National Quotation Bureau, Inc. If such sale price cannot be
calculated for such security on such date in the manner provided
above, such price shall be the fair market value as mutually
determined by the Borrower and the Holder. If the Borrower’s
Common stock is chilled for deposit at DTC, becomes chilled at any
point while this Note remains outstanding or deposit or other
additional fees are payable due to a Yield Sign, Stop Sign or other
trading restrictions, or if the closing sale price at any time
falls below $0.0009 (as appropriately and equitably adjusted for
stock splits, stock dividends, stock contributions and similar
events), then such 50% figure specified in clause 1.2(a)(ii) above
shall be reduced to 35%. In the event that the shares of the
Borrower’s Common Stock are not deliverable via DWAC
following the conversion of any amount hereunder, an additional 5%
discount will be attributed to the Conversion Price. Additionally,
t
he Borrower acknowledges that it will
take all reasonable steps necessary or appropriate, including
providing a board of directors resolution authorizing the issuance
of common stock to Holder . So long as the requested sale may be
made pursuant to Rule 144, the Company agrees to accept an opinion
of counsel to the Holder confirming the rights of the Holder to
sell shares of Common Stock issuable or issued to Holder on
conversion of this Note pursuant to Rule 144 as promulgated by the
SEC (“Rule 144”), as such Rule 144 may be in effect
from time to time, which opinion will be issued at the
Company’s expense and the conversion dollar amount will be
reduced by $750.00 to cover the cost of such legal opinion.
“Trading Day” shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. Additionally, if the Company
ceases to be a reporting company pursuant to the 1934 Act or if the
Note cannot be converted into free trading shares after 181 days
from the issuance date, an additional 15% discount will be
attributed to the Conversion Price for any and all Conversions
submitted thereafter.
b)
If at any time the
Conversion Price as determined hereunder for any Conversion would
be less than the par value of the Common Stock, then the Conversion
Price hereunder shall equal such par value for such Conversion and
the Conversion Amount for such Conversion shall be increased to
include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
Conversion Shares issuable upon such Conversion to equal the same
number of Conversion Shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2(b).
c)
Without in any way
limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (as defined below) the
Borrower shall pay to the Holder $1,000.00 per day in cash, for
each day beyond the Deadline that the Borrower fails to deliver
such Common Stock. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued
or, at the option of the Holder, shall be added to the principal
amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert this Note is a valuable right to the Holder.
The damages resulting from a failure, attempt to frustrate, or
interference with such conversion right are difficult if not
impossible to quantify. Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section are
justified.
1.3.
Authorized
Shares
. The Borrower covenants that the Borrower will at all
times while this Note is outstanding reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon
the full conversion or adjustment of this Note. The Borrower is
required at all times to have authorized and reserved five (5)
times the number of shares that is actually issuable upon full
conversion or adjustment of this Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved
Amount”). Initially, the Company will instruct the Transfer
Agent to reserve eight hundred eighty-seven million, five hundred
thousand (887,500,000) shares of common stock in the name of the
Holder for issuance upon conversion hereof. The Borrower represents
that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable. In addition, if the Borrower shall
issue any securities or make any change to its capital structure
which would change the number of shares of Common Stock into which
this Note shall be convertible at the then current Conversion
Price, the Borrower shall at the same time make proper provision so
that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights,
for conversion of this Note in full. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.
If, at
any time the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under Section 3.2 of the
Note.
1.4.
Method
of Conversion
.
a)
Mechanics of Conversion
.
Subject to Section 1.1, this Note may be converted by the Holder in
whole or in part at any time and from time to time after the Issue
Date, by submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 11:59 p.m., New York,
New York time).
b)
Book Entry upon Conversion
.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Borrower
shall,
prima
facie,
be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.
c)
Payment of Taxes
. The Borrower
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or
deliver any such shares or other securities or property unless and
until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has
been paid.
d)
Delivery of Common Stock upon
Conversion
. Upon receipt by the Borrower from the
Holder of a facsimile transmission or e-mail (or other reasonable
means of communication) of a Notice of Conversion meeting the
requirements for conversion as provided in this Section 1.4 or upon
an event triggering the calculation of an Adjusted Conversion
Price, the Borrower shall issue and deliver or cause to be issued
and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3)
business days after such receipt or such an event (the
“Deadline”) (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note)
in accordance with the terms hereof and the Purchase
Agreement.
e)
Obligation of Borrower to Deliver
Common Stock
. Upon receipt by the Borrower of a duly and
properly executed Notice of Conversion or upon an event triggering
the calculation of an Adjusted Conversion Price, the Holder shall
be deemed to be the holder of record of the Common Stock issuable
upon such conversion or as a result of an Adjusted Conversion
Price, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such
conversion or adjustment, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the
portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If
the Holder shall have given a Notice of Conversion as provided
herein or upon an event triggering the calculation of an Adjusted
Conversion Price, the Borrower’s obligation to issue and
deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the
Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Borrower to the
holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59 p.m., New York, New York time, on such
date.
f)
Delivery of Common Stock by Electronic
Transfer
. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided
the Borrower is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer
(“FAST”) program, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this
Section 1.4, the Borrower shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion or upon an event triggering the calculation of an
Adjusted Conversion Price to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“DWAC”) system.
g)
Failure to Deliver Common Stock Prior
to Deadline
. Without in any way limiting the
Holder’s right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery
of the Common Stock issuable upon conversion or adjustment of this
Note is not delivered by the Deadline, the Borrower shall pay to
the Holder $1,000.00 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock to
the Holder. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at
the option of the Holder, shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert and/or receive shares in the event of an
adjustment is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, or interference with such
conversion or adjustment right are difficult if not impossible to
qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are
justified.
h)
The
Borrower acknowledges that it will take all reasonable steps
necessary or appropriate, including accepting an opinion of counsel
to Holder confirming the rights of Holder to sell shares of Common
Stock issued to Holder on conversion or adjustment of the Note
pursuant to Rule 144 as promulgated by the SEC (“Rule 144"),
as such Rule may be in effect from time to time. So long as the
requested sale may be made pursuant to Rule 144 the Borrower agrees
to accept an opinion of counsel to the Holder which opinion will be
issued at the Borrower’s expense.
i)
Charges and
Expenses
. Issuance of Common
Stock to Holder, or any of its assignees, upon the conversion of
this Note shall be made without charge to the Holder for any
issuance fee, transfer tax, legal opinion and related charges,
postage/mailing charge or any other expense with respect to the
issuance of such Common Stock. Company shall pay all Transfer Agent
fees incurred from the issuance of the Common Stock to Holder, as
well as any and all other fees and charges required by the Transfer
Agent as a condition to effectuate such issuance. Any such fees or
charges as noted in this Section that are paid by the Holder
(whether from the Company’s delays, outright refusal to pay,
or otherwise), will be automatically added to the Principal Amount
of the Note and tack back to the Issue Date herein for purposes of
Rule 144.
1.5.
Restricted
Securities
. The shares of Common Stock issuable upon
conversion or adjustment of this Note may not be sold or
transferred unless (i) such shares are sold pursuant to an
effective registration statement under the Act or (ii) the Borrower
or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“Rule 144”) or
(iv) such shares are transferred to an “affiliate” (as
defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section
1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Any legend set forth on any stock certificate
evidencing any Conversion Shares shall be removed and the Borrower
shall issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel
form, substance and scope customary for
opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such
Common Stock may be made without registration under the Act, which
opinion shall be reasonably acceptable to the Company,
or (ii) in the case of the Common Stock issued or issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.
1.6.
Effect
of Certain Events
.
a)
Effect of Merger, Consolidation,
Etc
. At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting
power of the Borrower is disposed of, or the consolidation, merger
or other business combination of the Borrower with or into any
other Person (as defined below) or Persons when the Borrower is not
the survivor shall either: (i) be deemed to be an Event of Default
(as defined in Article III) pursuant to which the Borrower shall be
required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section
1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association,
trust or other entity or organization.
b)
Adjustment Due to Merger,
Consolidation, Etc
. If, at any time when this Note is issued
and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time, for
clarification, the Holder shall be entitled to convert this Note)
and (b) the resulting successor or acquiring entity assumes by
written instrument the obligations of this Section 1.6(b). The
above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share
exchanges.
c)
Adjustment Due to Distribution
.
If the Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock
as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the
Borrower’s shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the
date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder
of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution. Such
assets shall be held in escrow by the Company pending any such
conversion
d)
Purchase Rights
. If, at any
time when any Notes are issued and outstanding, the Borrower issues
any convertible securities or rights to purchase stock, warrants,
securities or other property (the “Purchase Rights”)
pro rata to the record holders of any class of Common Stock, then
the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the
number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
e)
Stock Dividends and Stock
Splits
. If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any securities convertible into or
exercisable for Common Stock; (B) subdivides outstanding shares of
Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (D) issues, in the
event of a reclassification of shares of the Common Stock, any
shares of capital stock of the Company, then the Conversion Price
(and each sale or bid price used in determining the Conversion
Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
f)
Notice of Adjustments
. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price as a result of the events described in this Section 1.6, the
Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.
1.7.
Revocation
.
If any Conversion Shares are not received by the Deadline, the
Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible
after the Maturity Date hereof until this Note is repaid or
converted in full.
1.8.
Prepayment
.
Notwithstanding anything to the contrary contained in this Note,
subject to the terms of this Section, at any time during the period
beginning on the Issue Date and ending on the date which is six (6)
months following the Issue Date (“Prepayment Termination
Date”), Borrower shall have the right, exercisable on not
less than five (5) Trading Days prior written notice to the Holder
of this Note, to prepay the outstanding balance on this Note
(principal and accrued interest), in full, in accordance with this
Section. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than ten (10) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date. If the Borrower
exercises its right to prepay the Note, the Borrower shall make
payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the Prepayment Factor (as
defined below), multiplied by the sum of: (w) the then outstanding
principal amount of this Note
plus
(x) accrued and unpaid
interest on the unpaid principal amount of this Note to the
Optional Prepayment Date
plus
(y) Default Interest,
if any, on the amounts referred to in clauses (w) and
(x)
plus
(z) any amounts owed to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the
Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to the Holder of the Note within
two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section. After the Prepayment Termination Date,
the Borrower shall have no right to prepay this Note. For purposes
hereof, the “Prepayment Factor” shall equal one hundred
and fifty percent (150%), provided that such Prepayment factor
shall equal one hundred and thirty five percent (135%) if the
Optional Prepayment Date occurs on or before the date which is
ninety (90) days following the Issue Date hereof.
ARTICLE
II. CERTAIN COVENANTS
2.1.
Distributions
on Capital Stock
. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent (a) pay, declare or set apart for
such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.
2.2.
Restriction
on Stock Repurchases
. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such
shares.
2.3.
Borrowings;
Liens
. Notwithstanding section 4(m) of the Purchase
Agreement, so long as the Borrower shall have any obligation under
this Note, the Borrower shall not (i) create, incur, assume
guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection, or suffer to
exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date hereof and of which the Borrower
has informed Holder in writing prior to the date hereof, or (b)
indebtedness to trade creditors or financial institutions incurred
in the ordinary course of business, or (ii) enter into, create or
incur any liens, claims or encumbrances of any kind, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom, securing any indebtedness occurring after the date
hereof.
2.4.
Sale
of Assets
. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets may be
conditioned on a specified use of the proceeds of
disposition.
2.5.
Advances
and Loans
. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any
person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and
affiliates of the Borrower, except loans, credits or advances in
existence or committed on the date hereof and which the Borrower
has informed Holder in writing prior to the date
hereof.
2.6.
Charter
.
So long as the Borrower shall have any obligations under this Note,
the Borrower shall not amend its charter documents, including
without limitation its certificate of incorporation and bylaws, in
any manner that materially and adversely affects any rights of the
Holder.
2.7.
Transfer
Agent
. The Borrower shall not change its transfer agent
without the prior written consent of the Holder. Any resignation by
the transfer agent without a replacement transfer agent consented
to by the Holder prior to such replacement taking effect shall
constitute an Event of Default hereunder.
ARTICLE
III. EVENTS OF DEFAULT
Any one
or more of the following events which shall occur and/or be
continuing shall constitute an event of default (each, an
“Event of Default”):
3.1.
Failure
to Pay Principal or Interest
. The Borrower fails to pay
the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.
3.2.
Conversion
and the Shares
. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens in writing
that it will not honor its obligation to do so at any time
following the execution hereof or) upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of
this Note, fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not
to transfer or delays, impairs, and/or hinders its transfer agent
in transferring (or issuing) (electronically or in certificated
form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note, or fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for five
(5) business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an event of
default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to
process a conversion, such advanced funds shall be paid by the
Borrower to the Holder within forty eight (48) hours of a demand
from the Holder.
3.3.
Breach
of Covenants
. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of seven (7) days
after written notice thereof to the Borrower from the
Holder.
3.4.
Breach
of Representations and Warranties
. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to
this Note or the Purchase Agreement.
3.5.
Receiver
or Trustee
. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or
for a substantial part of its property or business, or such a
receiver or trustee shall otherwise be appointed.
3.6.
Judgments
.
Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000.00, and shall
remain unvacated, unbonded or unstayed for a period of twenty (20)
days unless otherwise consented to by the Holder, which consent
will not be unreasonably withheld.
3.7.
Bankruptcy
.
Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the
Borrower.
3.8.
Delisting
of Common Stock
. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, or OTCQB,
OTC Pink or an equivalent replacement exchange, NASDAQ, the NYSE or
AMEX.
3.9.
Failure
to Comply with the Exchange Act
. The Borrower shall fail to
comply in any material respect with the reporting requirements of
the Exchange Act; and/or the Borrower shall cease to be subject to
the reporting requirements of the Exchange Act.
3.10.
Liquidation
. Any
dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.
3.11.
Cessation
of Operations
. Any cessation of operations by
Borrower or Borrower admits it is otherwise generally unable to pay
its debts as such debts become due, provided, however, that any
disclosure of the Borrower’s ability to continue as a
“going concern” shall not be an admission that the
Borrower cannot pay its debts as they become due.
3.12.
Maintenance
of Assets
. The failure by Borrower, during the
term of this Note, to maintain any material intellectual property
rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the
future).
3.13.
Financial
Statement Restatement
. The restatement of any
financial statements filed by the Borrower with the SEC for any
date or period from two years prior to the Issue Date of this Note
and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.
3.14.
Reverse
Splits
. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.
3.15.
Replacement
of Transfer Agent
. In the event that the Borrower proposes
to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer
agent to Borrower and the Borrower.
3.16.
Cross-Default
.
Notwithstanding anything to the contrary contained in this Note or
the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained
in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the
Holder, be considered a default under this Note and the Other
Agreements, in which event the Holder shall be entitled (but in no
event required) to apply all rights and remedies of the Holder
under the terms of this Note and the Other Agreements by reason of
a default under said Other Agreement or
hereunder. “Other Agreements” means, collectively,
all agreements and instruments between, among or by: (1) the
Borrower, and, or for the benefit of, (2) the Holder and any
affiliate of the Holder, including, without limitation, promissory
notes; provided, however, the term “Other Agreements”
shall not include the related or companion documents to this Note.
Each of the loan transactions will be cross-defaulted with each
other loan transaction and with all other existing and future debt
of Borrower to the Holder.
Upon
the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the
principal hereof or interest thereon when due at the Maturity
Date), the Note shall become immediately due and payable and the
Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the Default Sum (as
defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF
ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO
THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN);
MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the
continuation of any Event of Default specified in Sections 3.1
(solely with respect to failure to pay the principal hereof or
interest thereon when due on this Note upon a Trading Market
Prepayment Event pursuant to Section 1.7 or upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 and/or
3. 15 exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and
upon the occurrence of an Event of Default specified in the
remaining sections of Articles III (other than failure to pay the
principal hereof or interest thereon at the Maturity Date specified
in Section 3,1 hereof), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150%
times
the
sum
of (w) the then
outstanding principal amount of this Note
plus
(x) accrued and
unpaid interest on the unpaid principal amount of this Note to the
date of payment (the “Mandatory Prepayment
Date”)
plus
(y) Default Interest,
if any, on the amounts referred to in clauses (w) and/or
(x)
plus
(z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of
payment
plus
the amounts referred
to in clauses (x), (y) and (z) shall collectively be known as the
“Default Sum”) or (ii) the “parity value”
of the Default Sum to be prepaid, where parity value means (a) the
highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with
Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for
purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date),
multiplied by
(b) the
highest Closing Price for the Common Stock during the period
beginning on the date of first occurrence of the Event of Default
and ending one day prior to the Mandatory Prepayment Date (the
“Default Amount”) and all other amounts payable
hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law
or in equity.
If the
Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then
the Holder shall have the right at any time, so long as the
Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower,
upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal
to the Default Amount divided by the Conversion Price then in
effect. The Holder may still convert any amounts due hereunder,
including without limitation the Default Sum, until such time as
this Note has been repaid in full.3.17.
Inside Information
. The
Borrower or its officers, directors, and/or affiliates attempt to
transmit, convey, disclose, or any actual transmittal, conveyance,
or disclosure by the Borrower or its officers, directors, and/or
affiliates of, material non-public information concerning the
Borrower, to the Holder or its successors and assigns, which is not
immediately cured by Borrower’s filing of a Form 8-K pursuant
to Regulation FD on that same date.
3.18
Bid Price
. The
Borrower shall lose the “bid” price for its Common
Stock ($0.0001 on the “Ask” with zero market makers on
the “Bid” per Level 2) and/or a market (including the
OTC Pink, OTCQB or an equivalent replacement
exchange).
ARTICLE
IV. MISCELLANEOUS
4.1.
Failure
or Indulgence Not Waiver
. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2.
Notices
.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, email or facsimile, addressed as set forth
below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile or email,
with accurate confirmation generated by the transmitting facsimile
machine or computer, at the address, email or number designated in
the Purchase Agreement (if delivered on a business day during
normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than
on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur.
4.3.
Amendments
.
This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument (and the
other Notes issued pursuant to the Purchase Agreement) as
originally executed, or if later amended or supplemented, then as
so amended or supplemented.
4.4.
Assignability
.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an
“accredited investor” (as defined in Rule 501(a) of the
1933 Act). Notwithstanding anything in this Note to the contrary,
this Note may be pledged as collateral in connection with
a bona fide margin account or other lending
arrangement.
4.5.
Cost
of Collection
. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.
4.6.
Governing
Law
.
This Note shall
be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles
that would result in the application of the substantive laws of
another jurisdiction. Any action brought by either party
against the other concerning the transactions contemplated by
this Agreement must be brought only in the civil or state courts of
New York or in the federal courts located in the State and county
of New York. Both parties and the individual signing
this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall
be entitled to recover from the other party its reasonable
attorney’s fees and costs. In the event that any
provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or unenforceability of
any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or
taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower’s obligations to
Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other decision in favor of
the Holder.
This Note shall be
deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies of Holder, may
be enforced against Borrower by summary proceeding pursuant to New
York Civil Procedure Law and Rules Section 3213 or any similar rule
or statute in the jurisdiction where enforcement is
sought. For purposes of such rule or statute, any other
document or agreement to which Holder and Borrower are parties or
which Borrower delivered to Holder, which may be convenient or
necessary to determine Holder’s rights hereunder or
Borrower’s obligations to Holder are deemed a part of this
Note, whether or not such other document or agreement was delivered
together herewith or was executed apart from this
Note.
4.7.
Certain
Amounts
. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest plus Default Interest on such
interest, the Borrower and the Holder agree that the actual damages
to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to
convert this Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Note at a price in
excess of the price paid for such shares pursuant to this Note. The
Borrower and the Holder hereby agree that such amount of stipulated
damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity
to convert this Note into shares of Common Stock.
4.8.
Disclosure
.
Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not
constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1)
Trading Day after any such receipt or delivery, publicly disclose
such material, non-public information on a Current Report on Form
8-K or otherwise. In the event that the Company believes that a
notice contains material, non-public information relating to the
Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and
in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not
constitute material, non-public information relating to the Company
or its Subsidiaries.
4.9.
Notice
of Corporate Events
. Except as otherwise provided below, the
Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into
Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders
(and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a
record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the
Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30)
days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section
4.9.
4.10.
Remedies
.
The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Borrower acknowledges that the remedy at law for a
breach of its obligations under this Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.
4.11.
Usury
.
This Note shall be subject to the anti-usury limitations contained
in the Purchase Agreement.
(Remainder
of Page intentionally left blank)
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the Issue Date first set
forth above.
FRIENDABLE, INC.
By:
|
/s/
Robert A Rositano Jr.
|
|
|
Name:
Robert A Rositano, Jr.
|
|
|
Title:
CEO
|
|
EXHIBIT
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert principal under the 8%
Convertible Note of FRIENDABLE, INC., a Nevada corporation (the
Company
”),
into shares of common stock (the “
Common Stock
”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 1.1 of this
Note, as determined in accordance with Section 13(d) of the
Exchange Act.
The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common Stock pursuant
to any prospectus.
Issue Date of Note:
___________________________________________________
|
Date to Effect Conversion:
_____________________________________________
|
|
Conversion Price:
____________________________________________________
|
|
Principal Amount of Note to be Converted:
________________________________
|
|
Interest Accrued on Account
|
of Conversion at Issue:
________________________________________________
|
|
Additional Principal on Account of Conversion
|
Pursuant to Section 1.2(b) of the Note:
____________________________________
|
Number of shares of Common Stock to be issued:
___________________________
|
____________________________________________________________________
|
Remaining Balance of Note*:
___________________________________________
|
Signature:
___________________________________________________________
|
Name:
______________________________________________________________
|
Address for Delivery of Common Stock Certificates:
_________________________
|
____________________________________________________________________
|
____________________________________________________________________
|
|
Or
|
|
DWAC Instructions:
|
Broker No: ___________________
|
Account No: __________________
|
*Sum
provided does not include accrued interest and/or additional
fees
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER (THE "1933 ACT)
|
US
$32,000.00
FRIENDABLE,
INC
8%
CONVERTIBLE REDEEMABLE NOTE
DUE
MARCH 13, 2018
FOR
VALUE RECEIVED, Friendable, Inc. (the “Company”)
promises to pay to the order of the COVENTRY ENTERPRISES, LLC and
its authorized successors and permitted assigns ("
Holder
"), the aggregate
principal face amount of Thirty Two Thousand dollars exactly (U.S.
$32,000.00) on March 13, 2018 ("
Maturity Date
") and to pay
interest on the principal amount outstanding hereunder at the rate
of 8% per annum commencing on March 13, 2017. The interest will be
paid to the Holder in whose name this Note is registered on the
records of the Company regarding registration and transfers of this
Note. The principal of, and interest on, this Note are payable at
80 S.W. 8
th
Street, Suite 2000,
Miami, FL 33130, initially, and if changed, last appearing on the
records of the Company as designated in writing by the Holder
hereof from time to time. The Company will pay each interest
payment and the outstanding principal due upon this Note before or
on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Note by check or wire
transfer addressed to such Holder at the last address appearing on
the records of the Company. The forwarding of such check or wire
transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for
principal on this Note to the extent of the sum represented by such
check or wire transfer. Interest shall be payable in Common Stock
(as defined below) pursuant to paragraph 4(b) herein.
This
Note is subject to the following additional
provisions:
1.
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 made for
such registration or transfer or exchange, except that Holder shall
pay any tax or other governmental charges payable in connection
therewith.
2.
The Company shall be entitled to withhold from all payments any
amounts required to be withheld under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with
the Securities Act of 1933, as amended ("
Act
") and applicable state
securities laws. Any attempted transfer to a non-qualifying party
shall be treated by the Company as void. Prior to due presentment
for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on
the Company's records as the owner hereof for all other purposes,
whether or not this Note be overdue, and neither the Company nor
any such agent shall be affected or bound by notice to the
contrary. Any Holder of this Note electing to exercise the right of
conversion set forth in Section 4(a) hereof, in addition to the
requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company
written confirmation that this Note is being converted
("
Notice of
Conversion
") in the form annexed hereto as
Exhibit A
. The date of receipt
(including receipt by telecopy) of such Notice of Conversion shall
be the Conversion Date.
4.
(a)
The Holder of this
Note is entitled, at its option, and after full cash payment for
the shares convertible hereunder,
to convert all or any amount of
the principal face amount of this Note then outstanding into shares
of the Company's common stock (the "
Common Stock
") at a price
("
Conversion
Price
") for each share of Common Stock equal to 50% of the
lowest
closing bid price
(with a
ceiling of $0.004 per share)
of the Common Stock as reported
on the National Quotations Bureau OTCQB exchange which the
Company’s shares are traded or any exchange upon which the
Common Stock may be traded in the future ("
Exchange
"), for the
twenty
prior
trading days including the day
upon which a Notice of Conversion is received by the Company or its
transfer agent (provided such Notice of Conversion is delivered by
fax or other electronic method of communication to the Company or
its transfer agent after 4 P.M. Eastern Standard or Daylight
Savings Time if the Holder wishes to include the same day closing
price). If the shares have not been delivered within 3 business
days, the Notice of Conversion may be rescinded. Such conversion
shall be effectuated by the Company delivering the shares of Common
Stock to the Holder within 3 business days of receipt by the
Company of the Notice of Conversion. Accrued but unpaid interest
shall be subject to conversion. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded to the nearest whole
share. To the extent the Conversion Price of the Company’s
Common Stock closes below the par value per share, the Company will
take all steps necessary to solicit the consent of the stockholders
to reduce the par value to the lowest value possible under law. The
Company agrees to honor all conversions submitted pending this
increase.
In the event the Company
experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to 40% instead of 50% while that
“Chill” is in effect.
In no event shall the
Holder be allowed to effect a conversion if such conversion, along
with all other shares of Company Common Stock beneficially owned by
the Holder and its affiliates would exceed 9.9% of the outstanding
shares of the Common Stock of the Company. The conversion discount
and lookback period will be adjusted downward (i.e. for the benefit
of the Holder) if the Company offers a more favorable conversion
discount (whether via interest, rate OID or otherwise) or lookback
period to another party while this note is in effect and the Holder
will also get the benefit of any other term (for a example a higher
prepay or a lower fixed conversion price) granted to any third
party while this Note is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid
at the rate of 8% per annum. Interest shall be paid by the Company
in Common Stock ("Interest Shares"). The dollar amount converted
into Interest Shares shall be all or a portion of the accrued
interest calculated on the unpaid principal balance of this Note to
the date of such notice.
(c)
This Note may not be redeemed or
prepaid.
(d)
Upon (i) a transfer of all or substantially all of the assets of
the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital
reorganization or other change or exchange of outstanding shares of
the Common Stock, or (iii) any consolidation or merger of the
Company with or into another person or entity in which the Company
is not the surviving entity (other than a merger which is effected
solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a
"Sale Event"), then, in each case, the Company shall, upon request
of the Holder, redeem this Note in cash for 150% of the principal
amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may
convert the unpaid principal amount of this Note (together with the
amount of accrued but unpaid interest) into shares of Common Stock
immediately prior to such Sale Event at the Conversion
Price.
(e)
In case of any Sale Event in connection with which this Note is not
redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right
thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other
securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the
consideration received by the holders of Common Stock is other than
cash, the value shall be as determined by the Board of Directors of
the Company or successor person or entity acting in good
faith.
5.
No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and
rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for
payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and
diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the
payment of all sums owing and to be owing hereto.
7.
The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees and expenses, which may be incurred by
the Holder in collecting any amount due under this
Note.
8.
If one or more of the following described "Events of Default" shall
occur:
(a)
The Company shall default in the payment of principal or interest
on this Note or any other note issued to the Holder by the Company;
or
(b)
Any of the representations or warranties made by the Company herein
or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this Note, or the
Securities Purchase Agreement under which this note was issued
shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any
covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder;
or
(d)
The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for
its dissolution; (4) apply for or consent to the appointment of a
trustee, liquidator or receiver for its or for a substantial part
of its property or business; (5) file a petition for bankruptcy
relief, consent to the filing of such petition or have filed
against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty (30)
days after such appointment; or
(f)
Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial portion
of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or
similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any
of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(h)
defaulted on or breached any term of any other note of similar debt
instrument into which the Company has entered and failed to cure
such default within the appropriate grace period; or
(i)
The Company shall have its Common Stock delisted from an exchange
(including the OTCBB exchange) or, if the Common Stock trades on an
exchange, then trading in the Common Stock shall be suspended for
more than 10 consecutive days;
(j)
If a majority of the members of the Board of Directors of the
Company on the date hereof are no longer serving as members of the
Board;
(k)
The Company shall not deliver to the Holder the Common Stock
pursuant to paragraph 4 herein without restrictive legend within 3
business days of its receipt of a Notice of Conversion;
or
(l)
The Company shall not replenish the reserve set forth
in Section 12, within 3 business days of the request of the
Holder.
(m)
The Company shall not be “current” in its filings with
the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock in
a market (including the OTCQB marketplace or other
exchange).
Then,
or at any time thereafter, unless cured within 5 days, and in each
and every such case, unless such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed
to be a waiver of any subsequent default) at the option of the
Holder and in the Holder's sole discretion, the Holder may consider
this Note immediately due and payable, without presentment, demand,
protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything
herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately, and
without expiration of any period of grace, enforce any and all of
the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law. Upon an Event of Default,
interest shall accrue at a default interest rate of 24% per annum
or, if such rate is usurious or not permitted by current law, then
at the highest rate of interest permitted by law. In the event of a
breach of Section 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4
th
day after the
conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10
th
day. The penalty
for a breach of Section 8(n) shall be an increase of the
outstanding principal amounts by 20%. In case of a breach of
Section 8(i), the outstanding principal due under this Note shall
increase by 50%. Further, if a breach of Section 8(m) occurs or is
continuing after the 6 month anniversary of the Note, then the
Holder shall be entitled to use the lowest closing bid price during
the delinquency period as a base price for the conversion. For
example, if the lowest closing bid price during the delinquency
period is $0.01 per share and the conversion discount is 50% the
Holder may elect to convert future conversions at $0.005 per share.
If this Note is not paid at maturity, the outstanding principal due
under this Note shall increase by 10%.
If the
Holder shall commence an action or proceeding to enforce any
provisions of this Note, including, without limitation, engaging an
attorney, then if the Holder prevails in such action, the Holder
shall be reimbursed by the Company for its attorneys’ fees
and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or
proceeding.
Make-Whole for
Failure to Deliver Loss. At the Holder’s election, if the
Company fails for any reason to deliver to the Holder the
conversion shares by the by the 3rd business day following the
delivery of a Notice of Conversion to the Company and if the Holder
incurs a Failure to Deliver Loss, then at any time the Holder may
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Failure to Deliver Loss and the
Company must make the Holder whole as follows:
Failure
to Deliver Loss = [(High trade price at any time on or after the
day of exercise) x (Number of conversion shares)]
The
Company must pay the Failure to Deliver Loss by cash payment, and
any such cash payment must be made by the third business day from
the time of the Holder’s written notice to the
Company.
9.
In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining
provisions of this Note will not in any way be affected or impaired
thereby.
10.
Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed
by the Company and the Holder.
11.
The Company represents that it is not a “shell” issuer
and has never been a “shell” issuer or that if it
previously has been a “shell” issuer that at least 12
months have passed since the Company has reported form 10 type
information indicating it is no longer a “shell issuer.
Further. The Company will instruct its counsel to either (i) write
a 144 opinion to allow for salability of the conversion shares or
(ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions
reserving 213,333,000 shares of its Common Stock for conversions
under this Note (the “Share Reserve”). The reserve
shall be replenished as needed to allow for conversions of this
Note. Upon full conversion of this Note, any shares remaining in
the Share Reserve shall be cancelled. The Company shall pay all
costs associated with issuing and delivering the shares. If such
amounts are to be paid by the Holder, it may deduct such amounts
from the Conversion Price. Conversion Notices may be sent to the
Company or its transfer agent via electric mail. The company should
at all times reserve a minimum of four times the amount of shares
required if the note would be fully converted. The Holder may
reasonably request increases from time to time to reserve such
amounts.
13.
The Company will give the Holder direct notice of any corporate
actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as
soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the
laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon
the successors and assigns of each party hereto. The Holder and the
Company hereby mutually waive trial by jury and consent to
exclusive jurisdiction and venue in the courts of the State of New
York or in the Federal courts sitting in the county or city of New
York. This Agreement may be executed in counterparts, and the
facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by an officer thereunto duly authorized.
|
FRIENDABLE,
INC
|
|
|
|
|
|
/s/
Robert
A Rositano Jr.
|
|
|
By: Robert A
Rositano Jr.
|
|
|
Title:
CEO
|
|
EXHIBIT A
NOTICE
OF CONVERSION
(To be
Executed by the Registered Holder in order to Convert the
Note)
The
undersigned hereby irrevocably elects to convert $___________ of
the above Note into _________ Shares of Common Stock of Friendable,
Inc. (“Shares”) according to the conditions set forth
in such Note, as of the date written below.
If
Shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date of Conversion:
__________________________________________________________________________________
|
Applicable Conversion Price:
__________________________________________________________________________
|
Signature:
__________________________________________________________________________________________
|
|
[Print Name of Holder and Title of Signer]
|
Address:
___________________________________________________________________________________________
|
___________________________________________________________________________________________
|
|
SSN or EIN:
___________________________
|
Shares are to be registered in the following name:
__________________________________________________________________________
|
|
Name:
_____________________________________________________________________________________________
|
Address:
___________________________________________________________________________________________
|
Tel:
________________________________________________
|
Fax:
________________________________________________
|
SSN or EIN:
_________________________________________
|
|
Shares are to be sent or delivered to the following account:
|
|
Account Name:
_______________________________________________________________________________________
|
Address:
_____________________________________________________________________________________________
|
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this
“Agreement”), dated as of February 2, 2017, is entered
into by and between FRIENDABLE, INC., a Nevada corporation
(the “Company”), and
EMA
Financial, LLC, a Delaware limited liability company (the
“Purchaser”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act” or “1933 Act”), and Rule
506 promulgated thereunder
by the
United States Securities and Exchange Commission (the
“SEC”)
, the Company desires to issue and sell to
the Purchaser, and the Purchaser desires to purchase from the
Company
a 8% Convertible Note of the
Company, in the form attached hereto as Exhibit A, in the principal
amount of $159,750.00 (together with any note(s) issued in
replacement thereof or as interest thereon or otherwise with
respect thereto in accordance with the terms thereof, the
“Note”), convertible into shares (“Conversion
Shares”) of common stock, $0.0001 par value per share (the
“Common Stock”), of the Company, upon the terms and
subject to the limitations and conditions set forth in such
Note.
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 the Purchaser agree as follows:
1.
Purchase and Sale of Note.
a)
Purchase of
Note
. On the Closing Date (as
defined below), the Company shall issue and sell to the Purchaser,
and the Purchaser agrees to purchase from the Company, the Note for
an aggregate purchase price of $159,750.00 (“Purchase
Price”).
b)
Form of
Payment
. On the Closing Date
(i) the Purchaser shall pay the Purchase Price by wire transfer of
immediately available funds to the Company, in accordance with the
Company’s written wiring instructions, simultaneously with
delivery of the Note, and (ii) the Company shall deliver such Note
duly executed on behalf of the Company to the Purchaser,
simultaneously with delivery of such Purchase
Price.
c)
Closing
Date
. Subject to the
satisfaction (or written waiver) of the conditions thereto set
forth in Section 6 and Section 7 below, the closing of the
transactions contemplated by this Agreement (the
“Closing”) shall occur on the first business day
following the date hereof or such other mutually agreed upon time
(the “Closing Date”) at the offices of
Purchaser’s counsel.
2.
Purchaser’s
Representations and Warranties.
The Purchaser represents and warrants to the
Company that:
a)
Investment
Purpose
.
Purchaser is acquiring
the Securities for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution
thereof in violation of applicable securities laws; provided,
however, by making the representations herein, Purchaser does not
agree, or make any representation or warranty, to hold any of the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the
1933 Act. The Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. The Purchaser does not
presently have any agreement or understanding, directly or
indirectly, with any person to distribute any of the Securities in
violation of applicable securities laws.
b)
Accredited Investor
Status
. The Purchaser is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D (an “Accredited
Investor”).
c)
Reliance on
Exemptions
. The Purchaser
understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the
Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the
Securities.
d)
Information
.
The Purchaser and its advisors, if any, have been, and for so long
as the Securities remain outstanding will continue to be, furnished
with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities which have been reasonably requested by the
Purchaser or its advisors, provided that the Purchaser has not been
furnished with, and the Company shall not in the future deliver to
the Purchaser without its consent, any material non-public
information concerning the Company. The Purchaser and its advisors,
if any, have been, and for so long as the Securities remain
outstanding will continue to be, afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigation conducted by Purchaser or any of its
advisors or representatives shall modify, amend or affect
Purchaser’s right to rely on the Company’s
representations and warranties contained in Section 3 below. The
Purchaser understands that its investment in the Securities
involves a significant degree of risk.
e)
Governmental
Review
. The Purchaser
understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the
Securities.
f)
Transfer or
Re-sale
. The Purchaser
understands that (i) the sale or re-sale of the Securities has not
been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be
transferred unless (a) the Securities are sold pursuant to an
effective registration statement under the 1933 Act, (b) the
Purchaser shall have delivered to the Company an opinion of counsel
that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the
securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion
shall be reasonably acceptable to the Company, (c) the Securities
are sold or transferred to an “affiliate” (as defined
in Rule 144 promulgated under the 1933 Act (or a successor rule)
(“Rule 144”) of the Purchaser who agrees to sell or
otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule)
(“Regulation S”) and the Purchaser shall have delivered
to the Company an opinion of counsel reasonably acceptable to the
Company relating to such Regulation S; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in
accordance with the terms of such Rule and further, if such Rule is
not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with
a bona fide margin account or other lending
arrangement.
g)
Legends
.
The
Purchaser understands
that the Securities have been issued (or will be issued in the case
of the Conversion Shares) pursuant to an exemption from
registration or qualification under the 1933 Act and applicable
state securities laws, and except as set forth below, the
Securities shall bear any legend as required by the “blue
sky” laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be
placed against transfer of such stock
certificates):
“
NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE
HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel at the
Company’s expense, in the form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without
registration under the 1933 Act, which opinion shall be reasonably
accepted by the Company so that the sale or transfer is effected.
The Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery
requirements, if any.
h)
Authorization;
Enforcement
. This Agreement has
been duly and validly authorized. This Agreement has been duly
executed and delivered on behalf of the Purchaser, and this
Agreement constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its
terms.
3.
Representations
and Warranties of the Company
.
The Company represents and warrants to the Purchaser, as of the
date hereof and the Closing Date, that:
a)
Organization and
Qualification
. The Company and
each of its Subsidiaries (as defined below), if any, is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. Schedule
3(a) sets forth a list of all of the Subsidiaries of the Company
and the jurisdiction in which each is incorporated. The Company and
each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in
which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except
where the failure to be so qualified or in good standing would not
have a Material Adverse Effect. “Material Adverse
Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company
or its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith.
“Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest.
b)
Authorization;
Enforcement
. (i) The Company
has all requisite corporate power and authority to enter into and
perform this Agreement and the Note and to consummate the
transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement and the Note by the
Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation, the issuance of
the Note and the issuance and reservation for issuance of the
Conversion Shares issuable upon conversion and exercise thereof)
have been duly authorized by the Company’s Board of Directors
and no further consent or authorization of the Company, its Board
of Directors, or its shareholders is required, (iii) this Agreement
has been duly executed and delivered by the Company by its
authorized representative, and such authorized representative is
the true and official representative with authority to sign this
Agreement and the other documents executed in connection herewith
and bind the Company accordingly, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Note and each of such instruments will constitute, a legal, valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms.
c)
Capitalization
.
As of the date hereof, the authorized capital stock of the Company,
and number of shares issued and outstanding, is as set forth in the
Company’s most recent periodic report filed with the SEC.
Except as disclosed on Schedule 3(c) hereof, no shares are reserved
for issuance pursuant to the Company’s stock option plans.
Except as disclosed in the SEC Documents no shares are reserved for
issuance pursuant to securities exercisable for, or convertible
into or exchangeable for shares of Common Stock. All of such
outstanding shares of capital stock are, or upon issuance will be,
duly authorized, validly issued, fully paid and non-assessable. No
shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. As of the effective date of this
Agreement, and except as disclosed in the SEC Documents, (i) there
are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities, notes or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of any of the Securities. The Company has
furnished to the Purchaser true and correct copies of the
Company’s Certificate of Incorporation as in effect on the
date hereof (“Certificate of Incorporation”), the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect
thereto.
d)
Issuance of
Shares
. The Conversion Shares
are duly authorized and reserved for issuance and, upon conversion
of the Note, as the case may be, in accordance with their
respective terms, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.
e)
Acknowledgment of
Dilution
. The Company’s
executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the
Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company’s equity or rights
to receive equity of the Company. The board of directors
of the Company has concluded, in its good faith business judgment
that the issuance of the Securities is in the best interests of the
Company. The Company specifically acknowledges that its
obligation to issue the Conversion Shares upon conversion of the
Notes is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other
stockholders of the Company or parties entitled to receive equity
of the Company.
f)
No
Conflicts
. The execution,
delivery and performance of this Agreement, the Note by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares)
will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws, or (ii)
violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse
of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party and that
is not filed as an SEC Document or other document filed with the
SEC, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject)
applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect). Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or
failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party or by which any property or assets of
the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Purchaser owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Note in accordance with
the terms hereof or thereof or to issue and sell the Securities in
accordance with the terms hereof and thereof and to issue the
Conversion Shares. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant
to the preceding sentence have been obtained or effected on or
prior to the date hereof. The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the
“OTCBB”), or OTCQB, or OTC Pink and does not reasonably
anticipate that the Common Stock will be delisted by the OTCBB, or
OTCQB, or OTC Pink in the foreseeable future. The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
g)
SEC Documents;
Financial Statements
. The
Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the
“SEC Documents”). Upon written request the Company will
deliver to the Purchaser true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As
of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Exchange
Act of 1934, as amended (“1934 Act” or “Exchange
Act”), and none of the SEC Documents, at the time they were
filed with the SEC, 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
light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents
is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in
subsequent filings prior the date hereof). As of their respective
dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied,
during the periods involved and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business, and
(ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act.
h)
Absence of Certain
Changes
. Since November 15,
2016, there has been no material adverse change and no material
adverse development in the assets, liabilities, business,
properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries.
i)
Absence of
Litigation
. There is no action,
suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect. Schedule 3(i) contains a complete list and summary
description of any pending or, to the knowledge of the Company,
threatened proceeding against or affecting the Company or any of
its Subsidiaries, without regard to whether it would have a
Material Adverse Effect. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any
of the foregoing.
j)
Patents, Copyrights,
etc
. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to
conduct its business as now operated (and, as presently
contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company’s knowledge threatened, which challenges the
right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its
business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current
and intended products, services and processes do not infringe on
any Intellectual Property or other rights held by any person and/or
entity; and the Company is unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and each
of its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their
Intellectual Property.
k)
No Materially Adverse
Contracts, Etc
. Neither the
Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the
judgment of the Company’s officers has or is expected to have
a Material Adverse Effect.
l)
Tax
Status
. The Company and each of
its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and 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, except those being contested in good faith and has
set aside on its books provisions reasonably adequate for the
payment of all 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 know
of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of the Company’s tax returns is presently being
audited by any taxing authority.
m)
Certain
Transactions
. Except for
arm’s length transactions pursuant to which the Company or
any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of
its Subsidiaries could obtain from third parties and other than the
grant of any stock options disclosed on Schedule 3(c), none of the
officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner.
n)
Disclosure
.
All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the
Purchaser pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed.
o)
Acknowledgment
Regarding Purchaser’ Purchase of
Securities
. The Company
acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm’s length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by the Purchaser or any
of its respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or
a recommendation and is merely incidental to the Purchaser’s
purchase of the Securities.
p)
No Integrated
Offering
. 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 in any
security or solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act of
the issuance of the Securities to the Purchaser. The issuance of
the Securities to the Purchaser will not be integrated with any
other issuance of the Company’s securities (past, current or
future) for purposes of any shareholder approval provisions
applicable to the Company or its securities.
q)
Brokers
.
The
Company hereby represents and warrants that it has not
hired, retained or dealt with any broker, finder, consultant,
person, firm or corporation in connection with the negotiation,
execution or delivery of this Agreement or the transactions
contemplated hereunder. The Company covenants and agrees that
should any claim be made against Purchaser for any commission or
other compensation by any broker, finder, person, firm or
corporation, including without limitation, the Broker, based upon
the Company’s engagement of such person in connection with
this transaction, the Company shall indemnify, defend and hold
Purchaser harmless from and against any and all damages, expenses
(including attorneys’ fees and disbursements) and liability
arising from such claim. The Company shall pay the commission of
the Broker, to the attention of the Broker, pursuant to their
separate agreement(s) between the Company and the
Broker.
r)
Permits;
Compliance
. The Company and
each of its Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the
“Company Permits”), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. Neither the Company nor
any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. Since November 15, 2016, neither the Company nor
any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have
a Material Adverse Effect.
s)
Environmental
Matters
.
i.
There
are, to the Company’s knowledge, with respect to the Company
or any of its Subsidiaries or any predecessor of the Company, no
past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company’s knowledge, threatened in connection with any of
the foregoing. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.
ii.
Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company’s or any of its Subsidiaries’
business.
iii.
There
are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
t)
Title to
Property
. The Company and its
Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(t) or such as would not have a Material Adverse Effect.
Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a
Material Adverse Effect.
u)
Insurance
.
The Company and its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such coverage amounts as are prudent and customary in the
businesses in which the Company is engaged, including, but not
limited to, directors and officers insurance coverage with coverage
amounts that are at least equal to the aggregate Purchase Price.
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.
v)
Internal Accounting
Controls
. Except as disclosed
in the SEC Documents, the Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in
the judgment of the Company’s board of directors, 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
generally accepted accounting principles 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.
w)
Foreign Corrupt
Practices
. Neither the Company,
nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of,
the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
x)
Solvency
.
Except as disclosed in the SEC Documents, the Company (after giving
effect to the transactions contemplated by this Agreement) is
solvent (
i.e.
,
its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the
Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it
intend to take any action that would impair its ability to, pay its
debts from time to time incurred in connection therewith as such
debts mature.
y)
No Investment
Company
. The Company is not,
and upon the issuance and sale of the Securities as contemplated by
this Agreement will not be, an “investment company”
required to be registered under the Investment Company Act of 1940
(an “Investment Company”). The Company is not
controlled by an Investment Company.
z)
No “Shell”
. The
Company is not
,
and has not
at any time previously been a Shell Company, as defined in Rule
144.
aa)
Bad Actor
. No officer or
director of the Company would be disqualified under Rule 506(d) of
the Securities Act as amended on the basis of being a “bad
actor” as that term is established in the in the September
19, 2013 Small Entity Compliance Guide published by the Securities
and Exchange Commission.
a)
Best
Efforts
. The parties shall use
their best efforts to satisfy timely each of the conditions
described in Section 6 and 7 of this Agreement.
b)
Form D; Blue Sky
Laws
. 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 to the Purchaser
promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the
Purchaser at the applicable closing pursuant to this Agreement
under applicable securities or “blue sky” laws of the
states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so
taken to the Purchaser on or prior to the Closing
Date.
c)
Use of
Proceeds
. The Company shall use
the proceeds from the sale of the Securities for general
corporate purposes, marketing and sales, product development, key
personnel recruiting and business development
purposes.
d)
Financial
Information
. Upon written
request of the Purchaser, the Company agrees to send or make
available the following reports to the Purchaser until the
Purchaser transfers, assigns, or sells all of the Securities: (i)
within ten (10) days after the filing (or the applicable deadline
to so file) with the SEC or OTC Markets Group, a copy of its Annual
Report and its Quarterly Reports and any Supplemental Reports; (ii)
within one (1) day after release, copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the
shareholders of the Company, copies of any notices or other
information the Company makes available or gives to such
shareholders. Notwithstanding the foregoing, the Company shall not
disclose any material nonpublic information to the Purchaser
without its consent unless such information is disclosed to the
public prior to or promptly following such disclosure to the
Purchaser.
e)
Listing
.
The Company will obtain and, so long as the Purchaser owns any of
the Securities, maintain the listing and trading of its Common
Stock on the OTCBB, and OTCQB, or OTC Pink or any equivalent
replacement exchange, the NASDAQ Stock Market
(“NASDAQ”), the New York Stock Exchange
(“NYSE”), or the NYSE MKT, f/k/a American Stock
Exchange (“AMEX”), and will comply in all respects with
the Company’s reporting, filing and other obligations under
the bylaws or rules of the Financial Industry Regulatory Authority
(“FINRA”) and such exchanges, as applicable. The
Company shall promptly provide to the Purchaser copies of any
notices it receives from the SEC, OTC Markets Group and any other
exchanges or quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for
listing on such exchanges and quotation systems, provided that it
shall not provide any notices constituting material nonpublic
information.
f)
Corporate
Existence
. So long as the
Purchaser beneficially owns any Securities, the Company shall
maintain its corporate existence and shall not sell all or
substantially all of the Company’s assets, except in the
event of a merger or consolidation or sale of all or substantially
all of the Company’s assets, where the surviving or successor
entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on NASDAQ,
NYSE or AMEX.
g)
No
Integration
. The Company shall
not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the 1933 Act
or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its
securities.
h)
Securities Laws Disclosure;
Publicity
. The Company shall comply with applicable
securities laws by filing a Current Report on Form 8-K, within four
(4) Trading Days following the date hereof, disclosing all the
material terms of the transactions contemplated hereby, if the
Company deems the transactions contemplated hereby to constitute
material non-public information. The Company and Purchaser shall
consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the
Company nor Purchaser shall issue any such press release or
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 Purchaser, with respect to any
press release of the Company, 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.
i)
Non-Public Information
. Except
with respect to the material terms and conditions of the
transactions contemplated by this Agreement, the Company covenants
and agrees that neither it nor any other person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that the Company believes constitutes material
non-public information, unless prior thereto the Purchaser shall
have executed a written agreement regarding the confidentiality and
use of such information. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.
j)
Subsidiaries
. So long as the
Note remains outstanding, the Company shall not transfer any assets
or rights to any of its subsidiaries or permit any of its
subsidiaries to engage in any significant business or operations,
whether such subsidiaries are currently existing or hereafter
created.
k)
Insurance
. So long as the Note
remains outstanding, the Company and its Subsidiaries shall
maintain in full force and effect insurance reasonably believed by
the Company to be adequate coverage (a) on all assets and
activities, covering property loss or damage and loss of income by
fire or other hazards or casualty, and (b) against all liabilities,
claims and risks for which it is customary for companies similarly
situated to the Company to insure, including without limitation
applicable product liability insurance, required workmen’s
compensation insurance, and other insurance covering injury or
damage to persons or property, but excluding directors and officers
insurance coverage. The Company shall promptly furnish or cause to
be furnished evidence of such insurance to the Purchaser, in form
and substance reasonably satisfactory to the
Purchaser.
l)
Par Value
. If the closing bid
price at any time the Note is outstanding falls below
$0.0005
, the Company shall cause the par
value of its Common Stock to be reduced to
$0.00001
or less.
m)
[Intentionally
Omitted]
.
n)
[Intentionally
Omitted]
.
5.
Transfer Agent
Instructions
. Upon receipt of a
duly executed Notice of Conversion, the Company shall issue
irrevocable instructions to its transfer agent to issue
certificates, registered in the name of the Purchaser or its
nominee, for the Conversion Shares in such amounts as specified
from time to time by the Purchaser to the Company upon conversion
of the Note, or any part thereof, in accordance with the terms
thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Company proposes to
replace its transfer agent, the Company shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to this Agreement and the Securities (including but not
limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount (as defined in the Note)) signed by
the successor transfer agent to Company and the Company. Prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to Rule
144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold, all such
certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that: (i) no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion
Shares, prior to registration of the Conversion Shares under the
1933 Act or the date on which the Conversion Shares may be sold
pursuant to Rule 144 without any restriction as to the number of
Securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this
Agreement and the Note; (ii) it will not direct its transfer agent
not to transfer or delay, impair, and/or hinder its transfer agent
in transferring (or issuing)(electronically or in certificated
form) any certificate for Conversion Shares to be issued to the
Purchaser upon conversion of or otherwise pursuant to the Note as
and when required by the Note and this Agreement; and (iii) it will
not fail to remove (or direct its transfer agent not to remove or
impair, delay, and/or hinder its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any Conversion Shares
issued to the Purchaser upon conversion of or otherwise pursuant to
the Note as and when required by the Note and this Agreement.
Nothing in this Section shall affect in any way the
Purchaser’s obligations and agreement set forth in Section
2(g) hereof to comply with all applicable prospectus delivery
requirements, if any, upon re-sale of the Securities. If the
Purchaser provides the Company with (i) an opinion of counsel in
form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and
such sale or transfer is effected or (ii) the Purchaser provides
reasonable assurances that the Securities can be sold pursuant to
Rule 144, the Company shall permit the transfer, and, in the case
of the Conversion Shares, promptly instruct its transfer agent to
issue one or more certificates, free from restrictive legend, in
such name and in such denominations as specified by the Purchaser.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchaser, by
vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5 may be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the
Purchaser shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss
and without any bond or other security being
required.
6.
Injunction Posting
of Bond
. In the
event the Purchaser shall elect to convert the Note or any parts
thereof, the Company may not refuse conversion or exercise based on
any claim that Purchaser or anyone associated or affiliated with
Purchaser has been engaged in any violation of law, or for any
other reason. In connection with any injunction sought or attempted
by the Company, the Company shall be required to post a bond at
least equal to the greater of either: (i) the outstanding principal
amount of the Note; and (ii) the market value of the Conversion
Shares sought to be converted, exercised or issued, based on the
sale price per share of Common Stock on the principal market on
which it is traded.
7.
Delivery of Unlegended
Shares
.
a)
Within three (3) business days (such third
business day being the “
Unlegended Shares Delivery
Date
”) after the business
day on which the Company has received (i) a notice that Conversion
Shares, or any other Common Stock held by the Purchaser has been
sold pursuant to a registration statement or Rule 144 under the
1933 Act, (ii) a representation that the prospectus delivery
requirements, or the requirements of Rule 144, as applicable and if
required, have been satisfied, (iii) the original share
certificates representing the shares of Common Stock that have been
sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Purchaser and, if required,
Purchaser’s broker regarding compliance with the requirements
of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its
transfer agent (with copies to Purchaser) an appropriate
instruction and opinion of such counsel, directing the delivery of
shares of Common Stock without any legends including the legend set
forth in Section 4(
h
) above (the
“
Unlegended
Shares
”); and (z) cause
the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the
balance of the submitted Common Stock certificate, if any, to the
Purchaser at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date.
b)
The Company understands that a delay in the
delivery of the Unlegended Shares later than the Unlegended Shares
Delivery Date could result in economic loss to the Purchaser. As
compensation to Purchaser for such loss, the Company agrees to pay
late payment fees (as liquidated damages and not as a penalty) to
the Purchaser for late delivery of Unlegended Shares in the amount
of $1,000.00 per business day after the Unlegended Shares Delivery
Date. If during any three hundred and sixty (360) day period, the
Company fails to deliver Unlegended Shares as required by this
Section for an aggregate of thirty (30) days, then Purchaser or
assignee holding Securities subject to such default may, at its
option, require the Company to redeem all or any portion of the
shares subject to such default at a price per share equal to the
greater of (i) 200% of the most recent closing price of the Common
Stock or (ii) a fraction in which the numerator is the highest
closing price of the Common Stock during the aforedescribed thirty
(30) day period and the denominator of which is the lowest
conversion price during such thirty (30) day period, multiplied by
the conversion price or exercise price, as the case may be
(“
Unlegended Redemption
Amount
”). The Company
shall pay any payments incurred under this Section in immediately
available funds upon demand.
8.
Conditions to the
Company’s Obligation to Sell
. The obligation of the Company hereunder to issue
and sell the Note to the Purchaser at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are
for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:
a)
The
Purchaser shall have executed this Agreement and delivered the same
to the Company.
b)
The
Purchaser shall have delivered the Purchase Price to the
Company.
c)
The
representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Purchaser shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing Date.
d)
No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
9.
Conditions to The
Purchaser’s Obligation to Purchase
. The obligation of the Purchaser hereunder to
purchase the Note at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions,
provided that these conditions are for the Purchaser’s sole
benefit and may be waived by the Purchaser at any time in its sole
discretion:
a)
The
Company shall have executed this Agreement and delivered the same
to the Purchaser.
b)
The
Company shall have delivered to the Purchaser the duly executed
Note (in such denominations as the Purchaser shall request) in
accordance with Section 1 above.
c)
The
Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Purchaser, shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent (a
copy of which written acknowledgment shall be provided to Purchaser
simultaneously with Closing).
d)
The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Purchaser
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Purchaser including, but not limited
to certificates with respect to the Company’s Certificate of
Incorporation, By-laws, incumbency, and Board of Directors’
resolutions relating to the transactions contemplated
hereby.
e)
No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f)
No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g)
The
Conversion Shares shall have been authorized for quotation on the
OTCBB, OTCQB, and OTC Pink and trading of the Common Stock on the
OTCBB, OTCQB, and OTC Pink shall not have been suspended by the SEC
or the OTC Markets Group.
10.
Governing Law;
Miscellaneous
.
a)
Governing
Law
.
This Agreement shall be
governed by and construed in accordance with the laws of the State
of New York without regard to principles of conflicts of laws
thereof or any other State. Any action brought by any
party against any other party hereto concerning the transactions
contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state
and county of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based
upon
forum
non conveniens
.
The
parties executing this Agreement and other agreements referred to
herein or delivered in connection herewith on behalf of the Company
agree to submit to the in personam jurisdiction of such courts and
hereby irrevocably waive trial by
jury.
The prevailing party
shall be entitled to recover from the other party its reasonable
attorney’s fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or
enforceability of any other provision of any
agreement. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in
any suit, action or proceeding in connection with this Agreement or
any other transaction document contemplated hereby 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.
b)
Removal
of Restrictive Legends
. In the
event that Purchaser has any shares of the Company’s Common
Stock bearing any restrictive legends, and Purchaser, through its
counsel or other representatives, submits to the Transfer Agent any
such shares for the removal of the restrictive legends thereon in
connection with a sale of such shares pursuant
to any exemption to the registration requirements under
the Securities Act, and the Company and or its counsel refuses or
fails for any reason (except to the extent that such refusal or
failure is based solely on applicable law that would prevent the
removal of such restrictive legends) to render an opinion of
counsel or any other documents or certificates required for the
removal of the restrictive legends, then the Company hereby agrees
and acknowledges that the Purchaser is hereby irrevocably and
expressly authorized to have counsel to the Purchaser render any
and all opinions and other certificates or instruments which may be
required for purposes of removing such restrictive legends, and the
Company hereby irrevocably authorizes and directs the Transfer
Agent to, without any further confirmation or instructions from the
Company, issue any such shares without restrictive legends as
instructed by the Purchaser, and surrender to a common carrier for
overnight delivery to the address as specified by the Purchaser,
certificates, registered in the name of the Purchaser or its
designees, representing the shares of Common Stock to which the
Purchaser is entitled, without any restrictive legends and
otherwise freely transferable on the books and records of the
Company.
c)
Filing
Requirements
.
From the
date of this Agreement until the Notes are no longer outstanding,
the Company will timely and voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act,
whether or not the Company is then subject to such reporting
requirements, and comply with all requirements related to any
registration statement filed pursuant to this Agreement. The
Company will use reasonable efforts not to take any action or file
any document (whether or not permitted by the 1933 Act or the 1934
Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said acts until the Notes are no longer
outstanding.
The Company will maintain
the quotation or listing of its Common Stock on the OTCBB, OTCQB,
and OTC Pink, NYSE, or NASDAQ Stock Market (whichever of the
foregoing is at the time the principal trading exchange or market
for the Common Stock (the “
Principal
Market
”), and will comply
in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Principal
Market, as applicable. The Company will provide Purchaser with
copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any
Principal Market. As of the date of this Agreement and
the Closing Date, the OTC Pink, is the Principal Market.
Until the Note is no longer outstanding, the Company will continue
the listing or quotation of the Common Stock on a Principal Market
and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Principal Market.
d)
144
Default
. In the event
commencing twelve (12) months after the Closing Date and ending
twenty-four (24) months thereafter, the Purchaser is not permitted
to resell any of the Conversion Shares without any restrictive
legend or if such sales are permitted but subject to volume
limitations or further restrictions on resale as a result of the
unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933
Act or any successor rule (a “
144 Default
”), for any reason except for
Purchasers’ status as an Affiliate or “control
person” of the Company, or as a result of a change in current
applicable securities laws, then the Company shall pay such
Purchaser as liquidated damages and not as a penalty an amount
equal to two percent (2%) of the value of Conversion Shares (based
on the closing sale of the Common Stock) subject to such 144
Default during the pendency of the 144 Default of each thirty day
period thereafter (or portion thereof).
e)
Fees and Expenses
. On or prior
to the Closing, the Company shall pay or reimburse to Purchaser a
non-refundable, non-accountable sum equal to $9,750.00 as and for
the fees, costs and expenses (including without limitation legal
fees and disbursements and due diligence and administrative
expenses) incurred by the Purchaser in connection with the
Purchaser’s due diligence and negotiation, preparation and
execution of the Transaction Documents and consummation of the
Transactions. The Purchaser may withhold and offset the balance of
such amount from the payment of its Purchase Price otherwise
payable hereunder at Closing, which offset shall constitute partial
payment of such Purchase Price in an amount equal to such offset.
Except as expressly set forth in this Agreement or the Note to the
contrary, 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, stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser.
f)
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 the Purchaser in order to enforce any right or remedy
under the Note. Notwithstanding any provision to the contrary
contained in herein or under the Note, it is expressly agreed and
provided that the total liability of the Company under the Note 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 Note or herein
exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law and applicable to the Note 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 Note from the effective date 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 the Purchaser with respect to indebtedness evidenced by
the Note, such excess shall be applied by the 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 the
Purchaser’s election.
g)
Headings
.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.
h)
Severability
.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
i)
Entire Agreement;
Amendments
. This Agreement and
the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein,
neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the
Purchaser.
j)
Notices
.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, email or facsimile, addressed as set forth
below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile or email,
with accurate confirmation generated by the transmitting facsimile
machine or computer, at the address, email or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall
be:
Purchaser:
|
EMA Financial, LLC
|
|
40 Wall Street, Suite 1700
|
|
New York, NY 10005
|
|
Attn: Felicia Preston
|
|
admin@emafin.com
|
|
|
Company:
|
Friendable, Inc.
|
|
1821 S. Beacon Ave, Suite 353
|
|
Campbell, CA 95008
|
|
Attn: Robert A. Rositano Jr., CEO
|
|
Email: ________________
|
|
Fax: ________________
|
Each
party shall provide notice to the other party of any change in
address.
k)
Successors and
Assigns
. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor the Purchaser shall
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the
foregoing, subject to Section 2(f), the Purchaser may assign its
rights hereunder to any person that purchases Securities in a
private transaction from the Purchaser or to any of its
“affiliates,” as that term is defined under the 1934
Act, without the consent of the Company.
l)
Third Party
Beneficiaries
. This Agreement
is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
m)
Survival
.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Purchaser. The
Company agrees to indemnify and hold harmless the Purchaser and all
their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
n)
Further
Assurances
. Each party shall do
and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
o)
No Strict
Construction
. The language used
in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
p)
Remedies
.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchaser by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Purchaser
shall be entitled, in addition to all other available remedies at
law or in equity, and in addition to the penalties assessable
herein, to an injunction or injunctions restraining, preventing or
curing any breach of this Agreement and to enforce specifically the
terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being
required.
q)
Counterparts
. This Agreement
may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed to be an original and all
of which together shall be deemed to be one and the same
agreement.
r)
Signatures
. Any signature
transmitted by facsimile, e-mail, or other electronic means shall
be deemed to be an original signature.
(Remainder of page intentionally left blank)
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first
above written.
FRIENDABLE, INC.
By:
|
/s/
Robert A. Rositano Jr.
|
|
|
Name:
Robert A. Rositano Jr.
|
|
|
Title:
CEO
|
|
EMA FINANCIAL, LLC
By:
|
/s/
Felicia Preston
|
|
Name:
|
Felicia
Preston
|
|
Title:
|
|
|
GUARANTY
Each of
the undersigned subsidiaries of the Company jointly and severally,
absolutely, unconditionally and irrevocably, guarantees to the
Purchaser and their respective successors, indorsees, transferees
and assigns, the prompt and complete payment and performance by the
Company when due (whether at the stated maturity, by acceleration
or otherwise) of all amounts due under, and all other obligations
under, the Note. Each such subsidiary’s liability under this
Guaranty shall be unlimited, open and continuous for so long as
this Guaranty remains in force.
IHOOKUP - DE
By:
/s/ Robert A. Rositano
Jr.
Print
Name/Title: Robert A. Rositano Jr.- CEO
|
|
SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE
AGREEMENT
(the
“Agreement”), dated as of March 13, 2017, by and
between
Friendable,
Inc
, a Nevada corporation, with
headquarters located at 125 E. Campbell Ave, Campbell CA 95008 (the
“Company”), and
Coventry Enterprises,
LLC.
, a Limited Liability
Company, with its address at
80 S.W. 8
th
Street, Suite 2000,
Miami, FL 33130
(the
“Buyer”).
WHEREAS
:
A.
The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933
Act”);
B.
Buyer
desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement an 8%
convertible note of the Company, in the form attached hereto as
Exhibit A in the aggregate principal amount of $32,000.00 (together
with any note(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of
common stock, of the Company (the “Common Stock”), upon
the terms and subject to the limitations and conditions set forth
in such Note.
C.
The
Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and
NOW
THEREFORE
, the Company and the
Buyer severally (and not jointly) hereby agree as
follows:
1.
Purchase
and Sale of Note.
a.
Purchase
of Note
. On the Closing Date
(as defined below), the Company shall issue and sell to the Buyer
and the Buyer agrees to purchase from the Company such principal
amount of Note as is set forth immediately below the Buyer’s
name on the signature pages hereto.
b.
Form
of Payment
. On the Closing Date
(as defined below), the Buyer shall pay the purchase price for the
Note to be issued and sold to it at the Closing (as defined below)
(the “Purchase Price”) by wire transfer of immediately
available funds to the Company, or by the issuance of a full
recourse collateralized promissory note, in accordance with the
Company’s written wiring instructions, against delivery of
the Note in the principal amount equal to the Purchase Price as is
set forth immediately below the Buyer’s name on the signature
pages hereto, and the Company shall deliver such duly
executed Note on behalf of the Company, to the Buyer, against
delivery of such Purchase Price.
c.
Closing
Date
. The date and time of the first issuance and sale of
the Note pursuant to this Agreement (the “Closing
Date”) shall be on or about March 13, 2017 or such other
mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by
the parties.
2.
Buyer’s
Representations and Warranties.
The Buyer represents and warrants to the Company
that:
a.
Investment
Purpose
. As of the date hereof,
the Buyer is purchasing the Note and the shares of Common Stock
issuable upon conversion of or otherwise pursuant to the Note, such
shares of Common Stock being collectively referred to herein as the
“Conversion Shares” and, collectively with the Note,
the “Securities”) for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act;
provided
,
however
,
that by making the representations herein, the Buyer does not agree
to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act.
b.
Accredited
Investor Status
. The Buyer is
an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D (an “Accredited
Investor”).
c.
Reliance
on Exemptions
. The Buyer
understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
d.
Information
.
The Buyer and its advisors, if any, have been, and for so long as
the Note remain outstanding will continue to be, furnished with all
materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as
the Note remain outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
nonpublic information and will not disclose such information unless
such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor
any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree
of risk. The Buyer is not aware of any facts that may constitute a
breach of any of the Company's representations and warranties made
herein.
e.
Governmental
Review
. The Buyer understands
that no United States federal or state agency or any other
government or governmental agency has passed upon or made any
recommendation or endorsement of the
Securities.
f.
Transfer
or Re-sale
. The Buyer
understands that the sale or re-sale of the Securities has not been
and is not being registered under the 1933 Act or any applicable
state securities laws, and the Securities may not be transferred
unless the Securities are sold pursuant to an effective
registration statement under the 1933 Act, the Buyer shall
have delivered to the Company, at the cost of the Buyer, an opinion
of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that
the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion
shall be accepted by the Company, the Securities are sold or
transferred to an “affiliate” (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) (“Rule
144”) of the Buyer who agrees to sell or otherwise transfer
the Securities only in accordance with this Section 2(f) and who is
an Accredited Investor, the Securities are sold pursuant to
Rule 144, or the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) (“Regulation
S”), and the Buyer shall have delivered to the Company, at
the cost of the Buyer, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii)
any sale of such Securities made in reliance on Rule 144 may be
made only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any re-sale of such Securities under
circumstances in which the seller (or the person through whom the
sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person
is under any obligation to register such Securities under the 1933
Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case).
Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in
connection with a
bona
fide
margin account or other lending
arrangement.
g.
Legends
.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S,
within 2 business days, it will be considered an Event of Default
under the Note.
h.
Authorization;
Enforcement
. This Agreement has
been duly and validly authorized. This Agreement has been duly
executed and delivered on behalf of the Buyer, and this Agreement
constitutes a valid and binding agreement of the Buyer enforceable
in accordance with its terms.
i.
Residency
.
The Buyer is a resident of the jurisdiction set forth immediately
below the Buyer’s name on the signature pages
hereto.
3.
Representations
and Warranties of the Company
.
The Company represents and warrants to the Buyer
that:
a.
Organization
and Qualification
. The Company
and each of its subsidiaries, if any, is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned,
leased, used, operated and conducted.
b.
Authorization;
Enforcement
. (i) The Company
has all requisite corporate power and authority to enter into and
perform this Agreement, the Note and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Note by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Note and
the issuance and reservation for issuance of the Conversion Shares
issuable upon conversion or exercise thereof) have been duly
authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or
its shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.
c.
Issuance
of Shares
. The Conversion
Shares are duly authorized and reserved for issuance and, upon
conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not
impose personal liability upon the holder
thereof.
d.
Acknowledgment
of Dilution
. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares upon
conversion of the Note. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Note
in accordance with this Agreement, the Note is absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the
Company.
e.
No
Conflicts
. The execution,
delivery and performance of this Agreement, the Note by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares)
will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or by-laws, or (ii)
violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse
of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the
Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a material adverse
effect). All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company is not in violation of the listing
requirements of the OTC Markets QB (the “OTCQB”) and
does not reasonably anticipate that the Common Stock will be
delisted by the OTCBB in the foreseeable future, nor are the
Company’s securities “chilled” by FINRA. The
Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
f.
Absence
of Litigation
. There is no
action, suit, claim, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its subsidiaries, threatened against or affecting the
Company or any of its subsidiaries, or their officers or directors
in their capacity as such, that could have a material adverse
effect. Schedule 3(f) contains a complete list and summary
description of any pending or, to the knowledge of the Company,
threatened proceeding against or affecting the Company or any of
its subsidiaries, without regard to whether it would have a
material adverse effect. The Company and its subsidiaries are
unaware of any facts or circumstances which might give rise to any
of the foregoing.
g.
Acknowledgment
Regarding Buyer’ Purchase of Securities
. The Company acknowledges and agrees that the
Buyer is acting solely in the capacity of arm’s length
purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the
Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any statement made by
the Buyer or any of its respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental
to the Buyer’ purchase of the Securities. The Company further
represents to the Buyer that the Company’s decision to enter
into this Agreement has been based solely on the independent
evaluation of the Company and its
representatives.
h.
No
Integrated Offering
. 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 in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933
Act of the issuance of the Securities to the Buyer. The issuance of
the Securities to the Buyer will not be integrated with any other
issuance of the Company’s securities (past, current or
future) for purposes of any shareholder approval provisions
applicable to the Company or its securities.
i.
Title
to Property
. The Company and
its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(i) or such as would not have a material adverse effect.
Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a
material adverse effect.
j.
Bad
Actor
. No officer or director
of the Company would be disqualified under Rule 506(d) of the
Securities Act as amended on the basis of being a "bad
actor" as that term is established in the September 19, 2013
Small Entity Compliance Guide published by the Securities and
Exchange Commission.
k.
Breach
of Representations and Warranties by the Company
. If the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of default under the
Note.
4.
COVENANTS
.
a.
Expenses
.
At the Closing, the Company shall reimburse Buyer for expenses
incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith
(“Documents”), including, without limitation,
reasonable attorneys’ and consultants’ fees and
expenses, transfer agent fees, fees for stock quotation services,
fees relating to any amendments or modifications of the Documents
or any consents or waivers of provisions in the Documents, fees for
the preparation of opinions of counsel, escrow fees, and costs of
restructuring the transactions contemplated by the Documents. When
possible, the Company must pay these fees directly, otherwise the
Company must make immediate payment for reimbursement to the Buyer
for all fees and expenses immediately upon written notice by the
Buyer or the submission of an invoice by the
Buyer.
b.
Listing
.
The Company shall promptly secure the listing of the Conversion
Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long
as the Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion
of the Note. The Company will obtain and, so long as the Buyer owns
any of the Securities, maintain the listing and trading of its
Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq
SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange
(“AMEX”) and will comply in all respects with the
Company’s reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority
(“FINRA”) and such exchanges, as applicable. The
Company shall promptly provide to the Buyer copies of any notices
it receives from the OTCQB and any other exchanges or quotation
systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
c.
Corporate
Existence
. So long as the Buyer
beneficially owns any Note, the Company shall maintain its
corporate existence and shall not sell all or substantially all of
the Company’s assets, except in the event of a merger or
consolidation or sale of all or substantially all of the
Company’s assets, where the surviving or successor entity in
such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
d.
No
Integration
. The Company shall
not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the 1933 Act
or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its
securities.
e.
Termination
of Prepay
. The right of the
Company to prepay or redeem any of the existing notes between the
parties is hereby terminated and stricken and none of the existing
notes between the parties may be prepaid or
redeemed.
f.
Breach
of Covenants
. If the Company
breaches any of the covenants set forth in this Section 4, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an event of default under the
Note.
5.
Governing
Law; Miscellaneous
.
a.
Governing
Law
. This Agreement shall be
governed by and construed in accordance with the laws of the State
of New York without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in
the state and county of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon
forum non
conveniens
. The Company and
Buyer waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement 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.
b.
Counterparts;
Signatures by Facsimile
. This
Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c.
Headings
.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.
d.
Severability
.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
e.
Entire
Agreement; Amendments
. This
Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
majority in interest of the Buyer.
f.
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, (iv) via electronic mail
or (v) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such
notice is to be received) or delivery via electronic mail, or the
first business day following such delivery (if delivered other than
on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications
shall be:
If
to the Company, to:
Friendable,
Inc
125
E. Campbell Ave
Campbell,
CA 95008
Attn:
Robert Rositano, CEO
If
to the Buyer:
COVENTRY
ENTERPRISES, LLC
80 S.W.
8
th
Street
Suite
2000
Miami,
FL 33130
Attn:
Jack Bodenstein
Each
party shall provide notice to the other party of any change in
address.
g.
Successors
and Assigns
. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor the Buyer
shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may assign its rights hereunder to any person
that purchases Securities in a private transaction from the Buyer
or to any of its “affiliates,” as that term is defined
under the 1934 Act, without the consent of the
Company.
h.
Third
Party Beneficiaries
. This
Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any
other person.
i.
Survival
.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
j.
Further
Assurances
. Each party shall do
and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
k.
No
Strict Construction
. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any
party.
l.
Remedies
.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being
required.
IN WITNESS WHEREOF, the undersigned Buyer and the Company have
caused this Agreement to be duly executed as of the date first
above written.
Friendable, Inc
By
:
_/s/ Robert A Rositano Jr.
Name: Robert A. Rositano Jr.
Title: CEO
COVENTRY ENTERPRISES, LLC.
By:
/s/ Jack
Bodenstein
Name: Jack Bodenstein
Title: Manager
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of
Note:
$32,000.00
Aggregate Purchase Price:
Note: $32,000.00 less $2,000.00 in legal fees
EXHIBIT A
144 NOTE - $32,000