**Exhibit 10.119**

 

 

SECURITIES PURCHASE AGREEMENT

**Convertible Promissory Notes and Stock PurchaseWarrants**

** **

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”)is made and entered into as of the November 6, 2015, by and between QS Energy, Inc., a Nevada corporation (the “Issuer”)and those individuals and entities who sign and deliver an executed copy of this Agreement to the Issuer (each, a “Purchaser”and collectively, the “Purchasers”), with reference to the following:

 

RECITALS

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A.	Purchasers desireto purchase from Issuer and Issuer desires to sell to Purchaser certain of Issuer’s Convertible Notes, in the aggregate faceamount up to a maximum of Five Million Dollars ($5,000,000) in the form of Exhibit A attached hereto (individually,a “Note” and collectively, the “Notes”), and certain of Issuer’s Stock Purchase Warrants to purchaseup to a certain number of shares of the common stock (the “Common Stock”) of the Issuer equal to 50% of the numberof shares initially issuableon conversion of the Notes, in the form of Exhibit B attachedhereto (individually, the “Warrants” and collectively with the Notes, the “Securities”). The face amountof the Note each Purchaser has committed to purchase, and the amount of the purchase price thereof to be paid to the Issuer bythe Purchaser (a “Commitment”) is listed on the signature page such Purchaser executes and delivers to the Issuer.Minimum Commitment shall be no less than $25,000.

 

B.	Issuer’ssale of the Securities to the Purchasers may be made in reliance upon the provisions of Section 4(a)(2) under the Securities Actof 1933, as amended (the "Securities Act") or Rule 506 of Regulation D promulgated by the Securities and Exchange Commission(the ”SEC”) thereunder, or other applicable rules and regulations of the SEC or upon such other exemption from theregistration requirements of the Securities Act as may be available with respect to the transactions contemplated hereby.

 

C.	At any time whenany amount of principal or interest of the Notes shall be outstanding, such unpaid amounts shall be convertible, at the electionof the Purchaser, into shares of the Issuer’s Common Stock at a price of $0.10 per share (the “Conversion Price”).

 

D.	The Warrantsshall be issued at the same time each Note is issued to the Purchaser hereunder and shall be exercisable at $0.10 per share(the “Exercise Price”), for such number of shares equal to 50% of the result obtained by dividing (i) the faceamount of the Notes issued simultaneously with the Warrant by (ii) the Conversion Price. The Warrants shall expire one (1)year from the date of issuance thereof.

 

AGREEMENT

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NOW THEREFORE, in considerationof the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forthhereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Purchasersand the Issuer hereby agree as follows

 

1.	Purchase of theNotes and Warrants. On the terms and subject to the conditions set forth in this Agreement and in the Notes and Warrants, thePurchasers shall purchase from the Issuer and the Issuer shall sell to the Purchaser the Securities.

 

2.	Purchaser’sRepresentations, Warranties and Covenants. In order to induce the Issuer to sell and issue the Securities to the Purchaserunder one or more exemptions from registration under the Securities Act, the Purchasers, severally and not jointly, represent andwarrant to the Issuer, and covenant with the Issuer, that:

 

(a)	(i) Such Purchaser hasthe requisite power and authority to enter into and perform this Agreement, and each of the other agreements entered into by theparties hereto in connection with the transactions contemplated by this Agreement (collectively, the "Transaction Documents"),and to purchase the Securities in accordance with the terms hereof and thereof.

 

 

(ii)	The execution anddelivery of the Transaction Documents by the Purchaser and the consummation by it of the transactions contemplated thereby havebeen duly and validly authorized by the Purchaser's organizational documents and no further consent or authorization is requiredby the Purchaser.

 

(iii)	The TransactionDocuments have been duly and validly executed and delivered by the Purchaser.

 

(iv)	The Transaction Documents,and each of them, constitutes the valid and binding obligation of the Purchaser enforceable against the Purchaser in accordancewith their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors'rights and remedies.

 

(a)	The execution, deliveryand performance of the Transaction Documents by the Purchaser and the consummation by the Purchaser of the transactions contemplatedthereby will not conflict with or constitute a default under any agreement or instrument to which the Purchaser is a party or bywhich the Purchaser is bound.

 

(b)	The Purchaser is acquiringthe Securities for investment for its own account, and not with a view toward distribution thereof, and with no present intentionof dividing its interest with others or reselling or otherwise transferring or disposing of all or any portion of either the Notesor Warrants. The undersigned has not offered or sold a participation in this purchase of either the Notes or Warrants, and willnot offer or sell any interest therein. The Purchaser further acknowledges that the Purchaser does not have in mind any sale ofeither the Notes or Warrants currently or after the passage of a fixed or determinable period of time or upon the occurrence ornon-occurrence of any predetermined events or consequence; and that it has no present or contemplated agreement, undertaking, arrangement,obligation, indebtedness or commitment providing for or which is likely to compel a disposition of either the Notes or Warrantsand is not aware of any circumstances presently in existence that are likely in the future to prompt a disposition thereof.

 

(e)	The Purchaser acknowledgesthat the Securities have been offered to it in direct communication between itself and the Issuer and not through any advertisement,article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or on theInternet or broadcast over television or radio or presented in any seminar or any other general solicitation or general advertisement.

 

(f)	The Purchaser acknowledgesthat the Issuer has given it access to all information relating to the Issuer’s business that it has requested. The Purchaserhas reviewed all materials relating to the Issuer's business, finance and operations which it has requested and the Purchaser hasreviewed all of such materials as the Purchaser, in the Purchaser’s sole and absolute discretion shall have deemed necessaryor desirable. The Purchaser has had an opportunity ask questions of and to discuss the business, management and financial affairsof the Issuer with the Issuer's management. Specifically but not by way of limitation, the Purchaser acknowledges the Issuer’spublicly available filings made periodically with the SEC, which filings are available at www.sec.gov and which filings the Purchaseracknowledges reviewing or having had the opportunity of reviewing.

 

(g)	The Purchaser acknowledgesthat it has, by reason of its business and financial experience, knowledge, sophistication and experience in financial and businessmatters and in making investment decisions of this type that it is capable of (i) evaluating the merits and risks of an investmentin the Securities and making an informed investment decision in connection therewith; (ii) protecting its own interest; and (iii)bearing the economic risk of such investment for an indefinite period of time for Securities which are not transferable or freelytradable. The undersigned hereby agrees to indemnify the Issuer thereof and to hold each of such persons and entities, and theofficers, directors and employees thereof harmless against all liability, costs or expenses (including reasonable attorneys’fees) arising by reason of or in connection with any misrepresentation or any breach of warranties of the undersigned containedin this Agreement, or arising as a result of the sale or distribution of the Securities or the Common Stock issuable upon conversionof the Notes or exercise of the Warrants, by the undersigned in violation of the Securities Act, the Securities Exchange Act of1934, as amended (the “Exchange Act”), or any other applicable law, either federal or state. This subscription andthe representations and warranties contained herein shall be binding upon the heirs, legal representatives, successors and assignsof the Purchaser.

 

(h)	The Purchaseris familiar with the definition of an "accredited investor" as that term is defined in Rule 501(a) of Regulation D ofthe Securities Act and represents and warrants to the Issuer that it is either (i) an accredited investor at such time it wasoffered the Securities and will be on each date which it converts any of the Notes or exercises any of the Warrants as so definedor (ii) a “qualified institutional buyer” as defined in Rule 144A under the Securities Act. Such Purchaser is notrequired to be registered as a broker-dealer under Section 15 of the Exchange act. If the Purchaser is not a resident of the UnitedStates, the Purchaser is not a “U.S. person[s]” as that term is defined in Rule 902 of Regulation S promulgated underthe Securities Act of 1933, as amended.

 

 

(i)	During the term ofthis Agreement and the other Transaction Documents, the Purchaser will comply with the provisions of Section 9 of the ExchangeAct, and the rules and regulations promulgated thereunder, with respect to transactions involving the Common Stock. Commencingon the date on which the Purchaser received a term sheet from the Company or any representative or agent of the Company (writtenor oral) setting forth the material terms of the transactions contemplated hereunder until the date hereof and during the termof this Agreement and the other Transaction Documents, the Purchaser agrees not to sell the Issuer's Common Stock short or engagein any hedging transactions in the Issuer’s Common Stock, either directly or indirectly, through its affiliates, principals,agents or advisors.

 

(j)	The Purchaser is awarethat the Notes and the Warrants, and the shares of Common Stock issuable upon conversion of the Notes or exercise of the Warrantsare restricted securities as defined under federal securities laws and are not freely tradeable and may only be disposed of incompliance with state and federal securities laws. In connection with any transfer of the Notes and the Warrants, and the sharesof Common Stock issuable upon conversion of the Notes or exercise of the Warrants, other than pursuant to an effective registrationstatement or Rule 144, the Issuer may require the transferor thereof to provide to the Issuer an opinion of counsel, the form andsubstance of which opinion shall be reasonably satisfactory to the Issuer, to the effect that such transfer does not require registrationof such transferred Securities under the Securities Act. Further, the Purchaser understands and acknowledges that any certificatesevidencing the Notes, the Warrants or the shares of Common Stock issuable upon conversion of the Notes or exercise of the Warrantswill be restricted securities and not freely tradeable and will bear the legend in substantially the following form:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATEHAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED FOR SALE UNDER ANY STATE SECURITIES LAWS (COLLECTIVELY,“SECURITIES LAWS”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED FOR SALE UNDERALL APPLICABLE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE SATISFACTORYTO THE ISSUER, ANY SUCH OFFER, SALE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH SECURITIESLAWS.

** **

(k)	The Purchaser understandsand acknowledges that following the purchase of the Notes, the Warrants and any shares of Common Stock issuable upon conversionof the Notes or exercise of the Warrants, each may only be disposed of pursuant to either (i) an effective registration statementunder the Securities Act or (ii) an exemption from the registration requirements of the Securities Act.

 

(l)	The Purchaser understandsand acknowledges that the Issuer has neither filed a registration statement with the SEC or any state authorities nor agreed todo so, nor contemplates doing so in the future for the transactions contemplated by this Agreement or the other Transaction Documents,and in the absence of such a registration statement or exemption, the undersigned may have to hold the Notes, the Warrants andany shares of Common Stock issuable upon conversion of the Notes or exercise of the Warrants, indefinitely and may be unable toliquidate any of them in case of an emergency.

 

(m)	The Purchaser is purchasingthe Notes and Warrants, and will acquire any shares of Common Stock issuable upon conversion of the Notes or exercise of the Warrants,for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise disposeof any of the Notes or the Warrants, or any shares of Common Stock issuable upon conversion of the Notes or exercise of the Warrants,in accordance with the registration provisions of the Securities Act (or pursuant to an exemption from such registration provisions).

 

(n)	The Purchaser is notand will not be required to be registered as a "dealer" under the Exchange Act, either as a result of its execution andperformance of its obligations under this Agreement or otherwise.

 

(o)	The Purchaser understandsand acknowledges that proceeds raised in connection with this Agreement will be used by Issuer for general working capital purposes,including without limitation, the payment of salaries and professional fees, overhead and general administrative expenses.

 

 

(p)	The Purchaser understandsthat it is liable for its own tax liabilities and has obtained no tax advice from the Issuer in connection with the purchase ofthe Securities.

 

(q)	The Purchaser willnot pay or receive any finder’s fee or commission in respect of the consummation of the transactions contemplated by thisAgreement.

 

(r)	Purchaser hereby agreesand acknowledges that it has been informed of the following: (i) there are factors relating to the subsequent transfer of any ofthe Securities or shares of Common Stock underlying the Notes and Warrants that could make the resale of such Securities or sharesof Common Stock underlying the Notes and Warrants difficult; and (ii) there is no guarantee that the Purchaser will realize anygain from the purchase of the Securities. The purchase of the Securities involves a high degree of risk and is subject to manyuncertainties. These risks and uncertainties may adversely affect the Company’s business, operating results and financialcondition. In such an event, the trading price for the Common Stock could decline substantially and Purchaser could lose all orpart of its investment. Purchaser is urged to review the risks identified under the Risk Factors section of Issuer’s Form10-K for the year ended December 31, 2014, as filed with the SEC on March 16, 2015.

 

(s)	Purchaser understandsand acknowledges that the Notes have an implied annual interest rate of 10%, inasmuch as the Notes will be issued and paid in anamount equal to 110% of the Commitment, except that if a Note is not paid on the Maturity Date, which is twelve (12) months fromthe date of issue of the Note, then the balance of the unpaid amount of the Note shall be increased by 10% and the Issuer shallthen commence paying interest thereon at the rate of 10% per annum until all sums due under the Note are paid.

 

 3. Issuer’s Representations, Warranties and Covenants. The Issuer represents and warrants to the Purchaser that:

 

(a)	The Issuer is a corporationduly organized and validly existing in good standing under the laws of the State of Nevada, and has the requisite corporate powerand authorization to own its properties and to carry on its business as now being conducted.

 

(b)         (i) The Issuer hasthe requisite corporate power and authority to enter into and perform this Agreement, and each of the other agreements enteredinto by the parties hereto in connection with the transactions contemplated by the Transaction Documents, and to issue the Notesand Warrants in accordance with the terms hereof and thereof.

 

(ii)	the execution anddelivery of the Transaction Documents by the Issuer and the consummation by it of the transactions contemplated hereby and thereby,including without limitation the reservation for issuance and the issuance of the Notes and Warrants pursuant to this Agreement,have been duly and validly authorized by the Issuer's Board of Directors and no further consent or authorization is required bythe Issuer, its Board of Directors, or its shareholders.

 

 (iii) The Transaction Documents have been duly and validly executed and delivered by the Issuer.

 

(iv)	The TransactionDocuments, and each of them, constitutes the valid and binding obligation of the Issuer enforceable against the Issuer in accordancewith their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors'rights and remedies.

 

(c)	The execution, deliveryand performance of the Transaction Documents by the Issuer and the consummation by the Issuer of the transactions contemplatedthereby will not conflict with or constitute a default under any agreement or instrument to which the Issuer is a party or underany organizational documents of the Purchaser.

 

 4. Closing and Deliverables.

 

(a)	Subject to the provisionsof Section 4(b) below, provided that the Issuer shall have received on or prior to December 31, 2015, (but the Company has theoption to extend this date to January 31, 2016), copies of this Agreement executed by Purchaser, there shall be a closing or closings(each, a “Closing Date”) at which:

 

(i)	Purchaser shall deliver to the Issuerimmediately available funds, by check or by wire transfer (bank wiring instructions to be provided by Issuer on request) in anamount equal to the amount of the Purchaser’s Commitment as set forth beside the name of the Purchaser on the Purchaser’ssignature page hereto. Funds paid to Issuer under this Agreement will be deposited in Issuer’s operating account and usedas working capital.

 

 

(ii)	The Issuer shalldeliver to the Purchaser (x) a Note, in the face amount equal to 110% of the Purchaser’s Commitment and (y) a Warrant topurchase the exercisable amount of the Issuer’s Common Stock at the Exercise Price. The Note and Warrant will be dated asof the Closing Date, as such date may be extended by us.

 

(b)	The Issuer may continueto accept Commitments from Purchasers and issue and sell Securities to Purchasers at Closings on the terms and subject to the conditionsset forth in this Agreement until (i) the aggregate amount of the Commitments equals $5,000,000 or (ii) on or before December 31,2015, but the Company has the option to extend this date to January 31, 2016, whichever shall first occur.

 

 5. Miscellaneous.

 

(a). Each party shall paythe fees and expenses of its own advisers, counsel, accountants and other experts, if any, and all other expenses incurred by suchparty incident to the negotiation, preparation, execution, delivery and performance of the Transactions Documents.

 

(b)	This Agreement maybe executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall becomeeffective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signatureor signature transmitted by e-mail shall be considered due execution and shall be binding upon the signatory thereto with the sameforce and effect as if the signature were an original signature.

 

(c)	The headings of thisAgreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Wheneverrequired by the context of this Agreement, the singular shall include the plural and neutral shall include the masculine and feminine.

 

(d)	If any provision ofthis Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect thevalidity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provisionof this Agreement in any other jurisdiction.

 

(e)	This Agreement andthe Notes and Warrants represent the final agreement between the Purchasers and the Issuer with respect to the terms and conditionsset forth herein, and, the terms of this Agreement and the Notes and Warrants may not be contradicted by evidence of prior, contemporaneous,or subsequent oral agreements of the parties. No provision of this Agreement and the Notes and Warrants may be amended other thanby an instrument in writing signed by the Purchaser and the Issuer, and no provision hereof or thereof may be waived other thanby an instrument in writing signed by the party against whom enforcement is sought.

 

(f)	Any notices or othercommunications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to havebeen delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation oftransmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) day after depositwith a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. Theaddresses and facsimile numbers for such communications shall be:

 

If to the Issuer:

** **

QS Energy, Inc.

735 State Street, Suite 500

Telephone: 805-845-3581

Facsimile: 805-845-4377

 

 

If to a Purchaser:

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To the address set forth on the Purchaser’s signature pagehereto.

 

 

Each party shall provide five (5) days prior written notice to theother party of any change in address or facsimile number.

 

 (g) This Agreement may not be assigned by Purchaser.

 

(h)	This Agreement isintended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, anyother person.

 

(i)	The representationsand warranties of the Purchaser and the Issuer contained herein shall survive each of the Closings and the termination of thisAgreement and the other Transaction Documents.

 

(j)	The Purchaser andthe Issuer shall consult with each other in issuing any press releases or otherwise making public statements with respect to thetransactions contemplated hereby, except that no consultation shall be required if such disclosure is required by law or the rulesand regulations of the SEC.

 

(k). Each party shall doand perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such otheragreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intentand accomplish the purposes of this Agreement and the other Transaction Documents and the consummation of the transactions contemplatedhereby and thereby.

 

(l)	The language usedin this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strictconstruction will be applied against any party, as the parties mutually agree that each has had a full and fair opportunity toreview this Agreement and the other Transaction Documents and seek the advice of counsel on it and them.

 

(m)	The Purchaser andthe Issuer each shall have all rights and remedies set forth in this Agreement and all rights and remedies which such holders havebeen granted at any time under any other agreement or contract and all of the rights which the Purchaser has by law. Any personhaving any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without postinga bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, includingthe recovery of reasonable attorneys’ fees and costs, and to exercise all other rights granted by law.

 

(n)	This Agreement shallbe governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performedwholly within such state.

 

 

 

 

 

 

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IN WITNESS WHEREOF thePurchasers and the Issuer have executed this Agreement as of the date first above written.

 

THE ISSUER

 

**QS ENERGY, INC.**

 

 

By: /s/ Greggory Bigger

        GreggoryBigger

Its:  Chief Executive Officer

 

 

THE PURCHASER

 

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Name (signature)       |   | _______________________________

Amount of Commitment

(U.S. Dollars) |
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Address                |   |                                                                  |
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Phone Number           |   |                                                                  |
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Fax Number             |   |                                                                  |
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Social Security Number |   |                                                                  |
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E-mail Address         |   |                                                                  |

 

 

**CONVERTIBLE NOTE**

** ** 

***THE SECURITIES EVIDENCED BY THIS NOTEHAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED FOR SALE UNDER ANY STATE SECURITIES LAWS (COLLECTIVELY,“SECURITIES LAWS”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED FOR SALE UNDERALL APPLICABLE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE SATISFACTORYTO THE ISSUER, ANY SUCH OFFER, SALE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH SECURITIESLAWS.***

 

| $__________ | _____________, 2015 (“Issuance Date”) |
|-------------|---------------------------------------------------|

 

FOR VALUE RECEIVED, **QSENERGY, INC.**, a corporation organized under the laws of the State of Nevada (the “Company”), promises to pay tothe order of ______________ “Investor”, as that term is defined on the Acknowledgement and Acceptance page of thisConvertible Note (“Note”) (hereafter, together with any subsequent holder hereof, called “Holder”), at“Investor’s Address,” as that term is set forth on such page or at such other place as Holder may direct, theamount noted above, payable in full Twelve (12) Months from the Issuance Date (the “Maturity Date”).

 

If this Note is not paidin full on or prior to the Maturity Date the remaining balance shall be increased by 10% and the Company shall pay interest thereonat the rate of 10% per annum until all sums due hereunder are paid in full.

 

Payments of both principaland interest will be made in immediately available funds in lawful money of the United States of America to the Holder at the Investor’sAddress.

 

This Note is subject tothe following additional provisions:

 

1. The Company shall beentitled to withhold from all payments of principal and/or interest of this Note any amounts required to be withheld under theapplicable provisions of the U.S. Internal Revenue Code of 1986, as amended, or other applicable laws at the time of such payments.

 

2. This Note has beenissued subject to representations, warranties and covenants of the original Holder hereof as contained in that certain SecuritiesPurchase Agreement (“Agreement”) of even date herewith, and subject to all restrictions, terms, conditions and disclosuresin the Agreement, and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended, and applicablestate and other securities laws. Prior to the due presentment for such transfer of this Note, the Company and any agent of theCompany may treat the person in whose name this Note is duly registered on the Company's Note register as the owner hereof forthe purpose of receiving payment as herein provided and all other purposes, whether or not this Note is overdue, and neither theCompany nor any such agent shall be affected by notice to the contrary. The transferee shall be bound, as the original Holder,by the same representations and terms described herein and under the Agreement.

 

3. The Holder may,at such Holder’s option, at any time while any sums are outstanding and unpaid hereunder, convert the then-outstanding principalamount of this Note or any portion thereof, and any interest and any penalties accrued and unpaid thereon (the “ConversionAmount”), ________________ (#) into a number shares of fully paid and nonassessable Common Stock of the Company (the “ConversionShares”) pursuant to the following formula: the Conversion Amount divided by $0.10 (the “Conversion Price”).The Holder may exercise the right to convert all or any portion of the Conversion Amount by delivering to the Company (i) an executedand completed notice of conversion in the form attached to this Note (the "Notice of Conversion") to the Company and(ii) this Note. The business day on which a Notice of Conversion and this Note are delivered to the Company in accordance withthe provisions hereof shall be deemed a "Conversion Date.” The Company will transmit the certificates representing ConversionShares issuable upon such conversion of this Note to the Holder via express courier within a reasonable time after the ConversionDate. No fractional shares shall be issued upon conversion of this Note. The amount of any of the Conversion Amount which is lessthan a whole share of Common Stock shall be paid to the Holder in cash. Any delay due to such circumstance shall not be an eventof default under this Note.

  

 

4. The principal amountof this Note, and any accrued interest thereon, shall be reduced as per that principal amount indicated on the Notice of Conversionupon the proper receipt by the Holder of such Conversion Shares due upon such Notice of Conversion.

 

5. The number of ConversionShares shall be adjusted as follows:

 

a. If the Company shallat any time after the Issuance Date subdivide its outstanding shares of Common Stock into a greater number of shares of CommonStock, the number of Conversion Shares in effect immediately prior to such subdivision shall be proportionately increased, andconversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, theConversion Price in effect immediately prior to such combination shall be proportionately reduced.

 

b.	If the Company shallat any time or from time to time after the Issuance Date makes, or fixes a record date for the determination of holders of CommonStock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each suchevent the number of Conversion Shares issuable upon conversion of this Note shall be proportionately increased; provided, however,that if such record date is fixed and such dividend is not fully paid, or if such distribution is not fully made on the date fixedtherefor, the number of Conversion Shares shall be recomputed to reflect that such dividend was not fully paid or that such distributionwas not fully made.

 

c.	If Company at any timeor from time to time after the Issuance Date makes, or fixes a record date for the determination of holders of Common Stock entitledto receive, a dividend or other distribution payable in securities of Company other than shares of Common Stock, then and in eachsuch event provision shall be made so that Holder shall receive upon exercise of the conversion right of this Note, in additionto the number of shares of Common Stock receivable thereupon, the amount of securities of Company which Holder would have receivedhad the Conversion Amount of this Note been exercised on the date of such event and had it thereafter, during the period from thedate of such event to and including the date of conversion or purchase, retained such securities receivable during such period.

 

d.	If the Common Stockissuable upon the conversion of this Note or option to purchase is changed into the same or a different number of shares of anyclass or classes of stock, whether by recapitalization, reclassification or otherwise (other than a transaction described elsewherein Section 5 of this Note), then, and in any such event, each Holder shall have the right thereafter, upon conversion of this Noteor purchase pursuant to option to receive the kind and amount of stock and other securities and property receivable upon such reorganizationor other change, in an amount equal to the amount that Holder would have been entitled to had it immediately prior to such reorganization,reclassification or change converted this Note, but only to the extent this Note is actually converted, all subject to furtheradjustment as provided herein.

 

6. No provision ofthis Note shall alter or impair the obligation of the Company, which is absolute and unconditional, upon an Event of Default (asdefined below), to pay the principal of, and interest on this Note at the place, time, and rate, and in the coin or currency hereinprescribed.

 

a. Events of Default.Each of the following occurrences is hereby defined as an “Event of Default:”

 

Nonpayment. TheCompany shall fail to make any payment of principal, interest, or other amounts payable hereunder when and as due; or

 

Dissolutions, etc.The Company or any subsidiary shall fail to comply with any provision concerning its existence or any prohibition against dissolution,liquidation, merger, consolidation or sale of assets; or

 

 

Noncompliance withthis Agreement. The Company shall fail to comply in any material respect with any provision hereof, which failure does nototherwise constitute an Event of Default; or

 

Insolvency. Theinstitution of bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcylaw or any law for the relief of debtors shall be instituted by or against Company, which proceedings shall not have been vacatedby appropriate court order within sixty (60) days of such institution.

 

If one or more "Eventsof Default" shall occur, then, or at any time thereafter, and in each and every such case, unless such Event of Default shallhave been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) or curedas provided herein, at the option of the Holder, and in the Holder's sole discretion, the Holder may elect to consider this Note(and all interest through such date) immediately due and payable. In order to so elect, the Holder must deliver written noticeof the election and the amount due to the Company via certified mail, return receipt requested, at the Company’s addressas set forth herein (or any other address provided to the Holder), and thereafter the Company shall have thirty (30) business daysupon receipt to cure the Event of Default or pay this Note, or convert the amount due on the Note pursuant to the conversion formulaset forth above.

 

7. In case any provisionof this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, suchprovision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and thevalidity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

8. This Note does not entitlethe Holder hereof to any voting rights or other rights as a shareholder of the Company prior to the conversion into Common Stockthereof, except as provided by applicable law. If, however, at the time of the surrender of this Note and conversion the Holderhereof shall be entitled to convert this Note, the Conversion Shares so issued shall be and be deemed to be issued to such holderas the record owner of such shares as of the close of business on the Conversion Date.

 

9. The Holder shall payall issue and transfer taxes and other incidental expenses in respect of the issuance of certificates for Conversion Shares uponthe conversion of this Note, and such certificates shall be issued in the name of the Holder of this Note.

 

10. This Note may be prepaidin whole or in part at any time or from time to time without premium or penalty upon 10 days’ prior written notice from theCompany to the Holder.

 

11. Upon receipt by theCompany of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and in case of loss,theft or destruction of this Note, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amountto the Company or, in the case of any such mutilation, upon surrender and cancellation of such Note, and upon reimbursement tothe Company of all reasonable expenses incidental thereto, the Company will make and deliver to the Holder, in lieu thereof, anew Note in substantially identical form.

  

12.	If the last or appointedday for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shallbe a legal holiday in the United States or the State of California, then such action may be taken or such right may be exercisedon the next succeeding business day.

 

13. (a)	This Note shallbe governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performedwholly within such state.

 

(b)	Except as otherwiseprovided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon theparties hereto shall be in writing and, if by e-mail or facsimile transmission, shall be deemed to have been validly served, givenor delivered when sent, and if by personal delivery, shall be deemed to have been validly served, given or delivered upon actualdelivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after depositin the United States mails, as registered or certified mail, with proper postage prepaid and addressed to the party or partiesto be notified.

 

 

(c)	The Holder acknowledgesthat the Conversion Shares acquired upon the exercise of this Note will have restrictions upon its resale imposed by state andfederal securities laws, together with other restrictions, terms, conditions and disclosures as fully set forth in the Agreement.

 

(d)	With regard to anypower, remedy or right provided herein or otherwise available to any party hereunder (i) no waiver or extension of time shall beeffective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modification or impairmentshall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

 

(e)	 This Note may notbe amended, altered or modified except by a writing signed by the Company and the Holder. 

 

IN WITNESS WHEREOF, the Company has caused thisConvertible Note to be duly executed by an officer thereunto duly authorized.

 

**QS ENERGY, INC.**

**735 State Street, Suite 500**

**Santa Barbara, CA 93101**

** **

 

By /s/ Greggory Bigger

Name: Greggory Bigger

Title:   Chief Executive Officer

 

 

**ACKNOWLEDGED ANDACCEPTED:**

 

 

_______________________________

Investor Name (Signature)

 

 

_______________________________

Print Name

 

_______________________________

 

_______________________________

Investor Address

 

** **

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** **

**NOTICE OF EXERCISE OF CONVERSION RIGHT**

 

TO:	(Company Name)

 

(1)	The undersigned hereby elects to convert$______________ of the attached Note into ______________ shares of Common Stock (the "Shares") of QS Energy, Inc. (“Company”)pursuant to the terms of the attached Note.

 

(2)	Please issue a certificate or certificatesrepresenting the Shares in the name of the undersigned or in such other name as is specified below:

 

|   | _______________________________________________

(Print Name)

 

Address:

_______________________________________________

_______________________________________________

_______________________________________________ |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

  

(3) The undersigned confirms that the Sharesare being acquired for the account of the undersigned for investment only and not with a view to, or for resale in connection with,the distribution thereof and that the undersigned has no present intention of distributing or selling the Shares.

 

(4) The undersigned accepts such sharessubject to the restrictions on transfer and other terms, conditions and disclosures set forth in the attached Note and set forthin that certain Securities Purchase Agreement between the Company and the undersigned dated as of the date of the attached Note.

 

| __________________________

(Date) | __________________________

(Signature)  |
|------------------------------------|------------------------------------------|
|                               |                                     |
|                               | __________________________

(Print Name) |

 

 

 

**STOCK PURCHASE WARRANT**

 

***THIS WARRANT AND ANY SHARES ISSUED UPONITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF*1933, *AS AMENDED (THE "ACT"), AND HAVE BEENACQUIRED FOR INVESTMENT AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITIONOF ANY SHARES ISSUED UPON EXERCISE HEREOF MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINIONOF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. THE TRANSFEROF THIS WARRANT IS RESTRICTED AS SET FORTH HEREIN.***

*** ***

| No. ______ | ______________, 2015 |
|------------|----------------------|

* *

	 	

**QS ENERGY, INC.**

**WARRANT TO PURCHASE COMMON STOCK**

 

VOID AFTER 5:00 P.M. (Pacific Time) ON ______________,2016

 

THIS CERTIFIES that, forthe value received, the holder identified on the last page of this Warrant _____________ (the "Holder") is entitled,upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date of this Warrant and on orprior to 5:00 p.m. P.S.T. on the first anniversary of the date of this Warrant (the "Expiration Time"), but not thereafter,to subscribe for and purchase, from QS ENERGY, INC., a Nevada corporation (the "Company"), up to ________________ (#)shares of the Company's Common Stock (the "Shares") at a purchase price per share equal to $0.10 (the "ExercisePrice").

 

1.	Exercise ofWarrant.

 

The purchase rights representedby this Warrant are exercisable by the Holder, in whole or in part, at any time after the date of this Warrant and before the ExpirationTime by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed at the office of the Company, inSanta Barbara, California (or such other office or agency of the Company as it may designate by notice in writing to the Holderat the address of the Holder appearing on the books of the Company), and upon payment of an amount equal to the aggregate ExercisePrice for the number of Shares thereby purchased (by cash or by check or certified bank check payable to the order of the Companyin an amount equal to the purchase price of the shares thereby purchased); whereupon the Holder shall be entitled to receive astock certificate representing the number of Shares so purchased. The Company agrees that if at the time of the surrender of thisWarrant and purchase of the Shares, and the Holder shall be entitled to exercise this Warrant, the Shares so purchased shall beand be deemed to be issued to such holder as the record owner of such Shares as of the close of business on the date on which thisWarrant shall have been exercised as aforesaid.

 

Upon partial exercise ofthis Warrant, the Holder shall be entitled to receive from the Company a new Warrant in substantially identical form for the purchaseof that number of Shares as to which this Warrant shall not have been exercised. Certificates for Shares purchased hereunder shallbe delivered to the Holder within a reasonable time after the date on which this Warrant shall have been exercised as aforesaid.

  

2. No Fractional Sharesor Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. Withrespect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied bythe Exercise Price shall be paid in cash to the Holder.

 

3. Charges, Taxes andExpenses. The Holder shall pay all issue and transfer taxes and other incidental expenses in respect of the issuance of certificatesfor Shares upon the exercise of this Warrant, and such certificates shall be issued in the name of the Holder of this Warrant.

 

 

4. No Rights as aStockholder. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Companyprior to the exercise hereof.

 

5. Loss, Theft, Destructionor Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destructionor mutilation of this Warrant, and in case of loss, theft or destruction of this Warrant, upon delivery of an indemnity agreementor security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender andcancellation of such Warrant, and upon reimbursement to the Company of all reasonable expenses incidental thereto, the Companywill make and deliver to the Holder, in lieu thereof, a new Warrant in substantially identical form and dated as of such cancellation.

 

6. Saturdays, Sundays,Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or grantedherein shall be a Saturday or a Sunday or shall be a legal holiday in the United States or the State of California, then such actionmay be taken or such right may be exercised on the next succeeding business.

 

7. Merger, Reclassification,etc.

 

(a) Merger, etc. Ifat any time the Company proposes (A) the acquisition of the Company by another entity by means of any transaction or series ofrelated transactions (including, without limitation, any reorganization, merger, consolidation or stock issuance) that resultsin the transfer of fifty percent (50%) or more of the then outstanding voting power of the Company; or (B) a sale of all or substantiallyall of the assets of the Company, then the Company shall give the Holder ten (10) days notice of the proposed effective date ofthe transaction. If, in the case of such acquisition of the Company, and the Warrant has not been exercised by the effective dateof the transaction, this Warrant shall be exercisable into the kind and number of shares of stock or other securities or propertyof the Company or of the entity resulting from such merger or acquisition to which such Holder would have been entitled if immediatelyprior to such acquisition or merger, it had exercised this Warrant. The provisions of this Section 7(a) shall similarly apply tosuccessive consolidations, mergers, sales or conveyances.

  

(b) Reclassification,etc. If the Company at any time shall, by subdivision, combination or reclassification of securities or otherwise, change anyof the securities to which purchase rights under this Warrant exist into the same or a different number of securities of any classor classes, this Warrant shall thereafter be to acquire such number and kind of securities as would have been issuable as the resultof such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior tosuch subdivision, combination, reclassification or other change. If the Shares are subdivided or combined into a greater or smallernumber of Shares, the Exercise Price under this Warrant shall be proportionately reduced in case of subdivision of shares or proportionatelyincreased in the case of combination of shares, in both cases by the ratio which the total number of Shares to be outstanding immediatelyafter such event bears to the total number of Shares outstanding immediately prior to such event.

 

(c) Cash Distributions.No adjustment on account of cash dividends or interest on the Shares or other securities purchasable hereunder will be made tothe Exercise Price under this Warrant.

 

8. Restrictions on Transfer.

 

(a) Restrictions on Transferof Shares. In no event will the Holder make a disposition of this Warrant or the Shares unless and until, if requested by theCompany, it shall have furnished the Company with an opinion of counsel satisfactory to the Company and its counsel to the effectthat appropriate action necessary for compliance with the Securities Act of 1933, as amended (the "Act") relating tosale of an unregistered security has been taken. Notwithstanding the foregoing, the restrictions imposed upon the transferabilityof the Shares shall terminate as to any particular Share when (i) such security shall have been sold without registration in compliancewith Rule 144 under the Act, or (ii) a letter shall have been issued to the Holder at its request by the staff of the Securitiesand Exchange Commission or a ruling shall have been issued to the Holder at its request by such Commission stating that no actionshall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registrationunder the Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that nosubsequent restrictions on transfer are required, or (iii) such security shall have been registered under the Act and sold by theHolder thereof in accordance with such registration.

 

 

(b) Subject to the provisionsof Section 8(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrantwith a properly executed assignment at the principal office of the Company.

 

(c) Restrictive Legends.The stock certificates representing the Shares and any securities of the Company issued with respect thereto shall be imprintedwith legends restricting transfer except in compliance with the terms hereof and with applicable federal and state securities lawssubstantially as follows:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATEHAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF INTHE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THEISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT”.

 

9. Miscellaneous.

 

(a) Governing Law.This Warrant shall be governed by and construed in accordance with the laws of the State of California applicable to contractsmade and to be performed wholly within such state.

 

(b) Restrictions.The Holder acknowledges that the Shares acquired upon the exercise of this Warrant will have restrictions upon its resale imposedby state and federal securities laws.

 

(c) Waivers Strictly Construed.With regard to any power, remedy or right provided herein or otherwise available to any party hereunder (i) no waiver or extensionof time shall be effective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modificationor impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.

 

(d) Modifications.This Warrant may not be amended, altered or modified except by a writing signed by the Company and the Holder of this Warrant.

 

IN WITNESS WHEREOF, QSENERGY, INC. has caused this Warrant to be executed by its duly authorized representative dated as of the date first set forthabove.

 

|  

Holder:

 

_____________________

 

  |  

QS ENERGY, INC.

735 State Street, Suite 500

Santa Barbara, CA 93101

 

By: /s/ Greggory Bigger

Name:	Greggory Bigger

Title:	Chief Executive Officer |
|----------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

**NOTICE OF EXERCISE**

 

TO:	QS ENERGY, INC., a Nevada corporation

 

(1)	The undersignedhereby elects to purchase ______________ shares of Common Stock (the "Shares") of QS Energy, Inc. (“Issuer”)pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicabletransfer taxes, if any.

 

(2) 	Please issue acertificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________________________

(Print Name)

 

Address:

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________

 

(3) 	The undersignedconfirms that he is an “accredited investor” as defined by Rule 501(a) under the Securities Act of 1933, as amended,at the time of execution of this Notice.

 

(4)	The undersignedconfirms that the Shares are being acquired for the account of the undersigned for investment only and not with a view to, or forresale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or sellingthe Shares.

 

(5)	The undersignedaccepts such Shares subject to the restrictions on transfer set forth in the attached Warrant.

 

(6)	The undersignedacknowledges that the Issuer has given it access to all information relating to the Issuer’s business that the undersignedhas requested. The undersigned has reviewed all materials relating to the Issuer’s business, financial condition and operationswhich it has requested and the undersigned has reviewed all of such materials as the undersigned, in the undersigned’s soleand absolute discretion has deemed necessary or desirable. The undersigned has had an opportunity to ask questions of and discussthe business, management and financial affairs of the Issuer with the Issuer’s management. Specifically but not by way oflimitation, the undersigned acknowledges the Issuer’s publicly available filings made periodically with the SEC, which filingsare available at www.sec.gov, and which filings the undersigned acknowledges reviewing or having had the opportunity of reviewing.

 

(7)	The undersignedacknowledges that it has, by reason of its business and financial experience, such knowledge, sophistication and experience infinancial and business matters and in making investment decisions of this type that it is capable of (i) evaluating the meritsand risks of an investment in the Shares and making an informed investment decision in connection therewith; (ii) protecting itsown interest; and (iii) bearing the economic risk of such investment for an indefinite period of time for shares which are nottransferable or freely tradable. The undersigned hereby agrees to indemnify the Issuer and the officers, directors and employeesthereof harmless against all liability, costs or expenses (including reasonable attorneys’ fees) arising by reason of orin connection with any misrepresentation or any breach of warranties or representations of the undersigned contained in this Notice,or arising as a result of the sale or distribution of the Shares issuable upon exercise of the Warrants. The representationsand warranties contained herein shall be binding upon the heirs, legal representatives, successors and assigns of the undersigned.

 

|  

__________________________

(Date) | __________________________

(Signature)  |
|--------------------------------------------|------------------------------------------|
|                                       |                                     |
|                                       |                                     |
|                                       | __________________________

(Print Name) |

 

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