SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 5, 2015
Well Power, Inc.
(Exact name of registrant as specified in its charter)
| Nevada |
000-53985 |
N/A |
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
11111 Katy Freeway-Suite #910
Houston, Texas |
77079 |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (713)
973-5738
|
_____________________________________________________
(Former name or former address, if changed since
last report) |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] |
Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425) |
| |
|
| [ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| [ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| [ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On February 5, 2015, we issued a 10% Original Issue Discount Convertible
Promissory Note in the principal amount of $550,000 (the “Note”) and a Common Stock Purchase Warrants for the purchase
of 2,750,000 shares of our common stock to JDF Capital, Inc. The Note matures on February 5, 2016 and is convertible into shares
of the Company’s common stock at a 50% discount to the lowest daily volume weighted average price (“VWAP”) of
the Company’s common stock for (i) the 20 trading days immediately prior to the Issuance Date or (ii) the 20 trading days
prior to the date of conversion. The conversion price may be reduced if we are not DWAC or DTC FAST eligible.
The holder’s ability to convert the Note is limited in that
it will not be permitted to convert any portion of the Note if the number of shares of our common stock beneficially owned by the
holder and its affiliates, together with the number of shares of our common stock issuable upon any full or partial conversion,
would exceed 9.99% of our outstanding shares of common stock.
The five-year Warrant is exercisable at $0.02 per share and contains
provisions for a cashless exercise.
We received an Initial Advance of $40,500 after the payment of $6,000
in legal fees to legal counsel of JDF Capital, Inc. and the original discount of $3,500. Additional advances up to $450,000 may
be made upon the terms and conditions of the Note.
We agreed to repay a 10% Convertible Promissory Note (the “Iconic
Note”) in the principal amount of $275,000 made on August 6, 2014 with Iconic Holdings, L.L.C. If we fail to repay the Iconic
Note in ten days, it will be an event of default on the Note and an increase to the principal amount of the Note by $50,000.
The Note contain certain representations, warranties, and covenants,
including, among other things, rights to purchase additional notes, penalties for failure to deliver conversion stock and for buy-ins
and price protection for conversions. The Note also contains indemnification provisions, and events of default, and increases in
the amount of the principal and interest rates in the event of such defaults.
The foregoing description of the Note and accompanying transaction
documents is not intended to be complete and is qualified in its entirety by the complete text of the documents, which are filed
as Exhibits 10.1 through 10.3 hereto and are incorporated herein by reference.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.03 - CREATION OF A DIRECT FINANCIAL OBLIGATION
The information provided in Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference.
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 - UNREGISTERED SALES OF EQUITY SECURITIES
The information provided in Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference.
The above securities were issued pursuant to the exemption from
registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated
thereunder. The investors represented to us that they are accredited investors. We believe that the investors had adequate information
about us as well as the opportunity to ask questions and receive responses from our management.
Section 9 – Financial
Statements and Exhibits
Item 9.01 Financial Statements
and Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Well Power, Inc.
/s/ Dan Patience
Dan Patience
President
Date: February 10, 2015
SECURITY PURCHASE
AGREEMENT
THIS
SECURITY PURCHASE AGREEMENT (the "Agreement"), dated as of February 5, 2015, is entered into by and among Well Power,
Inc., a Nevada corporation (the "Company"), and JDF Capital, Inc. (the "Purchaser"). The Company and the Purchaser
are sometimes referred to herein as a "party" and collectively as the "parties".
W I T N E S S
E T H:
WHEREAS,
the Company and the Purchaser are executing and delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation
D (''Regulation D") as promulgated by the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and/or Section 4(a)(2) of the 1933 Act; and
WHEREAS,
the Purchaser wishes to purchase a 12% Original Issue Discount ("OID") Convertible Promissory Note of the Company (the
"Note"), in the original principal amount of $550,000 (subject to adjustment), subject to and upon the terms and conditions
of this Agreement and the Note and acceptance of this Agreement by the Company, on the terms and conditions referred to herein.
NOW
THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
AGREEMENT TO PURCHASE; PURCHASE PRICE.
a.
Purchase.
(i)
Subject to the terms and conditions of this Agreement and the Note (collectively
the "Transaction Documents"), the Purchaser hereby agrees to purchase an original issue discount Note in the aggregate
principal amount of $550,000 (subject to adjustment), together with a Warrant, which Note shall be initially funded and issuable
by February 5, 2015 or at such later date mutually agreed upon the by parties The entire purchase price of the Note is $500,000,
however, the Purchaser is bound by the Note to fund only $50,000 on the Closing Date. Therefore, in this Agreement, the term "Purchase
Amount" refers to the initial amount of $50,000 to be paid on the Closing Date. Subsequent funding of the Note (each
an "Advance"), in accordance with its terms, shall be subject to the terms and conditions of this Agreement.
(ii)
The Note referred to herein shall be in the form of Annex I to this
Agreement.
(iii)
The purchase of the Note, together with the Warrant, by the Purchaser and the
other transactions contemplated hereby are sometimes referred to herein and in the other Transaction Documents as the purchase
and sale of the Securities (as defined below), and are referred to collectively as the "Transactions" .
(iv)
The Purchaser shall deliver the Purchase Amount to counsel for the Purchaser
(the "Escrow Agent"), which advance shall be held in escrow until authorized for release to the Company by written instruction
of the Purchaser.
b.
Certain Definitions.
As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:
"Affiliate"
means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.
"Closing
Date" means the date of the closing of the issuance of Note and the Warrant.
"Common
Stock" means the Company's common stock, $0.001 par value.
"Common
Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation , any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Holder"
means the Person holding the relevant Securities at the relevant time.
"Last
Audited Date" means April 30, 2014.
"Market
Value" means the lowest daily volume weighted average price (VWAP) of the Common Stock for the 20 trading days immediately
prior to the date of this Agreement; provided, however, that the Market Value of the Pledged Securities shall be reviewed every
60 days (each an "Adjustment Date"), or more frequently if the closing price of the Common Stock on any Trading Day
between Adjustment Dates falls below the last computed Market Value by more than 30% (the "Alternative Adjustment Date"),
by the Company and the Purchaser and an appropriate adjustment to the number of Pledged Securities shall be made based upon the
Market Value, which shall be computed as the VWAP of the Common Stock for the 20 Trading Days immediately prior to the Adjustment
Date or the Alternative Adjustment Date.
"Material
Adverse Effect" means an event or combination of events, which individually or i n the aggregate, would reasonably be expected
to (w) adversely affect the legality, validity or enforceability of the Securities or any of the Transaction Documents, (x) have
or result in a material adverse effect on the results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) adversely impair the Company' s ability to perform fully on a timely
basis its obligations under any of the Transaction Documents or the Transactions contemplated thereby, or (z) materially and adversely
affect the value of the rights granted to the Purchaser in the Transaction Documents
"Person"
means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.
"Pledged
Shares" means shares of the Company's Common Stock having a Market Value equal to 400% of the principal amount of the Note
on the Closing Date, each Subsequent Closing Date and, as appropriate, each Adjustment Date.
"Principal
Trading Market" means the Over the Counter Bulletin Board, the OTC Markets or such other market on which the Common Stock
is principally traded at the relevant time.
"Purchaser
Control Person" means each director, executive officer, promoter, and such other Persons as may be deemed in control of the
Purchaser pursuant to Rule 405 under the 1933 Act or Section 20 of the Exchange Act.
"Securities"
means the Note, the Warrant Shares and any shares of Common Stock of the Company that may be issued to the Purchaser in connection
with the conversion of the principal amount and interest accrued thereon and any other agreements between the parties.
"Shares"
means the shares of Common Stock representing any or all of the Common Stock underlying the Note.
"State
of Incorporation "means Nevada.
"Subsequent
Closing Date" means the date of the closing of any subsequent Advance and the issuance of a Warrant in connection therewith.
"Subsidiary''
means any subsidiary of the Company.
"Trading
Day" means any day during which the Principal Trading Market shall be open for business.
"Transfer
Agent'' means, at any time, the transfer agent for the Company's Common Stock.
"Transaction
Documents" means this Purchase Agreement and the Note and includes all ancillary documents referred to in those agreements,
including the Warrant and the Transfer Agent
Instruction.
"Warrant"
mean s a warrant equal to 100% of the shares of Common Stock that would be issuable to the Purchaser upon conversion of the Note.
"Warrant Shares"
means the shares of Common Stock representing any or all of the Common Stock underlying the Warrant.
c.
Form of Payment; Delivery of Note.
(i)
The Purchaser shall pay the Purchase Amount or any Advance by delivering immediately
available good funds in United States Dollars to the Company on the Closing Date or any Subsequent Closing Date, as applicable,
in accordance with the terms of the Note. The Company understands and agrees that the Purchaser may, in the Purchaser's sole discretion,
fund no more than $50,000 or the Purchaser may fund any amount in excess of $50,000, up to and including $500,000.
(ii)
On the applicable Closing Date or Subsequent Closing Date, the Company shall
deliver the Note and the Warrant, duly executed on behalf of the Company, to the Purchaser
(iii)
On the applicable Closing Date or Subsequent Closing Date, the Company shall
deliver to the Transfer Agent an irrevocable instruction reserving the Pledged Securities (the "Transfer Agent Instruction
"), in the form attached hereto as Annex Il, a copy of which will be provided to the Purchaser along with a confirmation
from the Transfer Agent of its receipt of and compliance with the Transfer Agent Instruction.
(iv)
By signing this Agreement , each of the Purchaser and the Company agrees to
all of the terms and conditions of the Transaction Documents, all of the provisions of which are incorporated herein by th is
reference as if set forth in full.
d. Method
of Payment. Payment of the Purchase Amount shall be made by wire transfer of funds to:
2.
PURCHASER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Purchaser represents
and warrants to, and covenants and agrees with, the Company as follows:
a.
Without limiting Purchaser's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act, the Purchaser is purchasing the Securities for
its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to
or for sale in connection with any distribution thereof.
b.
The Purchaser is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 50l(a)(3), (ii) experienced in making
investments of the kind described in this Agreement and the other Transaction Documents, (i ii) able, by reason of the business
and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its Affiliates or selling agents), to protect its own interests in connection with the Transactions
described in this Agreement, and the related documents, and to evaluate the merits and risks of an investment in the Securities,
and (iv) able to afford the entire loss of its investment in the Securities.
c.
Al l subsequent offers and sales of the Securities by the Purchaser shall
be made pursuant to registration of the relevant Securities under the 1933 Act or pursuant to an exemption from registration.
d.
The Purchaser understands that the Securities are being offered and sold
to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions
and the eligibility of the Purchaser to acquire the Securities.
e.
The Purchaser and its advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Purchaser, including those set forth on any annex attached
hereto. The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries. Without limiting the generality of the foregoing, the
Purchaser has also had the opportunity to obtain and to review the Company's filings on EDGAR (collectively, the "Company's
SEC Documents").
f.
The Purchaser understands that its investment in the Securities involves
a high degree of risk.
g.
The Purchaser hereby represents that, in connection with its purchase of
the Securities, it has not relied on any statement or representation by the Company or any of its officers, directors and employees
or any of their respective attorneys or agents, except as specifically set forth herein.
h.
The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities.
i.
This Agreement and the other Transaction Documents to which the Purchaser
is a party, and the Transactions contemplated thereby, have been duly and validly authorized, executed and delivered on behalf
of the Purchaser and are valid and binding agreements of the Purchaser enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3.
COMPANY REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Purchaser as of the date hereof and as of the Closing Date: and each Subsequent Closing
Date.
a.
Rights of Others Affecting the Transactions.
There are no preemptive rights of any shareholder of the Company, as such, to acquire the Note, or any shares of the Company's
Common Stock that may be issued to the Purchaser in connection with any other agreements between the parties, in the event such
shares are issued.
b.
Status. The Company
is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the requisite
corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would
not have or result in a Material Adverse Effect. The Company has registered its stock and is obligated to file reports pursuant
to Section 12 or Section 15(d) of the Exchange Act, as amended. The Common Stock is, or immediately following the Closing Date
will be, and on each Subsequent Closing Date will be, quoted on the Principal Trading Market. The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common Stock for such quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the continuation of such quotation.
c.
Authorized Shares.
(i)
The authorized capital stock of the Company consists of 4,500,000,000 shares of Common Stock,
$0.001 par value.
(ii)
The Company has sufficient authorized and unissued shares of Common Stock as may be necessary
for the Purchaser to convert the principal amount of the Note and all interest accrued thereon and any other costs or fees that
may be paid with the Company's Common Stock pursuant to the terms of the Note.
d.
Transaction Documents and Stock. This Agreement
and each of the other Transaction Documents, and the Transactions contemplated thereby, have been duly and validly authorized
by the Company, this Agreement has been duly executed and delivered by the Company and this Agreement is, and the Note, the Warrant
and each of the other Transaction Documents, when executed and delivered by the Company, will be, valid and binding agreements
of the Company enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors' rights generally.
e.
Non-contravention. The execution and delivery of
this Agreement, the Warrant and each of the other Transaction Documents by the Company, the issuance of the Securities, and the
consummation by the Company of the other Transactions contemplated by this Agreement, the Note, the Warrant and the other Transaction
Documents do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute
a default under (i) the certificate of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common Stock except as herein set forth, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company
or any of its properties or assets, except such conflict, breach or default which would not have or result in a Material Adverse
Effect.
f.
Approvals. No authorization, approval or consent
of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the shareholders
of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the Purchaser as contemplated
by this Agreement, except such authorizations, approvals and consents that have been obtained.
g.
Filings. None of the Company's SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading.
h.
Absence of Certain Changes. Since the Last Audited
Date, there has been no material adverse change and no Material Adverse Effect, except as disclosed in the Company's SEC Documents.
Since the Last Audited Date, except as provided in the Company's SEC Documents, the Company has not (i) incurred or become subject
to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent
with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past practices;
(iii) declared or made any payment or distribution of cash or other property to shareholders with respect to its capital stock,
or purchased or redeemed , or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned
or transferred any other tangible assets, or canceled any debts owed to the Company by any third party or claims of the Company
against any third party, except in the ordinary course of business consistent with past practices; (v) waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi)
made any increases in employee compensation, except in the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with the terms and conditions of their employment.
i.
Full Disclosure. To the best of the Company's knowledge,
there is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in
the Company's SEC Documents) that has not been disclosed in writing to the Purchaser that would reasonably be expected to have
or result in a Material Adverse Effect.
j.
Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company,
threatened against or affecting the Company before or by any governmental authority or nongovernmental department, commission,
board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision , ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Documents. The Company is not aware of any valid basis for any
such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be expected
to have a Material Adverse Effect. There are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations
to which the Company is a party or by which it or any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a Material Adverse Effect.
k.
Absence of Events of Default. Except as set forth in the Company's SEC Documents, (i)
neither the Company nor any of its subsidiaries is in default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage, deed of trust or other material agreement to which it is
a party or by which its property is bound, and (ii) no Event of Default (or its equivalent term), as defined in the respective
agreement to which the Company or its Subsidiary is a party, and no event which, with the giving of notice or the passage of time
or both, would become an Event of Default (or its equivalent term) (as so defined in such agreement), has occurred and is continuing,
which would have a Material Adverse Effect.
l.
No Undisclosed Liabilities or Events. To the best
of the Company's knowledge, the Company has no liabilities or obligations other than those disclosed in the Transaction Documents
or the Company's SEC Documents or those incurred in the ordinary course of the Company's business since the Last Audited Date,
or which individually or in the aggregate, do not or would not have a Material Adverse Effect. No event or circumstances has occurred
or exists with respect to the Company or its properties, business, operations, condition (financial or otherwise), or results
of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There are no proposals currently under consideration
or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal
would (x) change the articles or certificate of incorporation or other charter document or by-laws of the Company, each as currently
in effect, with or without shareholder approval, which change would reduce or otherwise adversely affect the rights and powers
of the shareholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company,
including its interests in subsidiaries.
m.
No Integrated Offering. Neither the Company nor
any of its Affiliates nor any Person acting on its or their behalf has, directly or indirectly, at any time since August 1, 2014,
made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
n.
Dilution. Any shares of the Company's Common Stock
issued to the Purchaser in connection with any agreements between the parties hereto, in the event such shares are issued may
have a dilutive effect on the ownership interests of the other shareholders (and Persons having the right to become shareholder
s) of the Company. The Company's executive officers and directors have studied and fully understand the nature of the Securities
being sold hereby and recognize that they have such a potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests of the Company.
o.
Confirmation. The Company confirms that all statements
of the Company contained herein shall survive acceptance of this Agreement by the Purchaser. The Company agrees that, if any events
occur or circumstances exist prior to the Closing Date or any Subsequent Closing Date or the release of the Purchase Amount or
any Advance to the Company which would make any of the Company's representations, warranties, agreements or other information
set forth herein materially untrue or materially inaccurate as of such date, the Company shall immediately notify the Purchaser
(directly or through its counsel, if any) in writing prior to such date of such fact, specifying which representation , warranty
or covenant is affected and the reasons therefor
p.
Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the Transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents
by the Company and the consummation by it of the Transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the Company in connection therewith. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
q.
SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or l5(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred to herein as the "SEC Reports")
on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with d1e requirements of
the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial
statements of the Company comply in all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or the notes thereto (except that unaudited financial statements
may not contain all of the footnotes required by GAAP), and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
r.
Sarbanes-Oxley; Internal Accounting Controls. On
the Closing Date and on each Subsequent Closing Date, the Company will be in material compliance with all provision s of the Sarbanes
Oxley Act of 2002 which are applicable to it The Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific
authorizations,(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management' s general or specific
authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d- 15e)) for the Company and designed such disclosure controls and procedures to
ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers
by others within those entities, particularly during the period in which the Company's most recently filed periodic report under
the Exchange Act is being prepared. The Company's certifying officers have evaluated the effectiveness of the Company's controls
and procedures as of the date prior to the filing date of the most recently filed periodic report under the Exchange Act (such
date, the "Evaluation Date"). The Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company's internal
controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge, in
other factors that could significantly affect the Company's internal controls.
s.
Tax Status. Except for matters that would not, individually
or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has
filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any
Subsidiary.
t.
No Disagreements with Accountants and Lawyers. There
are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the accountants
and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants
and lawyers. By making this representation the Company does not, in any manner, waive the attorney/client privilege or the confidentiality
of the communications between the Company and its lawyers.
u.
No Disqualification Events. None of the Company,
any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in
the offering, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis
of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in
any capacity at the time of sale (each, an "Issuer Covered Person" and, together, "Issuer Covered Persons")
is subject to any of the "Bad Actor" disqualifications described in Rule 506(d) under the Securities Act (a "Disqualification
Event"). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification
Event. The Issuer has complied, to the extent applicable, with its disclosure obligations under Rule 506(e).
v.
Shell Company Status. The Company was a shell company,
as identified in Rule 144(i)(l), until January 22, 2014.
4.
CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a.
Transfer Restrictions.
The Purchaser acknowledges that (1) the Securities and the Warrant have not been and are not being registered under the provisions
of the 1933 Act and, the Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless
(A) subsequently registered thereunder or (B) the Purchaser shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance on Rule 144 promulgated
under the 1933 Act ("Rule 144") may be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such Securities under circumstances in which the seller, or the Person through whom the sale
is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (3) neither the Company nor any other Person is under
any obligation to register the Securities under the 1933 Act or to comply with the terms and conditions of any exemption therew1der.
b.
Restrictive Legend. The Purchaser acknowledges and agrees that the certificates
and other instruments representing the Warrant and any of the Securities shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of any such Securities):
"THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
c.
Filings. The
Company undertakes and agrees to make all necessary filings in connection with the sale of the Securities to the Purchaser under
any United States laws and regulations applicable to the Company, or by any domestic securities exchange or trading market, and
to provide a copy thereof to the Purchaser promptly after such filing.
d.
Reporting Status.
So long as the Purchaser beneficially owns the Warrant and any of the Securities, the Company shall file all reports required
to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, shall take all reasonable action under its control
to ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144(c)(l)
of the 1933 Act, is publicly available, and shall not terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and quotation and trading of its Common Stock on the Principal
Trading Market or a listing on the NASDAQ Capital Market and, to the extent applicable to it, will comply in all material respects
with the Company's reporting, filing and other obligations under the by-laws or rules of the Principal Trading Market and/or the
Financial Industry Regulatory Authority, as the case may be, applicable to it for so long as the Purchaser beneficially owns any
of the Securities.
e.
Use of Proceeds.
The Company will use the proceeds received hereunder (excluding amounts paid by the Company for legal fees in connection with
the sale of the Securities and as the original issue discount) for working capital.
f.
Publicity, Filings, Releases, Etc.
Each of the parties agrees that it will not disseminate any information relating to the Transaction Documents or the Transactions
contemplated thereby, including issuing any press releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance notice and an opportunity to comment
on the contents thereof. Neither party will include in any such Publicity any statement or statements or other material to which
the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement
is legally required to be included. In furtherance of the foregoing, the Company will provide to the Purchaser drafts of the applicable
text of the first filing of a Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K intended to be made
with the SEC which refers to the Transaction Documents or the Transactions contemplated thereby as soon as practicable (but at
least 2 Trading Days before such filing will be made) will not include in such filing any statement or statements or other material
to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement,
such statement is legally required to be included. Notwithstanding the foregoing, each of the parties hereby consents to the inclusion
of the text of the Transaction Documents in filings made with the SEC as well as any descriptive text accompanying or as a part
of such filing which is accurate and reasonably determined by the Company's counsel to be legally required. Notwithstanding, but
subject to, the foregoing provisions of this Section 4(t), the Company will, after the Closing Date and each Subsequent Closing
Date, promptly file a Current Report on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate form, referring
to the Transactions contemplated by the Transaction Documents.
g.
Pledge of Shares; Adjustment of Pledged Shares.
In order to secure repayment of the Note, the Company will reserve with the Transfer Agent, for the benefit of the Purchaser,
the Pledged Shares. The Company agrees that, following the Closing Date and each Subsequent Closing Date, the Market Value of
the Pledged Shares shall be reviewed every 60 days (each an "Adjustment Date"), or more frequently if the closing price
of the Common Stock on any Trading Day between Adjustment Dates falls below the last computed Market Value by more than 30% (the
"Alternative Adjustment Date"), by the Company and the Purchaser and an appropriate adjustment to the number of Pledged
Securities shall be made based upon the Market Value, which shall be computed as the VWAP of the Common Stock for the 20 Trading
Days immediately prior to the Adjustment Date or the Alternative Adjustment Date. The number of Pledged Shares shall be increased
with each Advance made by the Purchaser so that at all times the n umber of Pledged Shares shall be equal to equal to 400% of
the Purchase Amount plus all Advances.
h.
Right to Purchase Additional Notes.
The Company agrees that for a period of 12 months from the Closing Date, the Purchaser shall have the right (but not the obligation)
to purchase one or more additional convertible promissory notes, the aggregate principal amount of which will not exceed
$1,000,000, on
terms identical to the terms of the Note.
5.
OTHER TRANSFER AGENT INSTRUCTIONS.
a.
The Company warrants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 4(a) hereof, it will give its Transfer Agent no instructions inconsistent
with instructions to issue Common Stock to the Holder as contemplated in the Note. Nothing in this Section shall affect in any
way the Purchaser's obligations and agreement to comply with all applicable securities laws upon resale of the Securities. If
the Purchaser provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale
by the Purchaser of any of the Securities in accordance with clause (l)(B) of Section 4(a) of this Agreement is not required under
the 1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer or reissue
of the Shares or the Warrant Shares represented by one or more certificates for Common Stock without legend (or where applicable,
by electronic registration) in such name and in such denominations as specified by the Purchaser.
b.
The Company will authorize the Transfer Agent to give information relating
to the Company directly to the Holder or the Holder's representatives upon the request of the Holder or any such representative,
to the extent such information relates to (i) the status of the shares of Common Stock issued or claimed to be issued to the Holder
in connection with a Notice of Conversion in accordance with the terms of the Note, or (ii) the aggregate number of outstanding
shares of Common Stock of all shareholders (as a group, and not individually) as of a current or other specified date. At the
request of the Holder, the Company will provide the Holder with a copy of the authorization so given to the Transfer Agent.
6.
CLOSING DATE.
a.
The Closing Date for the payment of the Purchase Amount shall occur as
indicated in Section l(a)(i) after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied
or been waived by the party in whose favor such conditions run. Any Subsequent Closing Date shall occur on a date agreed upon
by the Purchaser and the Company, after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been
satisfied or been waived by the party in whose favor such conditions run.
b.
The closing of the Transactions shall occur on the Closing Date or on the
Subsequent Closing Date, as applicable, at the offices of the Purchaser or by electronic communications and shall take place no
later than 5:00 p.m. Eastern time, on such day or such other time as is mutually agreed upon by the Company and the Purchaser.
7.
CONDITIONS TO THE COMPANY' S OBLIGATION TO SELL.
The
Purchaser understands that the Company's obligation to sell the Note to the Purchaser pursuant to this Agreement on the Closing
Date and on each Subsequent Closing Date is conditioned upon:
a.
The execution and delivery of this Agreement by the Purchaser;
b.
Delivery by the Purchaser to the Company of good funds as payment in full
of an amount equal to the Purchase Amount or any subsequent Advance, as applicable, in accordance with this Agreement;
c.
The accuracy on the Closing Date or any Subsequent Closing Date of the
representations and warranties of the Purchaser contained in this Agreement, each as if made on such date, and the performance
by the Purchaser on or before such date of all covenants and agreements of the Purchaser required to be performed on or before
such date; and
d.
There shall not be in effect any law, rule or regulation prohibiting or
restricting the Transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.
8.
CONDITIONS TO THE PURCHASER' S OBLIGATION TO PURCHASE.
The
Company understands that the Purchaser's obligation to purchase the Note and its acceptance of any shares of the Company's Common
Stock that may be issued in connection with the Note is conditioned upon:
a.
The execution and delivery of this Agreement, the Note, the Warrant and
the other Transaction Documents by the Company, including the Transfer Agent Instruction;
b.
The accuracy in all material respects on each Closing Date and each Subsequent
Closing Date of the representations and warranties of the Company contained in this Agreement, each as if made on such date, and
the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed
on or before such date;
c.
The Company must be current with all required Exchange Act filings.
d.
There shall not be in effect any law, rule or regulation prohibiting or
restricting the Transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and
e.
From and after the date hereof to and including the Closing Date and each
Subsequent Closing Date, each of the following conditions will remain in effect: (i) the trading of the Common Stock shall not
have been suspended by the SEC or on the Principal Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii) no minimum prices shall been established for securities traded on the Principal
Trading Market; and (iv) there shall not have been any Material Adverse Effect in regards to the Company.
9.
INTENTIONALLY OMITTED.
10.
INDEMNIFICATION AND REIMBURSEMENT.
a.
(i) The Company agrees to indemnify and hold harmless the Purchaser and
its officers, directors, employees, and agents, and each Purchaser Control Person from and against any losses, claims, damages,
liabilities or expenses incurred (collectively, "Damages"),joint or several, and any action in respect thereof to which
the Purchaser, its partners, Affiliates, officers, directors, employees, and duly authorized agents, and any such Purchaser Control
Person becomes subject to, resulting from, arising out of or relating to any misrepresentation , breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the part of Company contained in this Agreement, as such Damages are incurred,
except to the extent such Damages result primarily from Purchaser's failure to perform any covenant or agreement contained in
this Agreement or the Purchaser's or its officer's, director's, employee's, agent's or Purchaser Control Person's negligence,
recklessness or bad faith in performing its obligations under this Agreement.
(ii)
The Company hereby agrees that, if the Purchaser, other than by reason of its negligence, illegal or willful misconduct (in each
case, as determined by a non- appealable judgment to such effect), (x) becomes involved in any capacity in any action, proceeding
or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the Transactions
contemplated by this Agreement or the other Transaction Documents, or if the Purchaser is impleaded in any such action, proceeding
or investigation by any Person, or (y) becomes involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction , against or involving the Company or in connection
with or as a result of the consummation of the Transactions contemplated by this Agreement or the other Transaction Documents,
or (z) is impleaded in any such action, proceeding or investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold hannless the Purchaser from and against and in respect of all losses, claims, liabilities, damages or expenses
resulting from, imposed upon or incurred by the Purchaser, directly or indirectly, and reimburse such Purchaser for its reasonable
legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses
are incurred. The indemnification and reimbursement obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchaser
who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and Purchaser Control
Persons (if any), as the case may be, of the Purchaser and any such Affiliate, and shall be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Company, the Purchaser, any such Affiliate and any such
Person. The Company also agrees that neither the Purchaser nor any such Affiliate, partner, director, agent, employee or Purchaser
Control Person shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company
in connection with or as a result of the consummation of this Agreement or the other Transaction Documents, except as may be expressly
and specifically provided in or contemplated by this Agreement.
b.
All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:
(i)
In the event any claim or demand in respect of which any Person claiming indemnification
under any provision of this Section (an "Indemnified Party") might seek indemnity under paragraph (a) of this Section
is asserted against or sought to be collected from such Indemnified Party by a Person other than a party hereto or an Affiliate
thereof (a "Third Party Claim"), the Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim
for indemnification that is being asserted under any provision of this Section against any Person (the "Indemnifying Party"),
together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim,
the Indemnifying Party shall not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by such failure of the Indemnified Party. The Indemnifying
Party shall notify the Indemnified Party as soon as practicable within the period ending 30 calendar days following receipt by
the Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party under this Section and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.
The following provisions shall also apply.
(x)
If the Indemnifying Party notifies the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have the right to defend, with counsel reasonably satisfactory
to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings,
which proceedings shall be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled
at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as
to which the Indemnified Party shall not be indemnified in full pursuant to paragraph (a) of this Section). The Indemnifying Party
shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that
the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this subparagraph (x), file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate protect its interests;
and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of
any Third Party Claim controlled by the Indemnifying Party pursuant to this subparagraph (x), and except as provided in the preceding
sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if
it irrevocably waives its right to indemnity under paragraph (a) of this Section with respect to such Third Party Claim.
(y)
If the Indemnifying Party fails to notify the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to paragraph (b) of this Section,
or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim,
or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have
the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this subparagraph (y), if the Indemnifying
Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability or the amount
of its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in subparagraph (z) below, the Indemnifying Party will not be required
to bear the costs and expenses of the Indemnified Party's defense pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this subparagraph
(y), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.
(z)
If the Indemnifying Party notifies the Indemnified Party that it does not dispute
its liability or the amount of its liability to the Indemnified Party with respect to the Third Party Claim under paragraph (a)
of this Section or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the amount of Damages
specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying Party under paragraph (a) of this Section
and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party
has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved
within 30 days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.
(ii)
In the event any Indemnified Party should have a claim under paragraph (a)
of this Section against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver
a written notification of a claim for indemnity under paragraph (a) of this Section specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such
claim (an "Indemnity Notice") with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party
to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute
the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such Indemnity Notice, the amount
of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under paragraph
(a) of this Section and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that
it the dispute is not resolved within 30 days after the Claim Notice, the Indemnifying Party shall be entitled to institute such
legal action as it deems appropriate.
c.
The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar rights of the Indemnified Party against the Indemnifying Party or others, and (ii) any liabilities
the Indemnifying Party may be subject to.
11.
JURY TRIAL WAIVER.
The Company and the Purchaser hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out or in connection with the Transaction Documents.
12.
GOVERNING LAW: MISCELLANEOUS.
a.
(i) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. Each of the parties consents to the exclusive jurisdiction of the federal courts in the
city of New York in the State of New York as in connection with any dispute arising under this Agreement or any of the other Transaction
Documents and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or
proceeding is improper. To the extent determined by such court, the Company shall reimburse the Purchaser for any reasonable legal
fees and disbursements incurred by the Purchaser in enforcement of or protection of any of its rights under any of the Transaction
Documents. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
(ii) The
Company and the Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of
this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches
of the provisions of this Agreement and the other Transaction Documents and to enforce specifically the terms and provisions hereof
and thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.
b.
Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
c.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
d.
All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
e.
A facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.
f.
This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
g.
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
h.
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other jurisdiction.
i.
This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
j.
This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
13.
NOTICES. Any
notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the
date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission,
(b) the
fifth Trading Day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or
(c) the
third Trading Day after mailing by domestic or international express courier, with delivery costs and fees prepaid, in each case,
addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party
may designate by 10 days' advance written notice similarly given to each of the other parties hereto):
| COMPANY: |
WELL
POWER, INC. |
| |
11111
Katy Freeway, Suite 910 |
| |
Houston,
Texas 77079 |
| |
Attn:
Dan Patience, President and Chief Financial Officer |
| |
Telephone
No.: 713-973-5738 |
| |
Facsimile
No.: 403-995-0789 |
| |
|
| PURCHASER: |
JDF
CAPITAL INC. |
| |
74
West George Street |
| |
Freehold,
NJ 07728 |
| |
Attn:
John Fierro |
| |
Telephone
No.: 718-290-4058 |
| |
Facsimile
No.: 800-319-6863 |
14. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES. The Company's and the Purchaser's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Note and the payment of the Purchase Amount, and shall inure
to the benefit of the Purchaser and the Company and their respective successors and assigns.
[Balance of page
intentionally left blank]
IN
WITNESS WHEREOF, this Agreement has been duly executed by the Purchaser and the Company as of the date set first above written.
JDF CAPITAL INC.
By: /s/ John
Fierro
Name: John Fierro
Title: President
WELL POWER, INC.
By: /s/ Dan
Patience
Name: Dan Patience,
Title: President
and Chief Financial Officer
ANNEX I
FORM OF NOTE
ANNEX 2
TRANSFER AGENT INSTRUCTION
TIDS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
WELL
POWER, INC.
10%
OID Convertible Promissory Note due February 5, 2016 (the "Note")
| Original Issue
Date: February 5, 2015 |
Principal Amount: Up
to USD$550,000, subject |
| |
to adjustment as described
herein. |
| |
|
| |
Purchase
Price: Up to USD$500,000 |
For
value received, Well Power, Inc., a Nevada corporation (the "Company"), hereby promises to pay to the
order of JDF Capital Inc. (together with its successors, representatives, and permitted assigns, the "Holder''),
in accordance with the terms hereinafter provided, up to an aggregate of $550,000 (Five Hundred Fifty Thousand Dollars) (the "Principal
Amount"). The Principal Amount outstanding shall be due and payable on February 5, 2016 (the "Maturity Date").
All
payments under or pursuant to this Note refer to and shall be made in United States Dollars in immediately available funds to
the Holder at the address of the Holder set forth in the Purchase Agreement or at such other place as the Holder may designate
from time to time in writing to the Company or by wire transfer of funds to the Holder's account, instructions for which are attached
hereto as Exhibit A.
ARTICLE
I
Section
1.1 Purchase Agreement. This Note has been executed and delivered pursuant to that certain Security Purchase Agreement
dated as of February 5, 2015 (the "Purchase Agreement") by and among the Company and the Holder. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.
Section
1.2 Loan Funding. At the request of the Company, this Note shall be funded as follows: (i) the Company will receive
an advance of Fifty Thousand Dollars ($50,000) (the "Initial Advance"), less attorney's fees in the amount of
Six Thousand Dollars ($6,000) and a fee in the amount of Three Thousand Five Hundred Dollars ($3,500) payable to Valerie Emanuel
and Associates, on the original issue date (the "Issuance Date") and (ii) further advances of the Principal Amount,
up to the amount of Four Hundred Fifty Thousand Dollars ($450,000), may be made in the sole and absolute discretion of the Holder
at any time prior to the Maturity Date. Subject to Section 1.3 below, if the Holder fails to make any advance beyond the Initial
Advance, then the Principal Amount of this Note shall equal Fifty-Five Thousand Dollars ($55,000). Subject to Section 1 .3 below,
if the Holder continues to make advances to, for example, Two Hundred Fifty Thousand Dollars ($250,000), then the Principal Amount
of this Note shall equal Two Hundred Seventy Five Thousand Dollars ($275,000).
Section
1.3 Payment of Iconic Note. Within ten days of the Issuance Date, the Company shall repay in full that certain 10% Convertible
Promissory Note in the principal amount of $275,000 issued by the Company on August 6, 2014 to Iconic Holdings, LLC. (the "Iconic
Note"). Failure by the Company to repay the Iconic Note in full on or before the tenth day following the Issuance Date
shall be an Event of Default under this Note and shall result in an increase to the Principal Amount of this Note in the amount
of Fifty Thousand Dollars ($50,000) (the "Default Principal Amount"). The Default Principal Amount shall become
a part of the Principal Amount and all references in this Note to the Principal Amount shall include the Default Principal Amount,
and interest on the Default Principal Amount from the Issuance Date shall become part of the interest accrued on the Principal
Amount and all references in this Note to interest accrued on the Principal Amount shall include the interest accrued on the Default
Principal Amount.
Section
1.4 Interest. Beginning on the Issuance Date, the outstanding principal balance of this Note shall bear interest, in
arrears, at a rate per annum equal to 10%.Interest shall be paid on the Maturity Date in cash or restricted shares of the Company's
common stock, $0.001 par value per share (the "Common Stock") at the option of the Holder.
Section
1.5 Payment on Non-Business Days. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday
under the laws of the State of New York, such payment may be due on the next succeeding business day and such next succeeding
day shall be included in the calculation of the amount of accrued interest payable on such date.
Section
1.6 Transfer. This Note may be transferred or sold, subject to the provisions of Section 4.8 of this Note, or pledged,
hypothecated or otherwise granted as security by the Holder.
Section
1.7 Replacement. Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect
to the loss, theft or destruction of this Note (or any replacement hereof), and without requiring an indemnity bond or other security,
or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Company shall issue a new Note,
of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.
ARTICLE
II
EVENTS
OF DEFAULT;
REMEDIES
Section
2.1 Events of Default. The occurrence of any of the following events shall be an "Event of Default"
under this Note:
(a)
the Company shall fail to make the payment of any amount of principal outstanding
on the date such payment is due hereunder;
(b)
the Company shall fail to make any payment of interest on the date such payment
is due hereunder, provided, however, that if the payment of interest is made i n shares of the Company's common stock, it shall
be an Event of Default if the common stock is not delivered to the Holder with 3 days after the date such interest is due;
(c)
the Company shall fail to repay the Iconic Note in full in accordance with
the terms set forth at Section 1.3 above;
(d)
the Company's Common Stock is suspended from listing or fails to be quoted
or listed on at least one of the OTC Markets, OTC Bulletin Board, Nasdaq Capital Market, NYSE MKT or The New York Stock Exchange,
Inc. for a period of 5 consecutive Trading Days;
(e)
the Company's notice to the Holder, including by way of public announcement,
at any time, of its inability to comply, or its intention not to comply, with proper requests from the Holder for conversion of
this Note into shares of Common Stock;
(f)
the Company shall fail to (i) timely deliver the shares of Common Stock upon
conversion of the Note or any accrued and unpaid interest, or (ii) make the payment of any fees and/or liquidated damages under
this Note or the Purchase Agreement, which failure in the case of items (i) and (ii) of this Section 2.l (f) is not remedied within
3 business days after the incurrence thereof;
(g)
default shall be made in the performance or observance of (i) any material
covenant, condition or agreement contained in this Note (other than as set forth in clauses (c) and (e) of this Section 2.1) and
such default is not fully cured within 5 business days after the occurrence thereof or (ii) any material covenant, condition or
agreement contained in the Purchase Agreement or any other Transaction Documents which is not covered by any other provisions
of this Section 2.1 and such default is not fully cured within 5 business days after the occurrence thereof
(h)
any material representation or warranty made by the Company herein or in the
Purchase Agreement or any other Transaction Documents shall prove to have been false or incorrect or breached in a material respect
on the date as of which made;
(i)
the Company shall (A) default in any payment of any amount or amounts of principal
or interest on any indebtedness (other than the indebtedness hereunder) the aggregate principal amount of which Indebtedness is
in excess of $50,000 or (B) default in the observance or performance of any other agreement or condition relating to any indebtedness
or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders or beneficiary
or beneficiaries of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to
its stated maturity;
(j)
the Company shall (i) apply for or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets,
(ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement
of creditors' rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, or (vii) take any
action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(k)
a proceeding or case shall be commenced in respect of the Company, without
its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization , moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution
of the Company or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding
or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 60 days
or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect)
or under the comparable laws of any jurisdiction (foreign or domestic) against the Company or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Company and shall continue undismissed,
or unstayed and in effect for a period of 60 days; or
(l)
the failure of the Company to instruct its transfer agent to remove any legends
from shares of Common Stock eligible to be sold under Rule 144 of the Securities Act and issue such unlegended certificates to
the Holder within 5 business days of the Holder's request so long as the Holder has provided reasonable assurances and opinions
of counsel to the Company that such shares of Common Stock can be resold pursuant to Rule 144; or
(m)
the failure of the Company to pay any amounts due to the Holder herein within
3 business days of receipt of notice to the Company.
Section
2.2 Remedies Upon An Event of Default. If an Event of Default (with the exception of an Event of Default pursuant to
Section 2.l(c) above) shall have occurred and shall be continuing, the Holder of this Note may at any time at its option, (a)
declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable in cash,
and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which
are hereby expressly unconditionally and irrevocably waived by the Company, subject to Section 3.4 hereof, demand that the Principal
Amount of this Note then outstanding shall be converted into shares of Common Stock at a Conversion Price (as defined in Section
3.2 below) per share calculated pursuant to Section 3.1(b) below, assuming that the date that the Event of Default occurs is the
Conversion Date and demand that all accrued and unpaid interest under this Note shall be converted into shares of Common Stock
in accordance with Section 3.1(b) below, or (c) exercise or otherwise enforce any one or more of the Holder's rights, powers,
privileges, remedies and interests under this Note, the Purchase Agreement, other Transaction Documents or applicable law. No
course of delay on the part of the Holder shall operate as a waiver thereof or otherwise prejudice the right of the Holder. No
remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity,
by statute or otherwise. In addition to the remedies set forth herein, if the Company fails to pay in full the Iconic Note as
described in Section 1.3 above, the Principal Amount shall be increased by the Default Principal Amount, which Default Principal
Amount shall become all due and owing, together with interest from the Issuance Date, in accordance with Section 1.3 above.
Section
2.3 Default Interest. In addition to the remedies set forth in Section 2.2 above, to the extent permitted by law, the
Company will pay interest to the Holder, payable on demand, on the outstanding Principal Amount of the Note from the date of the
Event of Default until such Event of Default is cured, at the rate of the lesser of 15% and the maximum applicable legal rate
per annum.
ARTICLE
III
CONVERSION;
ANTIDILUTION; PREPAYMENT
Section
3.1 Conversion Option.
(a)
Manner of Conversion. At any time on or after the Issuance Date, this
Note shall be convertible (in whole or in part), at the option of the Holder (the "Conversion Option"), into
fully paid and non-assessable shares of the Company's Common Stock on the date on which the Holder faxes a notice of conversion
(the "Conversion Notice"), duly executed , to the Company (the ''Voluntary Conversion Date"), provided ,
however, that the Conversion Price shall be subject to adjustment as described in Section 3.5 below. The Holder shall deliver
this Note to the Company at the address designated in the Purchase Agreement at such time that this Note is fully converted. With
respect to partial conversions of this Note, the Company shall keep written records of the amount of this Note converted as of
each Conversion Date.
(b)
Calculation of Number of Shares to be Issued. On any Voluntary Conversion
Date, the Holder may cause any outstanding Principal Amount of this Note plus all accrued and unpaid interest to convert into
a number of fully paid and nonassessable shares of Common Stock equal to the quotient of the elected outstanding Principal Amount
of this Note plus all interest accrued thereon as of the Voluntary Conversion Date divided by the Conversion Price as computed
in accordance with Section 3.2 below.
(c)
Conversion Limitations; Holder's Restriction on Conversion. The Company
shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note, to
the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates), as set forth on the
applicable Conversion Notice, would beneficially own in excess of 4.99% of the number of shares of the Company's Common Stock
outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) conversion of the remaining, non-converted portion of this Note beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion of the unexercised or non-converted portion of any other securities
of the Company (including, without limitation, any other Notes or the Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act. To the extent that the limitation contained in this Section applies, the determination of whether this Note
is convertible (in relation to other securities owned by the Holder) and of which a portion of this Note is convertible shall
be in the sole discretion of such Holder. To ensure compliance with this restriction , the Holder will be deemed to represent
to the Company each time it delivers a Conversion Notice that such Conversion Notice has not violated the restrictions set forth
in this Section and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes
of this Section, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K (or such related form), as the case
may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company's Transfer
Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The provisions of this Section may be waived by the Holder upon, at the election of the Holder,
not less than 61 days' prior notice to the Company, and the provisions of this Section 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).
Section
3.2 Conversion Price. The term "Conversion Price" shall mean the lower of (i) 50% of the lowest reported
sale price of the Common Stock for the 20 trading days immediately prior to the Issuance Date or (ii) 50% of the lowest reported
sale price for the 20 days prior to the Voluntary Conversion Date, which method of calculation shall be chosen in the sole discretion
of the Holder. If the Common Stock cannot be delivered by DWAC, the Conversion Price shall be reduced by 10%. If the Common Stock
is ineligible for DTC's FAST system, the Conversion Price shall be reduced by 5%. If the Common Stock cannot be delivered by DWAC
and is ineligible for DTC's FAST system, the Conversion Price shall be reduced by 15%.
Section
3.3 Mechanics of Conversion.
(a)
Delivery of Common Stock. Not later than 3 Trading Days after any Conversion
Date, the Company or its designated transfer agent, as applicable, shall issue and deliver to the Depository Trust Company ("DTC")
account on the Holder's behalf via the Deposit Withdrawal Agent Commission System ("DWAC") as specified in the
Conversion Notice, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled. In the alternative, not later than 3 Trading Days after any Conversion Date, the Company shall deliver
to the applicable Holder by express courier a certificate or certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 4 of the Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of this Note (the "Delivery Date"). Notwithstanding the foregoing to the contrary,
the Company or its transfer agent shall only be obligated to issue and deliver the shares to OTC on the Holder's behalf via DWAC
(or certificates free of restrictive legends) if such conversion is in connection with a sale and the Holder has complied with
the applicable requirements of federal and state securities laws. If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by the Delivery Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return this Note if tendered for conversion, whereupon the Company
and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice of revocation,
except that any amounts described in Sections 3.3(b) and (c) shall be payable through the date notice of rescission is given to
the Company.
(b)
Penalty for Failure to Deliver Common Stock. The Company understands
that a delay in the delivery of the shares of Common Stock upon conversion of this Note beyond the Delivery Date could result
in economic loss to the Holder. With the exception of events beyond the control of the Company, if the Company fails to deliver
to the Holder such shares via DWAC or a certificate or certificates pursuant to Section 3.3(a) above by the Delivery Date, the
Company shall pay to the Holder, in cash, an amount per Trading Day for each Trading Day until such shares are delivered via DWAC
or certificates are delivered, together with interest on such amount at a rate of 10% per annum, accruing until such amount and
any accrued interest thereon is paid in full, equal to (i) 1% of the aggregate principal amount of the Note requested to be converted
for the first 5 Trading Days after the Delivery Date and (ii) 2% of the aggregate principal amount of the Note requested to be
converted for each Trading Day thereafter. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's
failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and the
Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree
of specific performance and/or injunctive relief). Notwithstanding anything to the contrary contained herein, the Holder shall
be entitled to withdraw a Conversion Notice, and upon such withdrawal the Company shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 3.3(b) through the date the Conversion Notice is withdrawn.
(c)
Penalty in the Event of a Buy-In. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing
the shares of Common Stock issuable upon conversion of this Note on or before the Delivery Date, and if after such date the Holder
is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a sale by the Holder of the shares of Common Stock issuable upon full or partial conversion of this Note (a "Buy- In"),
then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number
of shares of Common Stock issuable upon conversion of this Note that the Company was required to deliver to the Holder in connection
with the conversion at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed,
and (2) at the option of the Holder, either reinstate the portion of the Note and equivalent number of shares of Common Stock
for which such conversion was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its conversion and delivery obligations hereunder. For example, if the Holder purchases 20,000
shares of Common Stock having a total purchase price of $11,000 (or $0.55 per share) to cover a Buy-In with respect to an attempted
conversion of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000 (or $0.50
per share), under clause (1) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The
Holder shall provide written notice to the Company indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the Company. Nothing in this Note shall limit the Holder's
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates representing shares
of Common Stock upon conversion of this Note as required pursuant to the terms hereof.
Section
3.4 Ownership Cap and Certain Conversion Restrictions. Notwithstanding anything to the contrary set forth in Section
3 of this Note, at no time may the Holder convert all or a portion of this Note if the number of shares of Common Stock to be
issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Holder at
such time, the number of shares of Common Stock which would result in the Holder beneficially owning (as determined in accordance
with Section 13(d) of the Exchange Act and the rules thereunder) more than 9.9% of all of the Common Stock outstanding at such
time; provided, however, that upon the Holder providing the Company with sixty-one (61) days notice (pursuant to Section 4.1 hereof)
(the "Waiver Notice") that the Holder would like to waive this Section 3.4 with regard to any or all shares of Common
Stock issuable upon conversion of this Note, this Section 3.4 will be of no force or effect with regard to all or a portion of
the Note referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during
the sixty-one days immediately preceding the Maturity Date.
Section
3.5 Adjustment of Conversion Price.
(a)
The Conversion Price shall be subject to adjustment from time to time as follows:
(i)
Adjustments for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Issuance Date, effect a stock split of the outstanding Common Stock, the applicable
Conversion Price in effect immediately prior to the stock split shall be proportionately decreased. If the Company shall at any
time or from time to time after the Issuance Date, combine the outstanding shares of Common Stock, the applicable Conversion Price
in effect immediately prior to the combination shall be proportionately increased. Any adjustments under this Section 3.5(a)(i)
shall be effective at the close of business on the date the stock split or combination occurs.
(ii)
Adjustments for Certain Dividends and Distributions. If the Company
shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, and in each event,
the applicable Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or,
in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying, the applicable
Conversion Price then in effect by a fraction:
(1)
the numerator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
(2)
the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number
of shares of Common Stock issuable in payment of such dividend or distribution.
(iii)
Adjustment for Other Dividends and Distributions. If the Company shall
at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in other than shares of Common Stock, then, and in
each event, an appropriate revision to the applicable Conversion Price shall be made and provision shall be made (by adjustments
of the Conversion Price or otherwise) so that the Holder of this Note shall receive upon conversions thereof, in addition to the
number of shares of Common Stock receivable thereon, the number of securities of the Company which the Holder would have received
had this Note been converted into Common Stock on the date of such event and bad thereafter, during the period from the date of
such event to and including the Conversion Date, retained such securities (together with any distributions payable thereon during
such period), giving application to all adjustments called for during such period under this Section 3.5(a)(iii) with respect
to the rights of the Holder of this Note; provided, however, that if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall
be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.
(iv)
Adjustments for Reclassification, Exchange or Substitution. If the Common
Stock issuable upon conversion of this Note at any time or from time to time after the Issuance Date shall be changed to the same
or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise
(other than by way of a stock split or combination of shares or stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii),
or a reorganization, merger, consolidation , or sale of assets provided for in Section 3.5(a)(v)), then, and in each event, an
appropriate revision to the Conversion Price shall be made and provisions shall be made (by adjustments of the Conversion Price
or otherwise) so that the Holder shall have the right thereafter to convert this Note into the kind and amount of shares of stock
and other securities receivable upon such reclassification , exchange, substitution or other change, all subject to further adjustment
as provided herein.
(v)
Adjustments for Reorganization, Merger, Consolidation or Sales of Assets.
If at any time or from time to time after the Issuance Date there shall be a capital reorganization of the Company (other than
by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 3.5(a)(i), (ii) and
(iii), or a reclassification, exchange or substitution of shares provided for in Section 3.5(a)(iv)), or a merger or consolidation
of the Company with or into another corporation where the holders of outstanding voting securities prior to such merger or consolidation
do not own over 50% of the outstanding voting securities of the merged or consolidated entity, immediately after such merger or
consolidation, or the sale of all or substantially all of the Company's properties or assets to any other person (an "Organic
Change"), then as a part of such Organic Change an appropriate revision to the Conversion Price shall be made and provision
shall be made (by adjustments of the Conversion Price or otherwise) so that the Holder shall have the right thereafter to convert
such Note into the kind and amount of shares of stock and other securities or property of the Company or any successor corporation
resulting from such Organic Change. In any such case, appropriate adjustment shall be made in the application of the provisions
of this Section 3.5(a)(v) with respect to the rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.5(a)(v) (including any adjustment in the applicable Conversion Price then in effect and the number of shares of
stock or other securities deliverable upon conversion of this Note) shall be applied after that event in as nearly an equivalent
manner as may be practicable.
(vi)
Issuance of Common Stock and Common Stock Equivalents. If the Company
at any time while this Note is outstanding, shall issue shares of Common Stock or Common Stock Equivalents (as defined in the
Purchase Agreement) entitling any person to acquire shares of Common Stock at a price per share less than the applicable Conversion
Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options
or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at a price
per share which is less than the applicable Conversion Price, such issuance shall be deemed to have occurred for less than the
applicable Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion,
exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the
Holder in writing, no later than 1 business day following the issuance of any Common Stock or Common Stock Equivalent subject
to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms.
(vii)
Consideration for Stock. In case any shares of Common Stock or any Common
Stock Equivalents shall be issued or sold:
(1)
in connection with any merger or consolidation in which the Company is the
surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the
Company shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration
therefor shall be deemed to be the fair value, as determined reasonably and in good faith by the Board of Directors of the Company,
of such portion of the assets and business of the non-surviving corporation as such Board may determine to be attributable to
such shares of Common Stock, Convertible Securities, rights or warrants or options, as the case may be; or
(2)
in the event of any consolidation or merger of the Company in which the Company
is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Company shall be changed
into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially
all of the assets of the Company for stock or other securities of any corporation , the Company shall be deemed to have issued
a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis
of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on
the date of such transaction of all such stock or securities or other property of the other corporation.
If
any such calculation results in adjustment of (i) the applicable Conversion Price or (ii) the number of shares of Common Stock
issuable upon conversion of the Note, the determination of the applicable Conversion Price or the number of shares of Common Stock
issuable upon conversion of the Note immediately prior to such merger, consolidation or sale, shall be made after giving effect
to such adjustment of the number of shares of Common Stock issuable upon conversion of the Note. In the event Common Stock is
issued with other shares or securities and/or other assets of the Company for consideration, the consideration computed as provided
in this Section 3.5(vii) shall be allocated among such securities and assets as determined in good faith by the Board of Directors
of the Company.
(b)
Record Date. In case the Company shall take record of the holders of
its Common Stock for the purpose of entitling them to subscribe for or purchase Common Stock or Convertible Securities, then the
date of the issue or sale of the shares of Common Stock shall be deemed to be such record date.
(c)
Certain Issues Excepted. Anything herein to the contrary notwithstanding,
the Company shall not be required to make any adjustment to the Conversion Price in connection with (i) securities issued (other
than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to a bona fide firm
underwritten public offering of the Company's securities, (iii) securities issued pursuant to the conversion or exercise of convertible
or exercisable securities issued or outstanding on or prior to the date hereof or issued pursuant to the Purchase Agreement, (iv)
the shares of Common Stock issuable upon the exercise of Warrants, (v) securities issued in connection with strategic license
agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital, (vi) Common
Stock issued or options to purchase Common Stock granted or issued pursuant to the Company's stock option plans and employee stock
purchase plans as they now exist, (vii) private sales of restricted common stock at a fixed price, which price may be a discount
to market value, and (viii) the payment of any accrued interest in shares of Common Stock pursuant to this Note.
(d)
No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith, assist in the carrying out of all the provision s of this Section
3.5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holder
against impairment. In the event the Holder shall elect to convert the Note as provided herein, the Company cannot refuse conversion
based on any claim that the Holder or any one associated or affiliated with the Holder has been engaged in any violation of law,
violation of an agreement to which the Holder is a party or for any reason whatsoever, unless an injunction from a court, or notice,
restraining and/ or adjoining conversion of all or of part of the Note shall have issued.
(e)
Certificates as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock issuable upon conversion of this Note pursuant to this
Section 3.5, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof
and furnish to the Holder a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon written request of the Holder, at any time, furnish or cause
to be furnished to the Holder a like certificate setting forth such adjustments and readjustments, the applicable Conversion Price
in effect at the time, and 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 the conversion of this Note. Notwithstanding the foregoing, the Company shall not be obligated
to deliver a certificate unless such certificate would reflect an increase or decrease of at least 1% of such adjusted amount.
(f)
Issue Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of shares of Common Stock
on conversion of this Note pursuant thereto; provided, however, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by the Holder in connection with any such conversion
(g)
Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of this Note. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall
pay cash equal to the product of such fraction multiplied by the average of the closing bid prices of the Common Stock for the
5 consecutive Trading Days immediately preceding the Conversion Date.
(h)
Reservation of Common Stock. The Company shall at all times when this
Note shall be outstanding, reserve and keep available out of its authorized but unissued Common Stock, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion of this Note and all interest accrued thereon;
provided that the number of shares of Common Stock so reserved shall at no time be less than 400% of the number of shares
of Common Stock for which the Principal Amount of this Note are at any time convertible (the "Reserved Amount").
The Company shall, from time to time in accordance with Nevada corporate law, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be sufficient to satisfy the Company's obligations under
this Section 3.5(h). The Company acknowledges that (i) 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 Com mon Stock in accordance with the terms and conditions of this Note. If, at any time the Company
does not maintain the Reserved Amount it will be considered an Event of Default under Section 2.1 of this Note.
(i)
Regulatory Compliance. If any shares of Common Stock to be reserved
for the purpose of conversion of this Note or any interest accrued thereon require registration or listing with or approval of
any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise
before such shares may be validly issued or delivered upon conversion, the Company shall, at its sole cost and expense, in good
faith and as expeditiously as possible, endeavor to secure such registration, listing or approval, as the case may be.
Section
3.6 Prepayment.
(a)
Prepayment by the Company. Notwithstanding anything to the contrary
contained herein, during the 90 days following the issuance of this Note (the "Prepayment Period") the Company shall
have the right, at the Company's option, to prepay in cash all or a portion of this Note as follows: (i) during the first 30 days
of the Prepayment Period, the amount to prepay the Note shall equal 130% of the aggregate principal amount of the Note plus all
accrued and unpaid interest applicable at the time of such request; (ii) during the next 30 days of the Prepayment Period, the
amount to prepay the Note shall equal 140% of the aggregate principal amount of the Note plus all accrued and unpaid interest
applicable at the time of such request; and (iii) during the next 30 days of the Prepayment Period, the amount to prepay the Note
shall equal 150% of the aggregate principal amount of the Note plus all accrued and unpaid interest applicable at the time of
such request.
(b)
Prepayment Upon an Event of Default. Notwithstanding anything to the
contrary contained herein, upon the occurrence of an Event of Default described in Sections 2.l(a), (b) and (d) through (m) hereof,
the Holder shall have the right, at such Holder's option, to require the Company to prepay i n cash all or a portion of this Note
at a price equal to one hundred twenty percent (120%) of the aggregate principal amount of this Note plus all accrued and unpaid
interest applicable at the time of such request (the "Event of Default Prepayment Price"). Nothing in this Section 3.6(b)
shall limit the Holder's rights under Section 2.2 hereof.
(c)
Prepayment Option Upon Major Transaction. In addition to all other rights
of the Holder contained herein, simultaneous with the occurrence of a Major Transaction (as defined in Section 3.6(e) hereof),
the Holder shall have the right, at the Holder's option, to require the Company to prepay all or a portion of the Holder's Note
at a price equal to one hundred ten percent (110%) of the aggregate principal amount of this Note plus all accrued and unpaid
interest (the ''Major Transact ion Prepayment Price").
(d)
Prepayment Option Upon Triggering Event. In addition to all other rights
of the Holder contained herein, after a Triggering Event (as defined below), the Holder shall have the right, at the Holder's
option, to require the Company to prepay all or a portion of this Note in cash at a price equal to the sum of (i) the greater
of (A) one hundred twenty percent (120%) of the aggregate principal amount of this Note plus all accrued and unpaid interest and
(B) in the event at such time the Holder is unable to obtain the benefit of its conversion rights through the conversion of this
Note and resale of the shares of Common Stock issuable upon conversion hereof in accordance with the terms of this Note and the
other Transaction Documents, the aggregate principal amount of this Note plus all accrued but unpaid interest hereon, divided
by the Conversion Price on (x) the date the Prepayment Price (as defined below) is demanded or otherwise due or (y) the date the
Prepayment Price is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Prepayment Price is demanded or
otherwise due, and (y) the date the Prepayment Price is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of this Note and the other Transaction Documents (the "Triggering Event
Prepayment Price," and, collectively with the "Major Transaction Prepayment Price," the "Prepayment
Price").
(e)
Major Transaction. A "Major Transaction" shall be deemed to have
occurred at such time as any of the following events:
(i)
the consolidation, merger or other business combination of the Company with
or into another Person (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction
of incorporation of the Company or (B) a consolidation, merger or other business combination in which holders of the Company's
voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities); or
(ii)
the sale or transfer of more than fifty percent (50%) of the Company's assets
(based on the fair market value as determined in good faith by the Company's Board of Directors) other than inventory in the ordinary
course of business in one or a related series of transaction s; o
(iii)
closing of a purchase, tender or exchange offer made to the holders of more
than fifty percent (50%) of the outstanding shares of Common Stock in which more than fifty percent (50%) of the outstanding shares
of Common Stock were tendered and accepted.
(f)
Triggering Event. A "Triggering Event" shall be deemed to
have occurred at such time as any of the following events:
(i)
the suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Markets, OTC Bulletin Board, Nasdaq Capital Market, NYSE MKT
or The New York Stock Exchange, Inc. for a period of five (5) consecutive Trading Days;
(ii)
the Company's notice to any holder of the Note, including by way of public
announcement, at any time, of its inability to comply (including for any of the reasons described in Section 3.8) or its intention
not to comply with proper requests for conversion of any Note into shares of Common Stock; o
(iii)
the Company's failure to comply with a Conversion Notice tendered in accordance
with the provisions of this Note within ten business days after the receipt by the Company of the Conversion Notice; or
(iv)
the Company deregisters its shares of Common Stock and as a result such shares
of Common Stock are no longer publicly traded; or
(v)
the Company consummates a "going private" transaction and as a result
the Common Stock is no longer registered under Sections 12(b) or 12(g) of the Exchange Act.
(g)
Mechanics of Prepayment at Option of Holder Upon Major Transaction.
No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major Transaction, but not prior
to the public announcement of such Major Transaction, the Company shall deliver written notice thereof via facsimile and overnight
courier ("Notice of Major Transaction") to the Holder of this Note. At any time after receipt of a Notice of
Major Transaction (or, in the event a Notice of Major Transaction is not delivered at least ten (10) days prior to a Major Transaction,
at any time within ten (10) days prior to a Major Transaction), any holder of the Notes then outstanding may require the Company
to prepay, effective immediately prior to the consummation of such Major Transaction, all of the holder 's Notes then outstanding
by delivering written notice thereof via facsimile and overnight courier (''Notice of Prepayment at Option of Holder Upon Major
Transaction") to the Company, which Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate (i)
the number of Notes that such holder is electing to prepay and (ii) the applicable Major Transaction Prepayment Price, as calculated
pursuant to Section 3.6(c) above.
(h)
Mechanics of Prepayment at Option of Holder Upon Triggering Event. Within
one (1) business day after the occurrence of a Triggering Event, the Company shal1 deliver written notice thereof via facsimile
and overnight courier ("Notice of Triggering Event") to each holder of the Notes. At any time after the earlier
of the Holder's receipt of a Notice of Triggering Event and such holder becoming aware of a Triggering Event, any holder of this
Note may require the Company to prepay all of the Notes on a pro rata basis by delivering written notice thereof via facsimile
and overnight courier ("Notice of Prepayment at Option of Holder Upon Triggering Event") to the Company, which
Notice of Prepayment at Option of Holder Upon Triggering Event shall indicate (i) the amount of the Note that such holder is electing
to have prepaid and (ii) the applicable Triggering Event Prepayment Price, as calculated pursuant to Section 3.6(d) above. The
Holder shall only be permitted to require the Company to prepay the Note pursuant to Section 3.6 hereof for the greater of a period
of ten (10) days after receipt by such holder of a Notice of Triggering Event or for so long as such Triggering Event is continuing.
(i)
Payment of Prepayment Price. Upon the Company's receipt of a Notice(s)
of Prepayment at Option of Holder Upon Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major Transaction
from any holder of the Notes, the Company shall immediately notify each holder of the Notes by facsimile of the Company's receipt
of such Notice(s) of Prepayment at Option of Holder Upon Triggering Event or Notice(s) of Prepayment at Option of Holder Upon
Major Transaction and each holder which has sent such a notice shall promptly submit to the Company such holder's certificates
representing the Notes which such holder has elected to have prepaid. The Company shall deliver the applicable Triggering Event
Prepayment Price, in the case of a prepayment pursuant to Section 3.6(d), to such holder within five (5) business days after the
Company's receipt of a Notice of Prepayment at Option of Holder Upon Triggering Event and, in the case of a prepayment pursuant
to Section 3.(e), the Company shall deliver the applicable Major Transaction Prepayment Price immediately prior to the consummation
of the Major Transaction; provided that the Holder's original Note shall have been so delivered to the Company; provided further
that if the Company is unable to prepay all of the Notes to be prepaid, the Company shall prepay an amount from each holder of
the Notes being prepaid equal to such holder's pro-rata amount (based on the number of Notes held by such holder relative to the
number of Notes outstanding) of all Notes being prepaid. If the Company shall fail to prepay all of the Notes submitted for prepayment
(other than pursuant to a dispute as to the arithmetic calculation of the Prepayment Price), in addition to any remedy such holder
of the Notes may have under this Note and the Purchase Agreement, the applicable Prepayment Price payable in respect of such Notes
not prepaid shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full. Until
the Company pays such unpaid applicable Prepayment Price in full to the Holder of the Notes submitted for prepayment, such holder
shall have the option (the "Void Optional Prepayment Option") to, in lieu of prepayment, require the Company to promptly
return to such holder(s) all of the Notes that were submitted for prepayment by such holder(s) under this Section 3.6 and for
which the applicable Prepayment Price has not been paid, by sending written notice thereof to the Company via facsimile (the "Void
Optional Prepayment Notice"). Upon the Company's receipt of such Void Optional Prepayment Notice(s) and prior to payment
of the full applicable Prepayment Price to such bolder, (i) the Notice(s) of Prepayment at Option of Holder Upon Triggering Event
or the Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the case may be, shall be null and void with respect
to those Notes submitted for prepayment and for which the applicable Prepayment Price has not been paid, (ii) the Company shall
immediately return any Notes submitted to the Company by each holder for prepayment under this Section 3.6(i) and for which the
applicable Prepayment Price has not been paid and (iii) the Conversion Price of such returned Notes shall be adjusted to the lesser
of (A) the Conversion Price as in effect on the date on which the Void Optional Prepayment Notice(s) is delivered to the Company
and (B) the lowest Closing Bid Price during the period beginning on the date on which the Notice(s) of Prepayment of Option of
Holder Upon Major Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering Event, as the case may be, is
delivered to the Company and ending on the date on which the Void Optional Prepayment Notice(s) is delivered to the Company; provided
that no adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. The Holder's
delivery of a Void Optional Prepayment Notice and exercise of its rights following such notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of such notice. Payments provided for in this Section 3.6
shall have priority to payments to other stockholders in connection with a Major Transaction.
(j)
Company Prepayment Option upon Major Transaction. Upon the consummation
of a Major Transaction, the Company may prepay in cash all or any portion of the outstanding principal amount of this Note together
with all accrued and unpaid interest thereon upon at least thirty (30) days prior written notice to the Holder (the "Company's
Prepayment Notice") at a price equal to one hundred twenty percent (120%) of the aggregate principal amount of this Note
plus any accrued but unpaid interest (the "Company ' s Prepayment Price"); provided, however, that if the Holder
has delivered a Conversion Notice to the Company or delivers a Conversion Notice within such thirty (30) day period following
delivery of the Company's Prepayment Notice, the principal amount of the Notes plus any accrued but unpaid interest designated
to be converted may not be prepaid by the Company and shall be converted in accordance with Section 3.3 hereof; provided further
that if during the period between delivery of the Company's Prepayment Notice and the Company's Prepayment Date (as defined below),
the Holder shall become entitled and elects to deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or Notice
of Prepayment at Option of Holder upon Triggering Event, then such rights of the holders shall take precedence over the previously
delivered Company Prepayment Notice if the holder so elects. The Company's Prepayment Notice shall state the date of prepayment
which date shalt be the date of the consummation of the Major Transaction (the "Company's Prepayment Date"),
the Company's Prepayment Price and the principal amount of Notes plus any accrued but unpaid interest to be prepaid by the Company.
The Company shall deliver the Company's Prepayment Price on the Company's Prepayment Date, provided, that if the holder(s) delivers
a Conversion Notice before the Company's Prepayment Date, then the portion of the Company's Prepayment Price which would be paid
to prepay the Notes covered by such Conversion Notice shall be returned to the Company upon delivery of the Common Stock issuable
in connection with such Conversion Notice to the holder(s). On the Company's Prepayment Date, the Company shall pay the Company's
Prepayment Price, subject to any adjustment pursuant to the immediately preceding sentence, to the holder(s) on a pro rata basis.
ff the Company fails to pay the Company's Prepayment Price by the third (3rd) business day after the Company's Prepayment Date,
the prepayment will be declared null and void and the Company shall lose its right to serve a Company's Prepayment Notice pursuant
to this Section 3.6U) in the future. Notwithstanding the foregoing to the contrary, the Company may effect a prepayment pursuant
to this Section 3.6(j) only if trading in the Common Stock shall not have been suspended by the Securities and Exchange Commission
or any other exchange or market on which the Common Stock is trading, and the Company is in material compliance with the terms
and conditions of this Note and the other Transaction Documents.
Section
3.7 Inability to Fully Convert.
(a)
Holder's Option if Company Cannot Fully Convert. If, upon the Company's
receipt of a Conversion Notice, the Company cannot issue shares of Common Stock for any reason, including, without limitation,
because the Company (w) does not have a sufficient number of shares of Common Stock authorized and available, or (x) is otherwise
prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or any of its securities from issuing all of the Common Stock which is to be issued
to the Holder pursuant to a Conversion Notice, then the Company shall issue as many shares of Common Stock as it is able to issue
in accordance with the Holder's Conversion Notice and, with respect to the unconverted portion of this Note, the Holder, solely
at Holder's option, can elect to:
(i)
require the Company to prepay that portion of this Note for which the Company
is unable to issue Common Stock in accordance with the Holder's Conversion Notice (the "Mandatory Prepayment")
at a price per share equal to the Conversion Price as of such Conversion Date (the "Mandatory Prepayment Price");
or
(ii)
void its Conversion Notice and retain or have returned, as the case may be,
this Note (provided that the Holder's voiding its Conversion Notice shall not effect the Company's obligations to make any payments
which have accrued prior to the date of such notice).
In
the event the Holder shall elect to convert any portion of the Note as provided herein, the Company cannot refuse conversion based
on any claim that the Holder or any one associated or affiliated with the Holder has been engaged in any violation of law, violation
of an agreement to which the Holder is a party or for any reason whatsoever, unless, an injunction from a court, on notice, restraining
and or adjoining conversion of all or part of the Note shall have been issued and the Company posts a surety bond for the benefit
of the Holder in an amount equal to 130% of the principal amount of the Note, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the event it obtains judgment.
(b)
Mechanics of Fulfilling Holder's Election. The Company shall immediately
send via facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice from the Holder which cannot be fully
satisfied as described in Section 3.7(a) above, a notice of the Company's inability to fully satisfy the Conversion Notice (the
"Inability to Fully Convert Notice"). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Company
is unable to fully satisfy such holder's Conversion Notice, (ii) the amount of this Note which cannot be converted and (iii) the
applicable Mandatory Prepayment Price. The Holder shall notify the Company of its election pursuant to Section 3.7(a) above by
delivering written notice via facsimile to the Company (''Notice in Response to Inability to Convert").
(c)
Payment of Prepayment Price. If the Holder shall elect to have the Note
prepaid pursuant to Section 3.7(a)(i) above, the Company shall pay the Mandatory Prepayment Price to the Holder within 30 days
of the Company's receipt of the Holder's Notice in Response to Inability to Convert, provided that prior to the Company's
receipt of the Holder's Notice in Response to Inability to Convert the Company has not delivered a notice to the Holder stating,
to the satisfaction of the Holder, that the event or condition resulting in the Mandatory Prepayment has been cured and all Conversion
Shares issuable to the Holder can and will be delivered to the Holder in accordance with the terms of this Note. If the Company
shall fail to pay the applicable Mandatory Prepayment Price to the Holder on a timely basis as described in this Section 3.7(c)
(other than pursuant to a dispute as to the determination of the arithmetic calculation of the Prepayment Price), in addition
to any remedy the Holder may have under this Note and the Purchase Agreement, such unpaid amount shall bear interest at the rate
of 2% per month (prorated for partial months) until paid in full. Until the full Mandatory Prepayment Price is paid in full to
the Holder, the Holder may (i) void the Mandatory Prepayment with respect to that portion of the Note for which the full Mandatory
Prepayment Price has not been paid, (ii) receive back such Note, and (iii) require that the Conversion Price of such returned
Note be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Holder voided the Mandatory Prepayment
and (B) the lowest closing bid price during the period beginning on the Conversion Date and ending on the date the Holder voided
the Mandatory Prepayment.
Section
3.8 No Rights as Shareholder. Nothing contained in this Note shall be construed as conferring upon the Holder, prior
to the conversion of this Note, the right to vote or to receive dividends or to consent or to receive notice as a shareholder
in respect of any meeting of shareholders for the election of directors of the Company or of any other matter, or any other rights
as a shareholder of the Company.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder
shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy or facsimile
at the address or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received ) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first
occur. The Company will give written notice to the Holder at least l 0 days prior to the date on which the Company takes a record
(x) with respect to any dividend or distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to
holders of Common Stock or (z) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or
winding-up and in no event shall such notice be provided to the Holder prior to such information being made known to the public.
The Company will also give written notice to the Holder at least 10 days prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall such notice be provided to the Holder prior to such information
being made known to the public.
Section
4.2 Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of
Nevada, without giving effect to any of the conflicts of law principles which would result in the application of the substantive
law of another jurisdiction. This Note shall not be interpreted or construed with any presumption against the party causing this
Note to be drafted.
Section
4.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference
only and shall not constitute a part of this Note for any other purpose.
Section
4.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note, at Jaw or in equity (including, without limitation,
a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit the Holder's right to pursue actual damages for
any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at
law for any such breach may be inadequate. Therefore the Company agrees that, in the event of any such breach or threatened breach,
the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain
such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being required.
Section
4.5 Enforcement Expenses. The Company agrees to pay all costs and expenses of enforcement of this Note, including, without
limitation, reasonable attorneys' fees and expenses.
Section
4.6 Binding Effect. The obligations of the Company and the Holder set forth herein shall be binding upon the successors
and assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof.
Section
4.7 Amendments. This Note may not be modified or amended in any manner except in writing executed by the Company and
the Holder.
Section
4.8 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for
the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell
or otherwise dispose of this Note. This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted
with a legend in substantially the following form:
"TIDS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS."
Section
4.9 Consent to Jurisdiction. Each of the Company and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction
of the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper . Each of the Company and the Holder consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that
such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 4.9 shall affect
or limit any right to serve process in any other manner permitted by law. Each of the Company and the Holder hereby agree that
the prevailing party in any suit, action or proceeding arising out of or relating to this Note shall be entitled to reimbursement
for reasonable legal fees from the nonprevailing party.
Section
4.10 Parties in Interest. This Note shall be binding upon, inure to the benefit of and be enforceable by the Company,
the Holder and their respective successors and permitted assigns.
Section
4.11 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 privilege.
Section
4.12 Company Waivers. Except as otherwise specifically provided herein, the Company and all others that may become liable
for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest
and all other demands' and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and
do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions
may be made without notice to any such persons and without affecting their liability herein and do further consent to the release
of any person liable hereon, all without affecting the liability of the other persons, firms or Company liable for the payment
of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.
(a)
No delay or omission on the part of the Holder in exercising its rights under
this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Holder, nor
shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights
on any future occasion.
(b)
THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHJCH THIS NOTE IS A PART
IS A COMMERCIAL TRANSACTION , AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
| WELL
POWER INC. |
| |
| By:
/s/ Dan Patience |
| Dan
Patience, President and Chief Financial |
| Officer |
| |
EXHIBIT
A
WIRE
INSTRUCTIONS
FORM OF
NOTICE OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ _________ of the principal amount of the above Note into shares of Common Stock
of Well Power, Inc. according to the conditions hereof, as of the date written below.
Date
of Conversion:
Applicable
Conversion Price:
Number
of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion:
Signature:
Print
Name:
Address:
Warrant No.: JDF-1
THIS WARRANT AND
THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
COMMON STOCK
PURCHASE WARRANT
WELL POWER,
INC.
| Warrant
Shares: 2,750,000 |
Aggregate
Exercise Amount :$55,000 |
| |
Initial
Issue Date: February 5, 2015 |
THIS
COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for value received, JDF Capital Inc., or its assigns (the
"Holder") is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set
forth, at any time on or after the date hereof (the "Initial Exercise Date") and on or prior to the close of business
on the five (5) year anniversary of the Initial Exercise Date (as subject to adjustment hereunder, the "Termination Date"),
to subscribe for and purchase from Well Power, Inc., a Nevada corporation (the "Company"), up to 2,750,000 shares (as
subject to adjustment herein, the "Warrant Shares") of common stock of the Company (the "Common Stock"). The
purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1.2.
This
Warrant is being issued in conjunction with the issuance by the Company to the Holder of that certain 10% OID Convertible Promissory
Note due on February 5, 2016 (the ''Note"). Capitalized terms used in this Warrant and not otherwise defined herein have
the meanings ascribed to them in the Note.
ARTICLE 1
EXERCISE RIGHTS
The
Holder will have the right to exercise this Warrant to purchase shares of Common Stock as set forth below.
1.1
Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, from and after the Initial Exercise Date, and then at any time, by delivery to
the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at
the address of the Holder appearing on the books of the Company) of a duly executed facsimile or emailed copy of the Notice of
Exercise form annexed hereto. Within three (3) business days following the date of exercise as aforesaid, the Holder shall deliver
the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or check drawn on
a United States bank unless the cashless exercise procedure specified in Section 1.3 below is specified in the applicable Notice
of Exercise. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal
to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise form
within 24 hours of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that,
by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
1.2
Exercise Price. The exercise price per share of Common Stock under this
Warrant is $0.02 per share, which is equal to 100% of the Conversion Price of the Principal Amount, subject to adjustment hereunder
(the "Exercise Price"). The aggregate exercise price is
$55,000
1.3 Cashless
Exercise. This Warrant may also be exercised, in whole or in part, by means of a "cashless exercise" in which the
Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) =
the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a "cashless
exercise," as set forth in the applicable Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder; and
(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.
1.4
Delivery of Warrant Shares. Warrant Shares purchased hereunder will
be delivered to Holder by 2:30 pm EST within two (2) business days of Notice of Exercise by "DWAC/FAST" electronic transfer
(such date, the "Warrant Share Delivery Date"). For example, if Holder delivers a Notice of Exercise to the Company
at 5:15 pm eastern time on Monday January 1st, the Company's transfer agent must deliver shares to Holder's broker via "DWAC/FAST"
electronic transfer by no later than 2:30 pm eastern time on Wednesday January 3rd. The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date of delivery of the Notice of Exercise. Holder may assess penalties or liquidated
damages (both referred to herein as "penalties") as follows. For each exercise, in the event that shares are not delivered
by the third business day (inclusive of the day of exercise), the Company shall pay the Holder in cash a penalty of $2,000 per
day for each day after the third business day (inclusive of the day of exercise) until share delivery is made. The Company will
not be subject to any penalties once its transfer agent correctly processes the shares to the DWAC system. The Company will
make its best efforts to deliver the Warrant Shares to the Holder the same day or next day
1.5
Delivery of Warrant. The Holder shall not be required to physically
surrender this Warrant to the Company. If the Holder has purchased all of the Warrant Shares available hereunder and the Warrant
has been exercised in full, this Warrant shall automatically be cancelled without the need to surrender the Warrant to the Company
for cancellation. If this Warrant shall have been exercised in part, the Company shall, at the request of Holder and upon surrender
of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant and, for purposes of Rule 144, shall tack back to the original date of this Warrant.
1.6
Warrant Exercise Rescission Rights. For any reason in Holder's sole
discretion, including if the Warrant Shares are not delivered by DWAC/FAST electronic transfer or in accordance with the timeframe
stated in Section 1.4, or for any other reason, Holder may, at any time prior to selling those Warrant Shares rescind such exercise,
in whole or in part, in which case the Company must, within three (3) days of receipt of notice from the Holder, repay to the
Holder the portion of the exercise price so rescinded and reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which the exercise was rescinded and, for purposes of Rule 144, such reinstated portion of the Warrant and the Warrant
Shares shall tack back to the original date of this Warrant. If Warrant Shares were issued to Holder prior to Holder's rescission
notice, upon return of payment from the Company, Holder will, within three (3) days of receipt of payment, commence procedures
to return the Warrant Shares to the Company
1.7
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder
the Warrant Shares on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to
purchase (in an open market transaction or otherwise) or the Holder's brokerage firm otherwise purchases, shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise
(a "Buy-In"), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder's total
purchase price (including brokerage commissions and other fees, if any) for the shares of Common Stock so purchased exceeds (y)
the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either (x) reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded), (y) deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery
obligations hereunder, or (z) pay in cash to the Holder the amount obtained by multiplying (1) the number of Warrant Shares that
the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.
1.8
Make-Whole for Market Loss after Exercise. At the Holder's election,
if the Company fails for any reason to deliver to the Holder the Warrant Shares by DWAC/FAST electronic transfer (such as by delivering
a physical certificate) and if the Holder incurs a Market Price Loss, then at any time subsequent to incurring the loss the Holder
may provide the Company written notice indicating the amounts payable to the Holder in respect of the Market Price Loss and the
Company must make the Holder whole as follows:
Market
Price Loss = [(High trade price on the day of exercise) x (Number of Warrant Shares)] - [(Sales price realized by Holder) x (Number
of Warrant Shares)]
The Company
must pay the Market Price Loss by cash payment, and any such cash payment must be made by the third business day from the time
of the Holder's written notice to the Company.
1.9
Make-Whole for Failure to Deliver Loss. At the Holder's election, if
the Company fails for any reason to deliver to the Holder the Warrant Shares by the Warrant Share Delivery Date and if the Holder
incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable
to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure
to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of Warrant Shares)]
The Company
must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the
time of the Holder's written notice to the Company.
1.10
Choice of Remedies. Nothing herein, including, but not limited to, Holder's
electing to pursue its rights under Sections 1.8 or 1.9 of this Warrant, shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof
1.11
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such shares,
all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder. The Company shall pay all transfer agent fees required for same-day
processing of any Notice of Exercise.
1.12
Holder's Exercise Limitations. Unless otherwise agreed in writing by
both the Company and the Holder, at no time will the Holder exercise any amount of this Warrant to purchase Common Stock that
would result in the Holder owning more than 4.99% of the Common Stock outstanding of the Company (the "Beneficial Ownership
Limitation "). Upon the written or oral request of Holder, the Company shall within twenty-four (24) hours confirm orally
and in writing to the Holder the number of shares of Common Stock then outstanding.
ARTICLE 2
ADJUSTMENTS
2.1
Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include
any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 2.1 shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
2.2
Subsequent Equity Sales.
(i)
If the Company or any Subsidiary thereof, as applicable, at any time while
this Warrant is outstanding, shall sell or grant any option to purchase , or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or any
security entitling the holder thereof (including sales or grants to the Holder) to acquire Common Stock, including, without limitation,
any debt, preferred stock, right, option, warrant, Variable Rate Transaction (as defined below) or other instrument that is convertible
into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock (a "Common Stock
Equivalent"), at an effective price per share less than the Exercise Price then in effect (such lower price, the "Base
Share Price" and such issuances collectively, a "Dilutive Issuance") (it being understood and agreed that if the
holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share
which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share
that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such
date of the Dilutive Issuance at such effective price regardless of whether such holder has received or ever receives shares at
such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced
and only reduced to equal the Base Share Price and consequently the number of Warrant Shares issuable hereunder shall be increased
such that the Aggregate Exercise Amount hereunder, after taking into account the decrease in the Exercise Price, shall be equal
to the Aggregate Exercise Amount prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder, in writing, no later than the business day following the issuance
or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 2.2, indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the "Dilutive
Issuance Notice"). In addition, the Company shall provide the Holder, whenever the Holder requests at any time while this
Warrant is outstanding, a schedule of all issuances of Common Stock or Common Stock Equivalents since the date of the Agreement,
including the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other
pricing terms. The term issuances shall also include all agreements to issue, or prospectively issue Common Stock or Common Stock
Equivalents, regardless of whether the issuance contemplated by such agreement is consummated. The Company shall notify the Holder
in writing of any issuances within twenty-four (24) hours of such issuance. For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 2.2, upon the occurrence of any Dilutive Issuance, the Holder
is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately
refers to the Base Share Price in the Notice of Exercise. "Variable Rate Transaction" means a transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include
the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to
being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified
or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii)
enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at
a future determined price
(ii)
Anything herein to the contrary notwithstanding, the Company shall not be required
to make any adjustment to the Exercise Price in connection with (i) securities issued (other than for cash) in connection with
a merger, acquisition, or consolidation, (ii) securities issued pursuant to a bona fide firm underwritten public offering of the
Company's securities,
(iii)
securities issued pursuant to the conversion or exercise of convertible or
exercisable securities issued or outstanding on or prior to the date hereof or issued pursuant to that certain Securities Purchase
Agreement of even date hereof between the Company and the Holder, (iv) the shares of Common Stock issuable upon the exercise of
this Warrant, (v) securities issued in connection with strategic license agreements or other partnering arrangements so long as
such issuances are not for the purpose of raising capital, (vi) Common Stock issued or options to purchase Common Stock granted
or issued pursuant to the Company's stock option plans and employee stock purchase plans as they now exist and (vii) the payment
of any accrued interest in shares of Common Stock pursuant to the Note.
2.3
Pro Rata Distributions. If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock,
then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record
date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or
rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors
in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets
or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
2.4
Notice to Holder. Whenever the Exercise Price is adjusted pursuant to
any provision of this Article 2, the Company shall promptly notify the Holder (by written notice) setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the
facts requiring such adjustment.
ARTICLE 3
COMPANY COVENANTS
3.1
Reservation of Shares. As of the issuance date of this Warrant and for
the remaining period during which the Warrant is exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Warrant Shares upon the full exercise of this Warrant. The
Company represents that upon issuance, such Warrant Shares will be duly and validly issued, fully paid and non-assessable. The
Company agrees that its issuance of this Warrant constitutes full authority to its officers, agents and transfer agents who are
charged with the duty of executing and issuing shares to execute and issue the necessary Warrant Shares upon the exercise of this
Warrant. No further approval or authority of the stockholders of the Board of Directors of the Company is required for the issuance
of the Warrant Shares.
3.2
No Adverse Actions. Except and to the extent as waived or consented
to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction
thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
ARTICLE 4
MISCELLANEOUS
4.1
Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable
upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part
thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted
under the Securities Act.
4.2
Transferability. Subject to compliance with any applicable securities
laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole
or in part, by a written assignment of this Warrant duly executed by the Holder or its agent or attorney. If necessary to obtain
a new warrant for any assignee, the Company, upon surrender of this Warrant, shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and such
new Warrants, for purposes of Rule 144, shall tack back to the original date of this Warrant. The Warrant, if properly assigned
in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
4.3
Assignability. The Company may not assign this Warrant. This Warrant
will be binding upon the Company and its successors, and will inure to the benefit of the Holder and its successors and assigns,
and may be assigned by the Holder to anyone of its choosing without the Company's approval.
4.4
Notices. Any notice required or permitted hereunder must be in writing
and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively
delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice
is deposited with the courier service for delivery
4.5
Governing Law. This Warrant will be governed by, and construed and enforced
in accordance with, the laws of the State of New York, without regard to the conflict of laws principles thereof. Any action brought
by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state
courts of New York or in the federal courts located in the State of New York. Both parties and the individuals signing this Agreement
agree to submit to the jurisdiction of such courts.
4.6
Delivery of Process by Holder to the Company. In the event of any action
or proceeding by Holder against the Company, and only by Holder against the Company, service of copies of summons and/or complaint
and/or any other process which may be served in any such action or proceeding may be made by Holder via U.S. Mail, overnight delivery
service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the
Company at its last known address or to its last known attorney set forth in its most recent SEC filing.
4.7
No Rights as Stockholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set
forth in Section 1.1. So long as this Warrant is unexercised, this Warrant carries no voting rights and does not convey to the
Holder any "control" over the Company, as such term may be interpreted by the SEC under the Securities Act or the Exchange
Act, regardless of whether the price of the Company's Common Stock exceeds the Exercise Price.
4.8
Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
4.9
Attorney Fees. In the event any attorney is employed by either party
to this Warrant with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement
of this Warrant or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions
of this Warrant, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys'
fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
4.10
Opinion of Counsel. In the event that an opinion of counsel is needed
for any matter related to this Warrant, Holder has the right to have any such opinion provided by its counsel. Holder also has
the right to have any such opinion provided by the Company's counsel.
4.11
Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies.
4.12
Amendment Provision. The term "Warrant" and all references
thereto, as used throughout this instrument, means this instrument as originally executed, or if later amended or supplemented,
then as so amended or supplemented.
4.13
No Shorting. Holder agrees that so long as this Warrant remains unexercised
in whole or in part, Holder will not enter into or effect any "short sale" of the common stock or hedging transaction
which establishes a net short position with respect to the common stock of the Company. The Company acknowledges and agrees that
as of the date of delivery to the Company of a fully and accurately completed Notice of Exercise, Holder immediately owns the
common shares described in the Notice of Exercise and any sale of those shares issuable under such Notice of Exercise would not
be considered short sales.
[Signatures appear
on next page.]
IN
WI1NESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first
above indicated.
WELL POWER, INC.
By: /s/ Dan
Patience
Dan Patience, President
and
Chief Financial
Officer
HOLDER
JDF CAPITAL INC.
By: /s/ John
Fierro
John Fierro, President
NOTICE OF EXERCISE
TO: Well Power,
Inc.(the "Company")
(1)
The undersigned hereby elects to purchase ____________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
(2)
Payment shall take the form of (check applicable box):
[ ] in lawful money
of the United States; or
[ ] the cancellation
of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 1.3, to exercise this Warrant
with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section
1.3.
(3)
Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:
The Warrant Shares
shall be delivered to the following DWAC Account Number:
(4)
Accredited Investor. The undersigned is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
(SIGNATURE OF HOLDER)
Name:
Date: