Exhibit 10.19
 
SECURED CONVERTIBLE PROMISSORY NOTE
 

Principal Amount: $_____ (9% OID) _______, 2012                 

Purchase Price: $_____

FOR VALUE RECEIVED, Cyclone Power Technologies, Inc. (the "Borrower"), hereby
promises to pay to ________________ (the “Payee"), the principal sum of
__________________________________ ($_____) Dollars on the Maturity Date.

1.           The principal amount of this Note and all accrued and unpaid
interest shall be due and payable on the one year anniversary date of the
issuance date above, unless earlier accelerated (the “Maturity Date”). Upon an
Event of Default and after the Maturity Date, this Note shall accrue interest at
the rate of 24% per annum or the maximum rate permissible by law, whichever is
less.

2.           This Note has been issued in connection with a Securities Purchase
Agreement (the “Agreement”), pursuant to which the Borrower and Payee have made
certain representations and warranties and, is subject to the provisions of such
Agreement, including that the maximum aggregate principal amount outstanding
under all Notes issued by the Borrower secured by the Army Contract (defined
below) pursuant to the several Agreements shall not exceed $545,000.

3.           The Borrower hereby grants to the Payee a security interest in the
outstanding accounts receivables due to the Borrower under its contract with the
U.S. Army (#W56HZV-11-C-0352) as described in Exhibit A hereto (the “Army
Contract”). The Borrower shall repay within ten (10) business days principal and
interest amount of the Note with proceeds from the paid invoices under the Army
Contract; provided however, all Notes subscribed to under the Agreements shall
be paid pro-rata and no more than 50% of such paid invoices shall be used for
early repayment of the Notes.

4.           Upon the closing by the Borrower of an equity or debt financing
during the time the Note is outstanding in which the Borrower receives gross
cash proceeds of at least $500,000 (a “Qualified Financing”), the outstanding
principal and interest of the Note will be repaid within three (3) business days
after the Qualified Financing closes; provided however, no more that 10% of the
gross proceeds from such Qualified Financing shall be applied to repayment of
the Notes, pro-rata. In the event of a sale of the Borrower or sale, lease,
transfer or assignment of all or substantially all of its assets, all
outstanding principal and interest on the Note issued to such Payee will be
repaid immediately prior to the completion of such sale of the Borrower and as a
condition to closing of such transaction.  This Note is an unconditional payment
obligation of the Company and is not conditional on receipt of revenues or funds
from any contract or revenue source.

5.           The Payee shall have the right to convert the principal and any
interest due under this Note into Shares of the Borrower's Common Stock, $.0001
par value per share (“Common Stock”) as set forth below.
 
 
 

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5.1.           Conversion into the Borrower's Common Stock.

(a)             The Payee shall have the right from and after the date of the
issuance of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note, and/or
accrued interest, at the election of the Payee (the date of giving of such
notice of conversion being a “Conversion Date”) into fully paid and
non-assessable shares of Common Stock as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 5.1(b) hereof (the “Conversion Price”), determined
as provided herein.  Upon delivery to the Borrower of a completed Notice of
Conversion, a form of which is annexed hereto as Exhibit A, Borrower shall issue
and deliver to the Payee within three (3) business days after the Conversion
Date (such third day being the “Delivery Date”) that number of shares of Common
Stock for the portion of the Note converted in accordance with the
foregoing.  The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest, if any, to be converted, by the Conversion
Price.

(b)             Subject to adjustment as provided in Section 5.1(c) hereof, the
conversion price (“Conversion Price”) per share shall be $0.15, subject to
adjustment as described herein.

(c)             The Conversion Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to Section 5.1(a),
shall be subject to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as follows:

A.             Merger, Sale of Assets, etc.  If (A) the Borrower effects any
merger or  consolidation of the Borrower with or into another entity, (B) the
Borrower effects any sale of all or substantially all of its assets in one or a
series of related transactions,  (C) any tender offer or exchange offer (whether
by the Borrower or another entity) is completed pursuant to which Payees of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, (D) the Borrower consummates a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with one or
more persons or entities whereby such other persons or entities acquire more
than the 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
Common Stock of the Borrower, or (F) the Borrower effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (in any such case, a “Fundamental  Transaction”), this Note, as
to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to convert into such number and kind
of shares or other securities and property as would have been issuable or
distributable on account of such Fundamental Transaction, upon or with respect
to the securities subject to the conversion right immediately prior to such
Fundamental Transaction.  The foregoing provision shall similarly apply to
successive Fundamental Transactions of a similar nature by any such successor or
purchaser.  Without limiting the generality of the foregoing, the anti-dilution
provisions of this Section shall apply to such securities of such successor or
purchaser after any such Fundamental Transaction.
 
 
 

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B.             Reclassification, etc.  If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes that may be issued or
outstanding, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.

C.             Stock Splits, Combinations and Dividends.  If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.

D.             Share Issuance.   So long as this Note is outstanding, if the
Borrower shall issue any Common Stock other than in connection with (i) full or
partial consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the securities or assets of a
corporation or other entity which Payees of such securities or debt are not at
any time granted registration rights other than piggy back rights, (ii) the
Company’s issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital which Payees of such securities or debt are not at
any time granted registration rights other than piggy back rights, (iii) the
Company’s issuance of Common Stock or the issuances or grants of options to
purchase Common Stock to employees, directors, and consultants, pursuant to
plans as such plans are constituted on the date hereof (iv) up to 5,000,000
shares per year issued to legitimate third party service providers and
contractors, (v) securities issued pursuant to financing deals in place as of
the date hereof, specifically the purchase of shares by GEM Global Yield Fund as
announced in the Borrower’s Form 8-K filed with the SEC on July 11, 2012; and
(vi) securities upon the exercise or exchange of or conversion of any securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of the date hereof on the terms in effect on
the date hereof (collectively, the foregoing (i) through (vi) are “Excepted
Issuances”), prior to the complete conversion or payment of this Note, for a
consideration per share that is less than the Conversion Price that would be in
effect at the time of such issue, then, and thereafter successively upon each
such issuance, the Conversion Price shall be reduced to such other lower issue
price.  For purposes of this adjustment, the issuance of any security or debt
instrument of the Borrower carrying the right to convert such security or debt
instrument into Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Conversion Price upon the
issuance of the above-described security, debt instrument, warrant, right, or
option  and again upon the issuance of shares of Common Stock upon exercise of
such conversion or purchase rights if such issuance is at a price lower than the
then applicable Conversion Price. Common Stock issued or issuable by the
Borrower for no consideration will be deemed issuable or to have been issued for
$0.001 per share of Common Stock.
 
 
 

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(d)             Whenever the Conversion Price is adjusted pursuant to Section
2.1(c) above, the Borrower shall promptly mail to the Payee a notice setting
forth the Conversion Price after such adjustment and setting forth a statement
of the facts requiring such adjustment.

(e)             During the period the conversion right exists, Borrower will
reserve from its authorized and unissued Common Stock not less than an amount of
Common Stock equal to 150% of the amount of shares of Common Stock issuable upon
the full conversion of this Note.  Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable.  Borrower
agrees that its issuance of this Note shall constitute full authority to its
officers, agents, and transfer agents who are charged with the duty of executing
and issuing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the conversion of this Note.

5.2             Method of Conversion.  This Note may be converted by the Payee
in whole or in part as described in Section 2.1(a) hereof.  Upon partial
conversion of this Note, a new Note containing the same date and provisions of
this Note shall, at the request of the Payee, be issued by the Borrower to the
Payee for the principal balance of this Note and interest which shall not have
been converted or paid.

5.3.             Maximum Conversion.  The Payee shall not be entitled to convert
on a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Payee and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Payee and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion Date.  For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.  Subject to
the foregoing, the Payee shall not be limited to aggregate conversions of
4.99%.  The Payee shall have the authority and obligation to determine whether
the restriction contained in this Section 2.3 will limit any conversion
hereunder and to the extent that the Payee determines that the limitation
contained in this Section applies, the determination of which portion of the
Notes are convertible shall be the responsibility and obligation of the
Payee.  The Payee may waive the conversion limitation described in this Section
2.3, in whole or in part, upon and effective after 61 days prior written notice
to the Borrower to increase such percentage to up to 9.99%.
 
 
 

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6.           If a minimum of six (6) months have passed (and Rule 144 is
available for the shares) or the shares are otherwise registered for resale, and
the Company’s common stock closes at a price of $.30 or higher for 10
consecutive trading days, then the Company may call a conversion of the
Principal amount of the Notes. The unpaid, accrued interest (6%) shall be
payable in cash at such time.

7.           Borrower represents and warrants that (a) this Note has been duly
authorized, executed and delivered by Borrower and constitutes a legal, valid
and binding obligation of the Borrower enforceable against it in accordance with
its terms; (b) no consent of any other party and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority, domestic
or foreign, is required to be obtained by Borrower in connection with the
execution, delivery or performance of this Note (other than any applicable Blue
Sky or Form D filing); and (c) the execution, delivery and performance of this
Note will not violate any provision of any applicable law or regulation or of
any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of any mortgage, indenture,
lease, contract or other instrument or to which the Borrower is a party or which
purports to be binding upon the Borrower or upon any of its assets.

8.           Borrower further represents and warrants to Payee, as an inducement
to incentivize Payee to purchase the Note, that Borrower has assessed the total
consideration payable under this Note and the Agreement and related finders’ fee
agreement, and Borrower has determined that the percentage rate being paid by it
does not exceed the maximum amount permitted to be paid by law, or otherwise
render the Note or Agreement unenforceable.

9.           The Borrower of this Note and all endorsers, sureties and
guarantors hereby waives presentment for payment, demand, protest and notice of
dishonor hereof.  Upon the occurrence of an Event of Default (as defined
herein), the entire unpaid principal amount of this Note together with accrued
interest shall immediately become due and payable, in addition to any penalty
payments set forth above.  In the event of the occurrence of an Event of
Default, the Borrower agrees to pay all costs of collection together with the
legal expenses and reasonable attorneys' fees paid or incurred by the holder of
this Note in its collection or enforcement.

 
 

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10.           Each of the following events shall constitute an "Event of
Default" as used herein:

 
(a)
The failure to make any payment of principal or interest of this Note, when due,
by acceleration or for any other reason; or

 
(b)
The Borrower breaches any material covenant or other term or condition of this
Note in any material respect and such breach, if subject to cure, continues for
a period of ten (10) business days after written notice to the Borrower from the
Payee; or

 
(c)
Any material representation or warranty of the Borrower made herein, or in the
Agreement, statement or certificate given in writing pursuant hereto or in
connection therewith shall be false or misleading in any material respect as of
the date hereof; or

 
(d)
Reservation Default.   Failure by the Borrower to have reserved for issuance
upon conversion of the Note the number of shares of Common Stock as required in
the Agreement; or

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

 
(f)
Judgments.  Any money judgment, writ or similar final process shall be entered
or filed against Borrower or any of its property or other assets for more than
$100,000, unless stayed vacated or satisfied within forty-five (45) days; or

 
(g)
Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings or relief under any bankruptcy law or any law, or the
issuance of any notice in relation to such event, for the relief of debtors
shall be instituted by or against the Borrower or any Subsidiary of Borrower; or

 
(h)
Delisting.   Delisting of the Common Stock from any Principal Market; failure to
comply with the requirements for continued listing on a Principal Market for a
period of ten (10) consecutive trading days; or

 
(i)
Non-Payment.   A default by the Borrower under any one or more obligations in an
aggregate monetary amount in excess of $100,000 for more than twenty (20) days
after the due date, unless the Borrower is contesting the validity of such
obligation in good faith.

 
 
 

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11.           Upon an Event of Default not cured within 30 days the conversion
price of the Note shall be reset to 75 % of the 10 day VWAP for the 10 trading
days preceding such event of default.

12.           This Note, and the rights associated herewith, may be transferred
or assigned by the Payee by delivery of written notice thereof to Borrower. The
Borrower shall reissue this Note as and when requested by the Payee at any time
prior to its maturity in accordance with those instructions.  The Borrower
hereby extends all covenants and warranties it has made herein and in the
Agreement to any third party assignees of this Note.

13.           The Borrower may prepay all or any part of this Note without
penalty. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

14.           No failure or delay on the part of the holder of this Note in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall a single or partial exercise of any other right, power or
privilege operate as a waiver.

15.            This Note is an unconditional obligation of the Borrower for the
payment of money only and is, accordingly, fully enforceable, among other
remedies in enforcement and collection, through action pursuant to CPLR 3213 or
similar summary proceeding or summary judgment motion entered at any time during
a action for enforcement of this Note. The Borrower hereby waives a jury trial.

16.           This Note is subject to the laws of the State of New York and
Borrower hereby consents jurisdiction in the State and County of New York for
any and all collection or enforcement matters, as more fully provided in the
Agreement.

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This Note is hereby executed and delivered by Borrower as of the date first set
forth above.

CYCLONE POWER TECHNOLOGIES, INC

By:_________________________________
     Christopher Nelson, President and GC
 
 
 
 

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EXHIBIT “A”
COLLATERAL
 
All current and future accounts payable under Borrower’s contract with the US
Army/TACOM (#W56HZV-11-C-0352), in the total remaining contract amount of
$880,000, which is expected to be paid as follows:

Payment Scheduled
to be Paid from Army
Estimated
Approximate Date
Maximum Amount Available
 for Early Repayment
$251,441
1 November 2012
$125,720
$251,441
1 February 2013
$125,720
$251,441
1 May 2013
$125,720
$130,527
15 July 2013
$65,263

 
 

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NOTICE OF CONVERSION

(To be executed by the Registered Payee in order to convert the Note)

The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note reissued by Cyclone Power
Technologies, Inc. on August __, 2012 into Shares of Common Stock of Cyclone
Power Technologies, Inc. (the “Borrower”) according to the conditions set forth
in such Note, as of the date written below.
 

Date of
Conversion:_____________________________________________________________________________________________________________

Conversion
Price:_______________________________________________________________________________________________________________

Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of Cyclone Power Technologies, Inc
____________________________________________________________________________________________________________________________

Shares To Be
Delivered:__________________________________________________________________________________________________________

Signature:_____________________________________________________________________________________________________________________

Print
Name:___________________________________________________________________________________________________________________

Address:______________________________________________________________________________________________________________________

   _____________________________________________________________________________________________________________________