Exhibit 10.34

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 16,
2013, is entered into by and between Cyclone Power Technologies, Inc., a Florida
corporation, (the “Company”), having its address at 601 NE 26th Court, Pompano
Beach, FL 33064, and Peak One Opportunity Fund, L.P., a Delaware limited
partnership (the “Buyer”), having its address at 333 South Hibiscus Drive, Miami
Beach, FL 33139.

 

WITNESSETH:

 

WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in accordance with and in reliance upon the exemption from securities
registration 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(2) of the 1933 Act; and

 

WHEREAS, the Buyer wishes to purchase from the Company, and the Company wishes
to sell the Buyer, upon the terms and subject to the conditions of this
Agreement, securities consisting of (i) the Company’s Convertible Debentures due
three years from the respective dates of issuance (the “Debentures”), each of
which are in the form of Exhibit A hereto, which will be convertible into shares
of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”),
in the aggregate principal amount of up to Two Hundred Twenty Thousand and
00/100 Dollars ($220,000), and (ii) shares of Common Stock that are currently
restricted with a value of up to Twenty Two Thousand and 00/100 Dollars
($22,000) (the “Restricted Stock”), for an aggregate purchase price of up to One
Hundred Nighty Eight Thousand and 00/100 Dollars ($198,000), all upon the terms
and subject to the conditions of this Agreement, the Debentures, and other
related documents;

 

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.     DEFINITIONS; AGREEMENT TO PURCHASE.

 

a.     Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

 

(i)     “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.

 

(ii)     “Certificates” means the relevant Restricted Stock certificates duly
executed on behalf of the Company and issued in the name of the Buyer.

 

(iii)     “Closing Date” means the date on which one of the two Closings are
held, which are the Signing Closing Date and the Second Closing Date.

 

 
 

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(iv)     “Common Stock” shall have the meaning ascribed to such term in the
Recitals.

 

(v)     “Conversion Price” means sixty five percent (65%) of the lowest closing
bid price (as reported by Bloomberg LP) of Common Stock for the twenty (20)
trading days immediately preceding the date of conversion of the Debentures
(subject to equitable adjustments resulting from any stock splits, stock
dividends, recapitalizations or similar events).

 

(vi)     “Conversion Shares” means the shares of Common Stock issuable upon
conversion of the Debentures.

 

(vii)     “Dollars” or “$” means United States Dollars.

 

(viii)     “Material Adverse Effect” means a material adverse effect on the
business, operations or condition (financial or otherwise), prospects or results
of operation of the Company and its Subsidiaries taken as a whole, irrespective
of any finding of fault, magnitude of liability (or lack of financial liability)
or purported lack of materiality (it being understood that the mere finding of
any such violation is in itself material and adverse). Without limiting the
generality of the foregoing, the occurrence of any of the following shall be
considered a Material Adverse Effect: (i) the threat or commencement of material
litigation in which the Company or any Subsidiary is, or has reason to believe
it will be, named as a defendant (including in any event products liability
claims against the Company or its Subsidiaries), (ii) the suspension or
withdrawal of any governmental authority or permit pertaining to any of the
Company’s or any Subsidiary’s products or services, (iii) the loss of any
material insurance coverage (including, in any case, comprehensive general
liability coverage, products liability coverage or directors and officers
coverage, in each case an in effect at the time of execution and delivery of
this Agreement), (iv) the taking of any adverse action by any Person affecting
the Common Stock (including, without limitation, (1) the commencement of any
regulatory investigation of which the Company is aware, the suspension of
trading of the Common Stock by the Financial Industry Regulation Authority
(“FINRA”), the SEC, or the OTC Bulletin Board (“OTCBB”), the failure of the
Common Stock to be DTC eligible or the placing of the Common Stock on the DTC
“chill list” or (2) the engaging in any market manipulation or other unlawful or
improper trading or other activity by any Affiliate), (v) the Company’s
independent registered accounts shall resign under circumstances where a
disagreement exists between the Company, (vi) the Company shall fail to timely
file any disclosure document as required by applicable federal or state
securities laws and regulations or by the rules and regulations of any exchange,
trading market or quotation system to which the Company or the Common Stock is
subject, or (vii) Christopher Nelson, or any other key director, officer or
employee of the Company, shall, for any reason (including, without limitation,
termination, resignation, retirement, death or disability) cease to act on
behalf of the Company in the same role and to the same extent as his or her
involvement as of the date of execution and delivery of this Agreement.

 

(ix)     “Person” means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.

 

 
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(x)     “Purchase Price” means the price that the Buyer pays for the Debentures
and Restricted Stock at each respective Closing, which are the Signing Purchase
Price and the Second Purchase Price, as such are defined in Sections 6(a) and
6(b), respectively.

 

(xi)     “Registration Rights Agreement” shall have the meaning ascribed to such
term in Section 3(d).

 

(xii)     “Restricted Stock” shall have the meaning ascribed to such term in the
Recitals.

 

(xiii)     “Securities” means the Debentures and the Shares.

 

(xiv)     “Shares” means the Conversion Shares and the Restricted Stock.

 

(xv)     “Share Calculation Price” shall have the meaning ascribed to such term
in Section 6(a).

 

(xvi)     “Second Debenture” means the second of the two (2) Debentures, in the
principal amount of $100,000, which is issued by the Company to the Buyer at the
Second Closing Date.

 

(xvii)     “Second Closing Date” shall have the meaning ascribed to such term in
Section 6(b).

 

(xviii)     “Signing Debenture” means the first of two Debentures, in the
principal amount of $120,000, which is issued by the Company to the Buyer at the
Signing Closing Date.

 

(xix)     “Signing Closing Date” shall have the meaning ascribed to such term in
Section 6(a).

 

(xx)     “Subsidiary” shall have the meaning ascribed to such term in Section
3(b).

 

(xxi)     “Transaction Documents” means, collectively, this Agreement, the
Debentures, the Registration Rights Agreement, the Transfer Agent Instruction
Letter, and the other agreements, documents and instruments contemplated hereby
or thereby.

 

(xxii)     “Transfer Agent” shall have the meaning ascribed to such term in
Section 4(a).

 

(xxiii)     “Transfer Agent Instruction Letter” shall have the meaning ascribed
to such term in Section 5(a).

 

b.     Purchase and Sale of Debentures and Restricted Stock.

 

(i)     The Buyer agrees to Purchase from the Company, and the Company agrees to
sell to the Buyer, the Debentures and Restricted Stock on the terms and
conditions set forth below in this Agreement and the other Transaction
Documents.

 

 
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(ii)     Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the Buyer will purchase the Debentures and the Restricted
Stock at certain closings (each, a “Closing”) to be held on certain respective
Closing Dates.

 

2.     BUYER’S REPRESENTATIONS, WARRANTIES, ETC.

 

The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:

 

a.     Without limiting the Buyer’s right to sell the Shares pursuant to the
Registration Statement, the Buyer is purchasing the Restricted Stock and
Debentures, and will be acquiring the Conversion Shares, 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.     Buyer 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
501(a)(3), (ii) experienced in making investments of the kind described in this
Agreement and the related documents, (iii) 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 (iv) able to afford the entire loss of its investment in the Securities.

 

c.     All subsequent offers and sales of the Securities by the Buyer shall be
made pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration and compliance with applicable states’ securities
laws.

 

d.     Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.

 

e.     Buyer and its advisors have been furnished with all materials relating to
the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Buyer.
Buyer and its advisors have been afforded the opportunity to ask questions of
the Company and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, Buyer has also had
the opportunity to obtain and to review (1) the Company’s Quarterly Reports on
Form 10-Q for the fiscal quarters ended June 30. 2013 and September 30, 2013 and
(2) the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2012 (collectively, the “SEC Documents”).

 

f.     Buyer understands that its investment in the Securities involves a high
degree of risk, including the risk of loss of the Buyer’s entire investment.

 

 
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g.     Buyer 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.

 

h.     Buyer is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. This Agreement and the other
Transaction Documents have been duly and validly authorized, executed and
delivered on behalf of the Buyer and create a valid and binding agreement of the
Buyer enforceable in accordance with its 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.

 

i.     The state in which any offer to purchase shares hereunder was made to or
accepted by Buyer is the state shown as the Buyer’s address contained herein.

 

3.     COMPANY REPRESENTATIONS AND WARRANTIES, ETC.

 

The Company represents and warrants to the Buyer that:

 

a.     Concerning the Debentures and the Shares. There are no preemptive rights
of any stockholder of the Company to acquire the Debentures or the Shares.

 

b.     Organization; Subsidiaries; Reporting Company Status. Attached hereto as
Schedule 3(b) is an organizational chart describing the Company’s majority-owned
subsidiaries (the “Subsidiaries”) and the relationships among the Company and
such Subsidiaries, including as to each Subsidiary its jurisdiction of
organization and the percentage of ownership held by the Company, and the parent
company of the Company, including the percentage of ownership of the Company
held by it. The Company and each Subsidiary is a corporation or other form of
businesses entity duly organized, validly existing and in good standing under
the laws its respective jurisdiction of organization, and each of them has the
requisite corporate or other power to own its properties and to carry on its
business as now being conducted. The Company and each Subsidiary is duly
qualified as a foreign corporation or other entity 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 a Material
Adverse Effect. The Common Stock is listed and traded on the OTCQB Market of the
OTC Markets Group, Inc. (trading symbol: CYPW). The Company has received no
notice, either oral or written, from FINRA, the SEC, or any other organization,
with respect to the continued eligibility of the Common Stock for such listing,
and the Company has maintained all requirements for the continuation of such
listing.

 

c.     Authorized Shares. Schedule 3(c) sets forth all capital stock and
derivative securities of the Company that are authorized for issuance and that
are issued and outstanding. All issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares, assuming
the prior issuance and exercise, exchange or conversion, as the case may be, of
all derivative securities authorized, as indicated in Schedule 3(c) (after
giving effect to an increase in authorized shares to be implemented by the
Company within thirty (30) days of the date hereof). The Shares have been duly
authorized and, when issued upon conversion of, or as interest on, the
Debentures, the Shares will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. At all times, the Company shall keep available and
reserved for issuance to the holders of the Debentures Common Stock duly
authorized for issuance against the Debentures.

 

 
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d.     Authorization. This Agreement, the Registration Rights Agreement, dated
as of the date hereof, between the Company and the Buyer, substantially in the
form of Exhibit B annexed hereto (the “Registration Rights Agreement”), and the
issuance of the Debentures (including without limitation the incurrence of
indebtedness thereunder) and Restricted Stock and the other transactions
contemplated by the Transaction Documents, have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company. Each of the Transaction Documents, when executed and delivered by the
Company, are and will be, valid, legal 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 the Transaction
Documents, the issuance of the Securities and the consummation by the Company of
the other transactions contemplated by this Agreement, the Registration Rights
Agreement and the Debentures (including without limitation the incurrence of
indebtedness thereunder) 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 articles 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 an event which results in
the creation of any lien, charge or encumbrance upon any assets of the Company
or the triggering of any preemptive or anti-dilution rights or rights of first
refusal or first offer on the part of holders of the Company’s securities, (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, or (iv) the
Company’s listing agreement for its Common Stock (if applicable), except such
conflict, breach or default which would not have 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 stockholders of the Company is required to be obtained
by the Company for the entering into and performing this Agreement and the other
Transaction Documents (including without limitation the issuance and sale of the
Securities to the Buyer as contemplated by this Agreement) except such
authorizations, approvals and consents that have been obtained, or such
authorizations, approvals and consents, the failure of which to obtain would not
have a Material Adverse Effect.

 

g.     SEC Filings. None of the 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. The Company timely filed all requisite forms, reports and exhibits
thereto with the SEC as required. The Company is not aware of any event
occurring on or prior to the execution and delivery of this Agreement that would
require the filing of, or with respect to which the Company intends to file, a
Form 8-K after such time.

 

 
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h.     Absence of Certain Changes. Since September 30, 2013, when viewed from
the perspective of the Company and its Subsidiaries taken as a whole, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its Subsidiaries (including, without
limitation, a change or development which constitutes, or with the passage of
time is reasonably likely to become, a Material Adverse Effect), except as
disclosed in the SEC Documents. Since September 30, 2013, except as provided in
the 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 stockholders 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 or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or 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 changes 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. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
SEC Documents) that has not been disclosed in writing to the Buyer that (i)
would reasonably be expected to have a Material Adverse Effect, (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to the Transaction Documents, or
(iii) would reasonably be expected to materially and adversely affect the value
of the rights granted to the Buyer in the Transaction Documents.

 

j.     Absence of Litigation. Except as described in the SEC Documents, 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, 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 a party to or subject to the provisions of, any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which
could reasonably be expected to have a Material Adverse Effect.

 

 
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k.     Absence of Events of Default. No Event of Default (or its equivalent
term), as defined in the respective agreement, indenture, mortgage, deed of
trust or other instrument, to which the Company 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 document), has
occurred and is continuing, which would have a Material Adverse Effect.

 

l.     No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the SEC Documents or those incurred in
the ordinary course of the Company’s business since September 30, 2013, and
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, 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 of incorporation, by-laws or any other
charter document 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.

 

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 during the six month period immediately prior to the date of this Agreement
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 Rule 506 of Regulation D in connection with
the offer and sale of the Securities as contemplated hereby.

 

n.     Dilution. The number of Shares issuable upon conversion of the Debentures
may increase substantially in certain circumstances, including, but not
necessarily limited to, the circumstance wherein the market price of the Common
Stock declines prior to the conversion of the Debentures. 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 a potential
dilutive effect and further that the conversion of the Debentures and/or sale of
the Conversion Shares may have an adverse effect on the market price of the
Common Stock. 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. The Company specifically acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Debentures is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.

 

 
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o.     Regulatory Permits. The Company has all such permits, easements,
consents, licenses, franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or other public
authorities (“Permits”) as are necessary to own and lease its properties and
conduct its businesses in all material respects in the manner described in the
SEC Documents and as currently being conducted. All such Permits are in full
force and effect and the Company has fulfilled and performed all of its material
obligations with respect to such Permits, and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or will result in any other material impairment of the rights of the holder of
any such Permit, subject in each case to such qualification as may be disclosed
in the Prospectus. Such Permits contain no restrictions that would materially
impair the ability of the Company to conduct businesses in the manner consistent
with its past practices. The Company has not received notice or otherwise has
knowledge of any proceeding or action relating to the revocation or modification
of any such Permit.

 

p.     Hazardous Materials. The Company is in compliance with all applicable
Environmental Laws in all respects except where the failure to comply does not
have and could not reasonably be expected to have a Material Adverse Effect. For
purposes of the foregoing:

 

“Environmental Laws” means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, any other “Superfund” or
“Superlien” law or any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, the environment or any
Hazardous Material.

 

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste,
substance or material, the generation, handling, storage, disposal, treatment or
emission of which is subject to any Environmental Law.

 

q.     Independent Public Accountants. Mallah Furman & Company PA is an
independent registered public accounting firm with respect to the Company, as
required by the 1933 Act, the 1934 Act and the rules and regulations promulgated
thereunder.

 

r.     Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (1)
transactions are executed in accordance with management’s general or specific
authorization; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (3) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

 

s.     Brokers. No Person (other than the Buyer and its principals, employees
and agents) is entitled to receive any consideration from the Company or the
Buyer arising from any finder’s agreement, brokerage agreement or other
agreement to which the Company is a party.

 

 
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4.     CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

 

a.     Transfer Restrictions. The parties acknowledge and agree that (1) the
Debentures have not been registered under the provisions of the 1933 Act and,
except as provided in the Registration Rights Agreement, the Shares have not
been registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) 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 Rule 144 and further, if Rule 144 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, (3) at the request of
the Buyer, the Company shall, from time to time, within two (2) business days of
such request, at the sole cost and expense of the Company, either (i) deliver to
its transfer agent and registrar for the Common Stock (the “Transfer Agent”) a
written letter instructing and authorizing the Transfer Agent to process
transfers of the Shares at such time as the Buyer has held the Securities for
the minimum holding period permitted under Rule 144, subject to the Buyer’s
providing to the Transfer Agent certain customary representations
contemporaneously with any requested transfer, or (ii) at the Buyer’s option or
if the Transfer Agent requires further confirmation of the availability of an
exemption from registration, furnish to the Buyer an opinion of the Company’s
counsel in favor of the Buyer and the Transfer Agent, reasonably satisfactory in
form, scope and substance to the Buyer and the Transfer Agent, to the effect
that a contemporaneously requested transfer of shares does not require
registration under the 1933 Act, pursuant to the 1933 Act, Rule 144 or other
regulations promulgated under the 1933 Act and (4) neither the Company nor any
other Person is under any obligation to register the Securities (other than
pursuant to the Registration Rights Agreement) under the 1933 Act or to comply
with the terms and conditions of any exemption thereunder.

 

b.     Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures, and, until such time as the Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing 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 (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), 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 CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

c.     Registration Rights Agreement. The parties hereto agree to enter into the
Registration Rights Agreement concurrently with the execution and delivery of
this Agreement.

 

d.     Securities Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Buyer
required under any United States laws and regulations applicable to the Company
(including without limitation state “blue sky” laws), or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.

 

 
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e.     Reporting Status; Public Trading Market; DTC Eligibility. So long as the
Buyer beneficially owns any Securities and any Shares are outstanding, (i) the
Company shall timely file, prior to or on the date when due, all reports that
would be required to be filed with the SEC pursuant to Section 13 or 15(d) of
the 1934 Act if the Company had securities registered under Section 12(b) or
12(g) of the 1934 Act; (ii) the Company shall not be operated as, or report, to
the SEC or any other Person, that the Company is a “shell company” or indicate
to the contrary to the SEC or any other Person; and (iii) the Company shall take
all other action under its control necessary to ensure the availability of Rule
144 under the 1933 Act for the sale of Shares by the Buyer at the earliest
possible date. Except as otherwise set forth in Transaction Documents, the
Company shall take all action under its control necessary to obtain and to
continue the listing and trading of its Common Stock (including, without
limitation, all Registrable Securities) on the OTC Markets, Inc. (“OTCM”) at the
mid-tier (“OTCQB”) or top-tier (“OTCQX”), and will comply in all material
respects with the Company’s reporting, filing and other obligations under the
by-laws or rules of the National Association of Securities Dealers, Inc.
(“NASD”). If, so long as the Buyer beneficially owns any of the Securities, the
Company receives any written notice from the OTCM, FINRA, NASD or the SEC with
respect to either any alleged deficiency in the Company’s compliance with
applicable rules and regulations (including without limitation any comments from
the SEC on any of the Company’s documents filed (or the failure to have made any
such filing) under the 1933 Act or the 1934 Act) (each, a “Regulatory Notice”),
then the Company shall promptly, and in any event within two business days,
provide copies of the Regulatory Notice to the Buyer, and shall promptly, and in
any event within five (5) business days of receipt of the Regulatory Notice (a
“Regulatory Response”), respond in writing to the OTCM, FIRNA,NASD and/or SEC
(as the case may be), setting forth the Company’s explanation and/or response to
the issues raised in the Regulatory Notice, with a view towards maintaining
and/or regaining full compliance with the applicable rules and regulations of
the OTCM, FIRNA, NASD and/or SEC and maintaining or regaining good standing of
the Company with the OTCM, FINRA, NASD and/or SEC, as the case may be, the
intent being to ensure that the Company maintain its reporting company status
with the SEC and that its Common Stock be and remain available for trading on
the OTCQB or OTCQX (for the avoidance of doubt, excluding the bottom-tier OTC
Pink (or, “pink sheets”). Further, at all times when any portion of the
Debentures are outstanding or any Restricted Stock is owned by the Buyer, the
Common Stock shall be eligible for clearing through the Depository Trust Company
(“DTC”) via the DTC’s “DWAC” system, and the Common Stock shall not be subject
to any DTC “chill” designation or similar restriction on the clearing of the
Common Stock through DTC.

 

f.     Use of Proceeds.   The Company will use the proceeds from the sale of the
Debentures and Restricted Stock (excluding amounts paid by the Company for legal
fees in connection with the sale of the Debentures) for working capital
purposes. Absent the prior written approval of a majority of the principal
amount of the Debentures then outstanding, the Company shall not use any portion
of the proceeds of the sale of the Debentures and Restricted Stock to (i) repay
any indebtedness or other obligation of the Company incurred prior to the date
of this Agreement outside the normal course of business, (ii) pay any dividends
or redemption amount on any of the Company’s equity or equity equivalents or
(iii) pay deferred compensation or any compensation to any of the directors or
officers of the Company in excess of the rate or amount paid or accrued during
the fiscal year ended December 31, 2012, other than modest increases consistent
with prior practice that are approved by the Company’s Board of Directors.

 

 
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g.     Available Shares. Commencing on the date of execution and delivery of
this Agreement, the Company shall have and maintain authorized and reserved for
issuance, free from preemptive rights, that number of shares equal to three
hundred percent (300%) of the number of shares of Common Stock (1) issuable
based upon the Conversion Price of the then-outstanding Debentures (including
accrued interest thereon) as may be required to satisfy the conversion rights of
the Buyer pursuant to the terms and conditions of the Debenture and (2) issuable
to the Buyer on future Closing Dates, based upon the lowest closing bid price
per share of the Common Stock on the date before the most recent Closing Date
(as reported by Bloomberg LP). Notwithstanding the foregoing, if the Company
reserves Fifteen Million (15,000,000) shares and increases the amount of shares,
if necessary to achieve three hundred percent (300%) coverage within thirty (30)
days of the date hereof, then the Company shall be deemed to have complied with
the minimum requirement set forth above. The Company shall monitor its
compliance with the foregoing requirements on an ongoing basis. If at any time
the Company does not have available an amount of authorized and non-issued
Shares required to be reserved and/or the closing bid price is below the
threshold stated above, then the Company shall, without notice or demand by the
Buyer, call within thirty (30) days of such occurrence and hold within sixty
(60) days of such occurrence a special meeting of shareholders, for the sole
purpose of increasing the number of shares authorized. Management of the Company
shall recommend to shareholders to vote in favor of increasing the number of
Common Stock authorized at the meeting. Members of the Company’s Management
shall also vote all of their own shares in favor of increasing the number of
Common Stock authorized at the meeting. If the increase in authorized shares is
approved by the stockholders at the meeting, the Company shall implement the
increase in authorized shares within one (1) business day following approval at
such meeting within ten (10) business days following approval at such meeting.
Alternatively, to the extent permitted by applicable law, in lieu of calling and
holding a meeting as described above, the Company may, within thirty (30) days
of the date when the Company does not have available an amount of authorized and
non-issued Shares required to be reserved as described above, procure the
written consent of stockholders to increase the number of shares authorized, and
provide the stockholders with notice thereof as may be required under applicable
law (including without limitation Section 14(c) of the 1934 Act and Regulation
14C thereunder). Upon obtaining stockholder approval as aforesaid, the Company
shall cause the appropriate increase in its authorized shares of Common Stock
within one (1) business day (or as soon thereafter as permitted by applicable
law).

 

h.     Reimbursement. If (i) Buyer becomes a party defendant in any capacity in
any action or proceeding brought by any stockholder of the Company, in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if the Buyer is impleaded in any
such action, proceeding or investigation by any Person, or (ii) the Buyer, other
than by reason of its gross negligence, willful misconduct or breach of law,
becomes a party defendant in any capacity in any action or proceeding brought by
the SEC against or involving the Company or in connection with or as a result of
the consummation of the transactions contemplated by the Transaction Documents,
or if the Buyer is impleaded in any such action, proceeding or investigation by
any Person, then in any such case, the Company will reimburse the Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
`preparation) incurred in connection therewith. The 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 Buyer who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
Persons (if any), as the case may be, of the Buyer 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 Buyer and any such Affiliate
and any such Person. Except as otherwise set forth in the Transaction Documents,
the Company also agrees that neither any Buyer nor any such Affiliate, partners,
directors, agents, employees or controlling Persons 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 the Transaction
Documents except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or willful
misconduct of the Buyer or from a breach of the representations, covenants and
conditions contained herein or from a breach of law.

 

 
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i.      No New Indebtedness or Liens. So long as any of the Debentures remain
outstanding, the Company shall not, absent the prior written consent of the
Buyer and (if any person other than the Buyer then holds any portion of the
Debenture), the holders of all Debentures then outstanding enter into, create,
incur, assume or suffer to exist any indebtedness or liens of any kind, on or
with respect to any of its property or assets now owned or hereafter acquired or
any interest therein or any income or profits therefrom that is senior to the
Company’s obligations under the Debentures, other than purchase money security
interests granted to suppliers to the Company and any of the foregoing that are
made in the ordinary course of business of the Company and its Subsidiaries.

 

j.     No Payments to Affiliates or Related Parties. So long as any of the
Debentures remain outstanding if the Debentures are in default, the Company
shall not, absent the prior written consent of the holders of all Debentures
then outstanding, make any payments to any of the Company’s or the Subsidiaries’
respective affiliates or related parties, including without limitation payments
or prepayments of principal or interest accrued on any indebtedness or
obligation in favor of affiliates or related parties.

 

k.     Notice of Material Adverse Effect. The Company shall notify the Buyer
(and any subsequent holder of the Debentures), as soon as practicable and in no
event later than five (5) business days of the Company’s knowledge of any
Material Adverse Effect on the Company. For purposes of the foregoing,
“knowledge” means the earlier of the Company’s actual knowledge or the Company’s
constructive knowledge upon due inquiry.

 

l.     Public Disclosure. Except to the extent required by applicable law,
absent the Buyer’s prior written consent, the Company shall not reference the
name of the Buyer in any press release, securities disclosure, business plan,
marketing or funding proposal.

 

 
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5.     TRANSFER AGENT INSTRUCTIONS.

 

a.     The Company shall at all times while any Debentures are outstanding
engage a Transfer Agent. As of the date of this Agreement, the Transfer Agent is
Transfer Online, Inc. On or before the Signing Closing Date and each subsequent
Closing Date, the Company will irrevocably instruct its Transfer Agent in
writing using the letter substantially in the form of Exhibit C annexed hereto,
executed by the Company, the Buyer, and the Transfer Agent on each Closing Date
(the “Transfer Agent Instruction Letter”), to (i) reserve that number of shares
of Common Stock as is required under Section 4(h) hereof, and (ii) issue Common
Stock from time to time upon conversion of the Debentures in such amounts as
specified from time to time by the Company to the Transfer Agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its permitted assigns and in such denominations to be specified by the
Buyer in connection with each conversion of the Debentures. The Transfer Agent
shall not be restricted from issuing shares from only the allotment reserved for
the Conversion Amount (as defined in the Debentures), but instead may, to the
extent necessary to satisfy the amount of shares issuable upon conversion, issue
shares above and beyond the amount reserved on account of the Conversion Amount,
without any additional instructions or authorization from the Company, and the
Company shall not provide the Transfer Agent with any instructions or
documentation contrary to the foregoing. The Company shall continuously monitor
its compliance with the share reservation requirements and, if and to the extent
necessary to increase the number of reserved shares to remain and be at least
three hundred percent (300%) of the Conversion Amount to account for any
decrease in the market price of the Common Stock, the Company shall immediately
(and in any event within two (2) business days) notify the Transfer Agent in
writing of the reservation of such additional shares, provided that in the event
that the number of shares reserved for conversion of the Debentures is less than
three hundred percent (300%) of the Conversion Amount, the Buyer may also
directly instruct the Transfer Agent to increase the reserved shares as
necessary to satisfy the minimum reserved share requirement, and the Transfer
Agent shall act accordingly, provided, further, that the Company shall within
two (2) business days provide any written confirmation, assent or documentation
thereof as the Transfer Agent may request to act upon a share increase
instruction delivered by the Buyer. The Company shall provide the Buyer with a
copy of all written instructions to the Company’s Transfer Agent with respect to
the reservation of shares simultaneously with the issuance of such instructions
to the Transfer Agent. The Company covenants that no instruction other than such
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 4(a) hereof prior to registration and sale of the
Converted Shares under the 1933 Act will be given by the Company to the Transfer
Agent and that the Converted Shares shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement, and applicable law. If the Buyer
provides the Company and/or the Transfer Agent with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(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
de-legending or transfer of the Securities and, in the case of the Converted
Shares, instruct the Company’s Transfer Agent to issue one or more certificates
for Common Stock without legend in such name and in such denominations as
specified by the Buyer.

 

b.     (i)     The Company will permit the Buyer to exercise the right to
convert the Debentures by telecopying or otherwise delivering an executed and
completed Notice of Conversion to the Company and/or the Transfer Agent. If so
requested by the Buyer, the Company will within one (1) business day respond
with its endorsement so as to confirm the outstanding principal amount of any
Debenture submitted for conversion or shall reconcile any difference with the
Buyer promptly after receiving such Notice of Conversion.

 

 
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(ii)     The term “Conversion Date” means, with respect to any conversion
elected by the holder of the Debentures, the date specified in the Notice of
Conversion, provided the copy of the Notice of Conversion is given either via
mail or facsimile to or otherwise delivered to the Transfer Agent and/or the
Company in accordance with the provisions hereof so that it is received by the
Transfer Agent and/or the Company on or before such specified date.

 

(iii)     The Company will transmit (or will cause the Transfer Agent to
transmit) the certificates representing the Converted Shares issuable upon
conversion of any Debentures (together, unless otherwise instructed by the
Buyer, with Debentures not being so converted) to the Buyer at the address
specified in the Notice of Conversion (which may be the Buyer’s address for
notices as contemplated by Section 12 hereof or a different address) via express
courier, by electronic transfer or otherwise, within two (2) business days (the
“Delivery Date”) after (A) the business day on which the Company has received
the Notice of Conversion (by facsimile or other delivery) or (B) the date on
which payment of interest and principal on the Debentures, which the Company has
elected to pay by the issuance of Common Stock, as contemplated by the
Debentures, was due, as the case may be.

 

c.     From and after the date on which the Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the failure
to issue unrestricted, freely tradable Conversion Shares to the Buyer upon
Conversion shall be considered a non-curable Event of Default, which,
accordingly, shall entitle the Buyer(s) whose Debentures are being converted to
demand that the Debentures held by the Buyer(s) be immediately redeemed in full
by a cash payment equal to one hundred forty percent (140%) of the aggregate of
the unpaid principal amount of and accrued interest on such Debentures (whether
or not the terms of such Debentures expressly permit the redemption thereof).
The Company acknowledges that its failure to honor a Notice of Conversion shall
cause definable financial hardship on the Buyer(s).

 

d.     The Company shall inform the Transfer Agent of the reservation of shares
contemplated by Section 4(g) and this Section 5, and shall keep current in its
payment obligations to the Transfer Agent such that the Transfer Agent will
continue to process share transfers and the initial issuance of shares of Common
Stock upon the conversion of Debentures. The Company hereby authorizes the
Transfer Agent to correspond and otherwise communicate with the Buyer or their
representatives in connection with the foregoing and other matters related to
the Common Stock. Further, the Company hereby authorizes the Buyer or its
representative to provide instructions to the Transfer Agent that are consistent
with the foregoing and instructs the Transfer Agent to honor any such
instructions. Should the Company fail for any reason to keep current in its
payment obligations to the Transfer Agent, the Buyer may pay such amounts as are
necessary to compensate the Transfer Agent for performing its duties with
respect to share reservation and/or issuance of shares upon conversion or
de-legending certificates representing Restricted Stock, and all amounts so paid
shall be promptly reimbursed by the Company. If not so reimbursed within thirty
(30) days, such amounts shall, at the option of the Buyer and without prior
notice to or consent of the Company, be added to the principal amount due under
the Debenture(s) held by the Buyer, whereupon interest will begin to accrue on
such amounts at the rate specified in the Debentures.

 

 
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e.     The Buyer shall be entitled to exercise its conversion privilege with
respect to the Debentures notwithstanding the commencement of any case under 11
U.S.C. §101 et seq. (the “Bankruptcy Code”). In the event the Company is a
debtor under the Bankruptcy Code, the Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. §362 in
respect of the Buyer’s conversion privilege. The Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362
in respect of the conversion of the Debentures. The Company agrees, without cost
or expense to the Buyer, to take or to consent to any and all action necessary
to effectuate relief under 11 U.S.C. §362.

 

6.     CLOSINGS.   

 

a.     Promptly upon the execution and delivery of this Agreement, the
Registration Rights Agreement, the Signing Debenture, and all conditions in
Sections 7 and 8 herein are met (the “Signing Closing Date”), (A) the Company
shall deliver to the Buyer the following: (i) Restricted Stock in a number equal
to $12,000 divided by the closing bid price per share of the Common Stock on the
Signing Closing Date (as reported by Bloomberg LP) (the “Share Calculation
Price”) (or, alternatively, an irrevocable letter of instructions to the
Transfer Agent providing for the issuance to the Buyer of such shares of
Restricted Stock, duly executed by the Chief Executive Officer or Chief
Financial Officer of the Company); (ii) the Signing Debenture; (iii) the Company
Legal Opinion; (iv) the Transfer Agent Instruction Letter; (v) duly executed
counterparts of the Transaction Documents; (vi) an officer’s certificate of the
Company confirming the accuracy of the Company’s representations and warranties
contained herein; and (vii) any fees and shares of Common Stock due under
Section 12 of this Agreement; and (B) the Buyer shall deliver to the Company the
following: (i) $108,000 (the “Signing Purchase Price”) and (ii) duly executed
counterparts of the Transaction Documents (as applicable).

 

b.     Approximately sixty one (61) days following the Signing Closing Date, on
a date determined upon mutual agreement of the Buyer and the Company and subject
to satisfaction of the conditions set forth in Sections 7 and 8, (A) the Company
shall deliver to the Buyer the following: (i) Restricted Stock in a number equal
to $10,000 divided by the Share Calculation Price (or, alternatively, an
irrevocable letter of instructions to the Transfer Agent providing for the
issuance to the Buyer of such shares of Restricted Stock, duly executed by the
Chief Executive Officer or Chief Financial Officer of the Company); (ii) the
Second Debenture; (iii) the Company Legal Opinion, provided that a Company Legal
Opinion need not be delivered at the Second Closing Date if the Company has
previously delivered to the Buyer a “blanket” legal opinion covering the
Restricted Stock and Debentures to be issued at the Second Closing Date and the
Company has not been notified by its counsel that such opinion has been
withdrawn or modified; (iv) an amendment to the Transfer Agent Instruction
Letter instructing the Transfer Agent to reserve that number of shares of Common
Stock as is required under Section 4(h) hereof, if necessary; (v) an officer’s
certificate of the Company confirming the accuracy of the Company’s
representations and warranties contained herein; and (vi) and any fees and
shares of Common Stock due under Section 13 of this Agreement; and (B) the Buyer
shall deliver to the Company the following: (i) $90,000 (the “Second Purchase
Price”) and (ii) duly executed counterparts of the Transaction Documents (as
applicable).

 

c.     Each Closing shall be deemed to occur on the related Closing Date at the
office of the Buyer’s counsel and shall take place no later than 5:00 P.M., New
York time, on such day or such other time as is mutually agreed upon by the
Company and the Buyer.

 

 
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7.     CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The Company’s obligation to sell the Debentures to the Buyer pursuant to this
Agreement on each Closing Date is conditioned upon:

 

a.     Delivery to the Company of good funds as payment in full of the Purchase
Price for the Debentures and Restricted Stock at each Closing in accordance with
this Agreement;

 

b.     The accuracy on the Closing Date of the representations and warranties of
the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and

 

c.     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.

 

d.     If the Company closes strategic funding of $1 million or more prior to
the Second Closing Date, the Company may delay, with the consent of the Buyer,
or cancel the Second Debenture.

 

8.     CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

 

The Buyer’s obligation to purchase the Restricted Stock and Debentures at the
Closing is conditioned upon:

 

a.     The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;

 

b.     Delivery by the Company to the Buyer of the Debentures and Restricted
Stock to be purchased in accordance with this Agreement;

 

c.     Delivery by the Company to the Buyer of an opinion of counsel to the
Company, substantially in the form attached hereto as Exhibit D and dated as of
the Closing Date (the “Company Legal Opinion”) or if such Company Legal Opinion
is a “blanket” opinion covering the Restricted Stock and Debentures to be issued
on such Closing Date, a prior date;

 

d.     The accuracy in all material respects on the 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;

 

e.     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

 

 
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f.     From and after the date hereof to and including the Closing Date, (i) the
trading of the Common Stock shall not have been suspended by the SEC, FINRA, or
the NASD and trading in securities generally on OTCM shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on the OTCM; (ii) there shall not have occurred any outbreak or
escalation of hostilities involving the United States or any material adverse
change in any financial market that in either case in the reasonable judgment of
the Buyer makes it impracticable or inadvisable to purchase the Debentures.

 

9.     GOVERNING LAW; MISCELLANEOUS.

 

a.     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 jurisdiction of the federal courts
whose districts encompass any part of Dade County, Florida or the state courts
of the State of Florida sitting in the City of Miami and Dade County in
connection with any dispute arising under this Agreement 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. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Documents.

 

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 or email transmission of this signed Agreement or a Notice of
Conversion under the Debentures 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 the written consent of a majority
in interest of the holders of the Debentures and an instrument in writing signed
by the Company.

 

 
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j.     This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.

 

k.      This Agreement shall be construed as if both Parties had equal say in
its drafting, and thus shall not be construed against the drafter.

 

10.     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 seventh business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or

 

c.     the third business day after mailing by next-day 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 ten (10) days’ advance written notice
similarly given to each of the other parties hereto):

 

COMPANY:

Cyclone Power Technolgies, Inc.

601 NE 26th Court

Pompano Beach, FL 33064

Facsimile: 954-788-6565

Attention: Chris Nelson, President and General Counsel

       

BUYER:

Peak One Opportunity Fund, L.P.

333 South Hibiscus Drive

Miami Beach, FL 33139

Fax No. 305-531-2287

Attention: Jason Goldstein

     

With copies to (which shall not constitute notice):

     

Zabatta Group, LLP

91 Central Park West, Suite 1H

New York, NY 10023

Fax No. 866-466-9016

Attention: Patrick G. Zabatta, Esq.

 

 
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11.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s
representations and warranties herein shall survive for so long as any
Debentures are outstanding and any shares of Restricted Stock are held by the
Buyer, whichever is later, and shall inure to the benefit of the Buyer, its
successors and assigns.

 

12.     FEES; EXPENSES.

 

a.     The Company shall pay to Peak One Investments, LLC a non-accountable fee
(the “Due Diligence Fee”) of $7,500 and 1,000,000 shares of Common Stock to
cover the expenses and analysis performed in connection with the analysis of the
Company and the propriety of the Buyer’s making the contemplated investment.

 

b.     The Company will pay the legal fees of the Buyer’s counsel (the “Legal
Fees”) in the amount of $7,500. The Company further agrees to pay in full the
reasonable legal fees of the Buyer’s counsel incurred after the Signing Closing
Date incurred in connection with the Transaction Documents (including
enforcement of the Company’s obligations or the exercise of the Buyer’s remedies
thereunder).

 

c.     The Company will pay the Due Diligence Fee, Legal Fees and issue the
required number of shares of Restricted Stock on the Signing Closing Date. In
furtherance of the foregoing, in that connection, the Company hereby authorizes
the Buyer to deduct such amounts from the Purchase Price and transmit same to
the respective payee. Notwithstanding the foregoing, if for any reason any such
Closings do not occur, then the Company shall remain liable to pay the Due
Diligence Fee and Legal Fees as provided in Sections 13(a) and (b) and shall
remit payment to the Buyer within five (5) days after the Buyer delivers to the
Company a notice and demand for payment thereof. The Company shall pay
disbursements of the Buyer’s legal counsel and legal fees incurred after the
Signing Closing Date within ten (10) days of invoice therefor.

 

[Signature Page Follows]

 

 
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and the
Company as of the date first set forth above.

 

 

 

COMPANY:

 

CYCLONE POWER TECHNOLOGIES, INC.

   

By: /s/ Christopher Nelson

Name: Christopher Nelson

Title: President

   

BUYER:

 

PEAK ONE OPPORTUNITY FUND, L.P. 

 

     By: Peak One Investments, LLC, General Partner

 

 

 

          By: /s/ Jason Goldstein

          Name: Jason Goldstein

          Title: Managing Member 

 

 

 

[Signature Page to Securities Purchase Agreement]