Document:

cafd-ex101_92.htm

 

Exhibit 10.1

AMENDMENT AND WAIVER NO. 2 TO RIGHT OF FIRST OFFER AGREEMENT

This Amendment and Waiver No. 2 to the Right of First Offer Agreement, dated as of June 28, 2016 (this “Waiver Agreement”), is made and entered into by and between 8point3 Operating Company, LLC, a Delaware limited liability company (the “Operating Company”), and First Solar, Inc., a Delaware corporation (the “Sponsor”).

RECITALS

WHEREAS, the Operating Company and the Sponsor are parties to that certain Right of First Offer Agreement, dated as of June 24, 2015, as amended by that certain Amendment and Waiver thereto, dated as of March 28, 2016 (as so amended, the “ROFO Agreement”);

WHEREAS, pursuant to the ROFO Agreement, and subject to the terms and conditions set forth therein, the Sponsor granted to the Operating Company an exclusive right of first offer to acquire the ROFO Assets, including the 250 MWac Moapa solar generation project located in Clark County, Nevada (the “Project”);

WHEREAS, the Sponsor indirectly owns 100% of the limited liability company membership interests (the “Moapa Interests”) in Moapa Southern Paiute Solar, LLC, which directly owns the Project;

WHEREAS, the Sponsor desires for the Operating Company to waive certain provisions of the ROFO Agreement and, in connection with such waiver, the Sponsor and the Operating Company desire to amend certain provisions of the ROFO Agreement (in each case, as set forth below); and

WHEREAS, (a) the Conflicts Committee (the “Conflicts Committee”) of the Board of Directors (the “Board of Directors”) of 8point3 General Partner, LLC, a Delaware limited liability company and the general partner (“General Partner”) of 8point3 Energy Partners LP, a Delaware limited partnership (the “Partnership”) and the managing member of the Operating Company, has, based on the belief of the members of the Conflicts Committee that the consummation of the transactions contemplated hereby on the terms and conditions set forth in this Waiver Agreement are in the best interests of the Partnership Group (as defined in the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of June 24, 2015 (the “Partnership Agreement”)), unanimously approved the transactions contemplated hereby and such approval constituted “Special Approval” for purposes of the Partnership Agreement, (b) the Conflicts Committee has unanimously recommended that the Board of Directors approve the transactions contemplated hereby, and (c) subsequently, the Board of Directors has approved the transactions contemplated hereby.

 

 

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Waiver Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.01 Definitions. Capitalized terms not otherwise defined herein shall have the meanings given to such terms in the ROFO Agreement. 

1.02 Waiver and Agreement. The Operating Company hereby:

(a) waives its right of first offer and all of its other rights arising under the ROFO Agreement, including Sections 2.1 and 2.2 thereof (collectively, the “ROFO Rights”), with respect to the Moapa Interests; and

(b) (i) agrees that any negotiations by the Sponsor or its Affiliate with any Third Party in respect of any direct or indirect sale or transfer of the Moapa Interests prior to the date hereof shall not have constituted a breach or default under any provision of the ROFO Agreement, including Section 2.1 thereof, and (ii) waives and discharges the Sponsor and its Representatives from any and all claims arising out of the ROFO Agreement in connection with such negotiations.

1.03 Amendment. Annex A of the ROFO Agreement is hereby amended by deleting the table set forth therein in its entirety and replacing it with the table set forth in Annex 1 hereof.

1.04 Limitation. The foregoing waiver, amendment and modification are effective only in the specific instances and for the specific purposes for which they are given, and no other provisions of the ROFO Agreement are waived, amended or modified in any way other than as provided herein.  Except as otherwise expressly provided or contemplated by this Waiver Agreement, all of the terms, conditions and provisions of the ROFO Agreement remain unaltered and in full force and effect and are hereby ratified and confirmed. 

1.05 Representations and Warranties of the Sponsor. The Sponsor hereby represents and warrants to the Operating Company, as of the date hereof, as follows:

(a) The Sponsor has been duly formed and is validly existing and in good standing as a corporation under the Laws of the State of Delaware with all requisite corporate power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its business as presently conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Waiver Agreement.

(b) The Sponsor (i) has all requisite corporate power and authority to execute and deliver this Waiver Agreement and to perform its obligations hereunder, and (ii) has taken all necessary corporate action to authorize the execution, delivery and performance of this Waiver Agreement.

(c) This Waiver Agreement has been duly and validly executed and delivered by the Sponsor and, assuming this Waiver Agreement has been duly and validly authorized, executed and delivered by the Operating Company, constitutes a legal, valid and binding 

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obligation of the Sponsor, enforceable against the Sponsor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws relating to or affecting the enforcement of creditors’ rights in general and by general principles of equity.

(d) The execution, delivery and performance of this Waiver Agreement by the Sponsor will not (i) conflict with or violate any provision of its certificate of incorporation or bylaws, (ii) constitute, with or without notice or the passage of time or both, a material violation, a material breach or default, create a material lien, conflict in any material respect with, or require any material consent or approval, or give rise to any material right of termination, modification, cancellation, prepayment, suspension, limitation, revocation, preemption, right of first refusal (or similar right to purchase) or acceleration under any material indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, loan or credit arrangement to which the Sponsor is a party, or (iii) contravene, in any material respect, any material law.

(e) The execution, delivery and performance of this Waiver Agreement by the Sponsor does not requires any material consent, approval, exemption, waiver, clearance, authorization, filing, registration or notification, of or to any Governmental Entity or other Person, except as has already been obtained, made or waived.

1.06 Representations and Warranties of the Operating Company. The Operating Company hereby represents and warrants to the Sponsor, as of the date hereof, as follows:

(a) The Operating Company has been duly formed and is validly existing and in good standing as a limited liability company under the Laws of the State of Delaware with all requisite limited liability company power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its business as presently conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Waiver Agreement.

(b) The Operating Company (i) has all requisite limited liability company power and authority to execute and deliver this Waiver Agreement and to perform its obligations hereunder, and (ii) has taken all necessary limited liability company action to authorize the execution, delivery and performance of this Waiver Agreement.

(c) This Waiver Agreement has been duly and validly executed and delivered by the Operating Company and, assuming this Waiver Agreement has been duly and validly authorized, executed and delivered by the Sponsor, constitutes a legal, valid and binding obligation of the Operating Company, enforceable against the Operating Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws relating to or affecting the enforcement of creditors’ rights in general and by general principles of equity.

(d) The execution, delivery and performance of this Waiver Agreement by the Operating Company will not (i) conflict with or violate any provision of its certificate of formation or limited liability company agreement, (ii) constitute, with or without notice or the 

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passage of time or both, a material violation, a material breach or default, create a material lien, conflict in any material respect with, or require any material consent or approval, or give rise to any material right of termination, modification, cancellation, prepayment, suspension, limitation, revocation, preemption, right of first refusal (or similar right to purchase) or acceleration under any material indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, loan or credit arrangement to which such Person is a party, or (iii) contravene, in any material respect, any material Law.

(e) The execution, delivery and performance of this Waiver Agreement by such Person does not requires any material consent, approval, exemption, waiver, clearance, authorization, filing, registration or notification, of or to any Governmental Entity or other Person, except as has already been obtained, made or waived.

1.07 Facsimile; Counterparts. Any Party may deliver executed signature pages to this Waiver Agreement by facsimile transmission to the other Parties, which facsimile copy shall be deemed to be an original executed signature page.  This Waiver Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute a single instrument. 

1.08 GOVERNING LAW. THIS WAIVER AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS, TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.  FOR THE AVOIDANCE OF DOUBT, IT IS INTENDED THAT 6 DEL. C. § 2708, WHICH PROVIDES FOR ENFORCEMENT OF DELAWARE CHOICE OF LAW WHETHER OR NOT THERE ARE OTHER RELATIONSHIPS WITH DELAWARE, SHALL APPLY.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

 

 

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IN WITNESS WHEREOF, each of the Parties has caused this Waiver Agreement to be executed and delivered in their names by their respective duly authorized officers or representatives.

 

	
First Solar, Inc.

	
 
	
 
	
 

	
By:
	
 
	
/s/ Mark Widmar

	
 
	
 
	
Name:  Mark Widmar

	
 
	
 
	
Title:    Chief Financial Officer

	
 
	
 
	
 

	
8point3 Operating Company, LLC

	
 
	
 
	
 

	
By: 
	
 
	
8point3 Energy Partners LP, 

its managing member

	
 
	
 
	
 

	
By: 
	
 
	
8point3 General Partner, LLC, 

its general partner

	
 
	
 
	
 

	
By:
	
 
	
/s/ Natalie Jackson

	
 
	
 
	
Name:  Natalie Jackson

	
 
	
 
	
Title:    Vice President

 

 

 

[Amendment & Waiver No. 2  to FS ROFO Agreement]

 

ANNEX 1

ROFO ASSETS

 

	
Project
	
Location
	
Capacity (MWAC)

	
Kingbird 
	
California
	
40

	
California Flats (130)
	
California
	
130

	
California Flats (150)
	
California
	
150

	
Cuyama 
	
California
	
40

	
Stateline
	
California
	
300

	
Switch Station 1
	
Nevada
	
100

	
Switch Station 2
	
Nevada
	
79Exhibit 10.43

 

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: $80,000.00	Issue Date: January 31, 2016
	Debt Settlement Price: $80,000.00	 

 

CONVERTIBLE PROMISSORY
NOTE 

 

Grid Petroleum Corporation, a Nevada
corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Direct Capital Group Inc,
a Nevada corporation, or registered assigns (the “Holder”) the sum of $80,000.00 together with any interest as set
forth herein, on July 31, 2016 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at
the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”)
until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may
not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this
Note, which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof
until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid
and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the
extent not converted into Common free trading stock, $0.00001par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date
on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of Las Vegas, Nevada 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 Debt Settlement Agreement dated the date hereof, pursuant to which this Note was originally issued
(the “Debt Settlement Agreement”).

 

    	 	1	 

     

    

 

This Note is free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The
Holder shall have the right from time to time, and at any time during the period beginning on the date, which is one hundred
eighty (180) days, following the dates listed for each invoice listed in Exhibit B. The Maturity Date for invoice in the
amount of $80,000.00, July 31, 2016 (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in
Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this
Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and
non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price
(the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however,
that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon
conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of
the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock.

 

For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise
provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion
may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower,
and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable
Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A
(the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below;
provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower before 6:00 p.m., Las Vegas, Nevada time on such conversion date (the
“Conversion Date”).

 

    	 	2	 

     

    

 

The term “Conversion Amount” means,
with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any, on the
amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

1.2 Conversion
Price.

 

(a) Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion
Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the
Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Conversion
Price" shall mean par .00001 multiplied by the number of Common Stock converted at the time.

 

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

 

1.3 Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Debt Settlement Agreement. The Borrower is
required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full
conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved
Amount”).

 

    	 	3	 

     

    

 

The Reserved Amount shall be increased from time
to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Debt Settlement Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common
Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance
of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this
Note.

 

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

 

1.4 Method of Conversion.

 

(a) Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time
to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., Las Vegas, Nevada time) and (B)
subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b) Surrender of
Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in
accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event
of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower
will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal
amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

    	 	4	 

     

    

 

(c) Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street
name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been
paid.

 

(d) Delivery of
Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or
other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the
“Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of
this Note) in accordance with the terms hereof and the Debt Settlement Agreement.

 

(e) Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed
to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount
of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on
its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such
conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to
issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance
which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion
Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by
the Borrower before 6:00 p.m., Las Vegas, Nevada 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 to the Holder by crediting the account of Holder’s
Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

    	 	5	 

     

    

 

(g) Failure to
Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon
conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 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 (by written notice
to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower
agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to
frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties
acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5 Concerning the Shares. The
shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been
furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a
successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in
Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and
who is an Accredited Investor (as defined in the Debt Settlement Agreement). Except as otherwise provided in the Debt
Settlement Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock
issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date that can then be immediately sold, each
certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

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

 

    	 	6	 

     

    

 

The legend set forth above
shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6 Effect of
Certain Events.

 

(a) Effect of
Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which
more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall
either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required
to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any
individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b) Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes,
there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of
all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the
Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such
transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the
conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives,
to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior
written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the
consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or
acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

    	 	7	 

     

    

 

(c) Adjustment Due to
Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a
subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any
conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the
amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon
such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.

 

(d) Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed
issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance,
the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive
Issuance.

 

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

 

    	 	8	 

     

    

 

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

 

(e) Share Purchase Rights.
If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to Common
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 Share Purchase
Rights, the aggregate Share 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 Debt
Settlement 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 Debt Settlement Rights.

 

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

 

1.7 Trading Market
Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this
Note and the other Notes issued pursuant to the Debt Settlement Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common
Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the
Closing Date (as defined in the Debt Settlement Agreement), subject to equitable adjustment from time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring
after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions
under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of
Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be
considered an Event of Default under Section 3.3 of the Note.

 

    	 	9	 

     

    

 

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

 

1.9 Prepayment.
Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date
and ending on the date which is ninety (90) days following the issue date, the Borrower shall have the right, exercisable on
not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that
the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three
(3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional
Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the
order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional
Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an
amount in cash (the “Optional Prepayment Amount”) equal to 140%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and
(x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an
Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section 1.9.

 

    	 	10	 

     

    

 

Notwithstanding anything
to the contrary contained in this Note, at any time during the period beginning on the date of the invoices listed on Exhibit B,
which is ninety-one (91) days following the issue date and ending on the date of the invoices listed on Exhibit B, which is one
hundred fifty (150) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading
Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in
accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered
addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which
shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date,
the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder
as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the
Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second
Optional Prepayment Amount”) equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus
(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second
Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding anything
to the contrary contained in this Note, at any time during the period beginning on the date of the invoices listed on Exhibit
B, which is one hundred fifty-one (151) days following the issue date and ending on the date which is one hundred eighty (180)
days following the issue date of the invoices listed on Exhibit B, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued
interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the
Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon
the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional
Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount
in cash (the “Third Optional Prepayment Amount”) equal to 150%, multiplied by the sum of: (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional
Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

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

 

    	 	11	 

     

    

 

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
Repurchase. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower
or any warrants, rights or options to purchase or acquire any such shares.

 

2.3 Borrowings. So long as the
Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of
any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit
or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the
date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c)

borrowings, the proceeds of which shall be used
to repay this Note.

 

2.4 Sale of Assets. So long as
the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any
consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5 Advances and Loans. So
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written
consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date
hereof, (b) made in the ordinary course of business or (c) not in excess of $500,000.

 

    	 	12	 

     

    

 

ARTICLE III. EVENTS OF DEFAULT

 

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

 

3.1 Failure to Pay Principal or
Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity,
upon acceleration or otherwise.

 

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

 

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 Debt Settlement Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder.

 

3.4 Breach of Representations and
Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate
given in writing pursuant hereto or in connection herewith (including, without limitation, the Debt Settlement 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 Debt Settlement Agreement.

 

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

 

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

 

    	 	13	 

     

    

 

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 Stock. The
Borrower shall fail to maintain the listing of the Stock on at least one of the OTCBB or an equivalent replacement exchange,
the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.9 Failure to Comply with the
Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; 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 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 Debt Settlement 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 Debt Settlement 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.

 

    	 	14	 

     

    

 

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, and/or 3. 15 exercisable through the delivery of
written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of
Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon
at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times
the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the
unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus
the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the
“parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of
Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of
determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of
a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of
Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts
payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the
Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

    	 	15	 

     

    

 

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.

 

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, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

     Grid Petroleum Corporation

     412 N. Main Street

     Suite 100

     Buffalo, WY 82834

 

    	 	16	 

     

    

 

If to the Holder:

     Direct Capital Group Inc

     1401 Camino Del Mar #202

     Del
Mar, CA 92014

 

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 Debt Settlement 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 Nevada without regard to principles of
conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of Nevada or in the federal courts located in the state and county of Clark. The
parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and
Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's
fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.

 

Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

    	 	17	 

     

    

 

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

 

4.9 Notice of Corporate
Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification
of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution
or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The
Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously
with the notification to the Holder in accordance with the terms of this Section 4.9.

 

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

 

    	 	18	 

     

    

 

IN WITNESS WHEREOF, Borrower has caused this
Note to be signed in its name by its duly authorized officer this January 31, 2016

 

Grid Petroleum Corporation

 

     By: _Edward Aruda____________

     Edward Aruda

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	19	 

     

    

 

EXHIBIT A

NOTICE OF CONVERSION

 

The undersigned
hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common
Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Grid Petroleum
Corporation, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the
Borrower dated as of January 31, 2016 (the “Note”), as of the date written below. No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

	[  ] 	The Borrower shall electronically
transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with
DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).	 
	 	 	 
	 	Name of DTC Prime Broker:	 
	 	Account Number:	 
	 	 	 
	[  ] 	The undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers
are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:	 
	 	 	 
	 	Direct Capital Group Inc

1401 Camino Del Mar #202

Del Mar, CA 92014

Attention: Certificate Delivery

	 
	 	 	 
	 	Date of Conversion:	 _____________
	 	Applicable Conversion Price:	$.00001
	 	Number of Shares of Common Stock to be Issued	 
	 	   Pursuant to Conversion of the Notes:	_____________
	 	Amount of Principal Balance Due remaining	 
	 	   Under the Note after this conversion:	_____________
	 	 	 
	 	 	 
	 	By:_____________________________	 
	 	Title: President.	 
	 	Date: ______________	 

 

 

    	 	20

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