SECURITIES
PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is entered into on December 2, 2015, as of October 12, 2015,
between Saleen Automotive, Inc., a Nevada corporation (the “Company”), and SM Funding Group, Inc., a Delaware
corporation (“Purchaser”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell
to the Purchaser, and the Purchaser desires to purchase from the Company, a 12.0% Senior Secured Convertible Note of the Company
in the form of Exhibit A hereto (the “Note”), as more fully described in this Agreement; and


 


WHEREAS,
the Company’s obligations under the Note are senior to other obligations of the Company pursuant to that certain Subordination
Agreement, dated October 21, 2015, among W-Net Fund I, L.P., other holders of Company’s secured debt, the Company and the
Purchaser.


 


NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:


 


ARTICLE
I.


DEFINITIONS


 


1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Note (as defined herein), and (b) the following terms have the meanings set forth in this
Section 1.1:


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser,
any investment fund or managed account that is managed on a discretionary basis by the same investment manager as the Purchaser
will be deemed to be an Affiliate of the Purchaser.


 


“Board
of Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of California are authorized or required by law or other governmental action
to close.


 


“Closing”
shall have the meaning ascribed to such term in Section 2.1(a).


 


“Closing
Date” shall have the meaning ascribed to such term in Section 2.1(a).


 


“Commission”
means the Securities and Exchange Commission.


 




    	 



    	 	 	 



    

 


“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed into.


 


“Company
Intellectual Property” shall have the meaning ascribed to such term in Section 3.1(m).


 


“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


 


“Governmental
Entity”


 


“Intellectual
Property” means any and all United States and foreign: (a) patent registrations and patent applications (including all
reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein and all improvements
to the inventions disclosed in each such registration or application, (b) trademarks, service marks, trade dress, trade names
and corporate names, whether or not registered, including but not limited to all common law rights, and registrations and applications
for registration thereof, (c) copyrights (including but not limited to copyrights on designs) (registered or otherwise) and registrations
and applications for registration thereof, (d) computer software, including, without limitation, source code, operating systems
and specifications, data, data bases, files, documentation and other materials related thereto, data and documentation, (e) trade
secrets and confidential technical and business information (including but not limited to formulas, compositions, and inventions
reduced to practice, whether or not patentable), (f) confidential technology (including know-how and show-how), manufacturing
and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information, (h) any right arising under any law providing protection to industrial
or other designs, (i) all rights to obtain and rights to apply for patents, and to register trademarks and copyrights, and (j)
all rights to sue or recover and retain damages and costs and attorneys’ fees for present and past infringement of any of
the foregoing.


 


“IP
Security Agreement” means the Intellectual Property Security Agreement, dated the date hereof, by the Company in favor
of the Purchaser, in the form of Exhibit C attached hereto, securing the obligations of the Company under the Note and
other Transaction Documents.


 


“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 




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“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 


“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.


 


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


 


“Securities”
means the Note, the Preferred Shares, and any shares of Common Stock issuable upon conversion of the Preferred Shares.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Security
Agreement” means the Security Agreement, dated the date hereof, by the Company in favor of the Purchaser, in the form
of Exhibit B attached hereto, securing the obligations of the Company under the Note and other Transaction Documents.


 


“Security
Documents” means any and all means any and all security agreements, pledge agreements, hypothecation agreements, collateral
assignments, mortgages, deeds of trust, control agreements and similar such agreements, executed and delivered by the Company,
any of its Subsidiaries and/or any third party in favor of the Purchaser pursuant to the Transaction Documents which secures the
Company’s obligations under the Transaction Documents, and other documents executed, delivered and/or filed by the Company,
any of its Subsidiaries, any third party and/or the Purchaser as permitted or required under any of the foregoing, including without
limitation the Security Agreement and the IP Security Agreement.


 


“Subscription
Amount” means, as to the Purchaser, the aggregate amount to be paid for Note purchased hereunder as specified below
the Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds. The initial principal amount of the Purchaser’s Note shall
be equal to the Purchaser’s Subscription Amount.


 




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“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, include any direct or
indirect subsidiary of the Company formed or acquired after the date hereof.


 


“Subsidiary
Guarantee” means the Subsidiary Guarantee, in the form attached hereto as Exhibit E, executed by each Subsidiary
in favor of the Purchaser, guaranteeing the Company’s obligations under the Note.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States
or any day on which banking institutions in the State of California are authorized or required by law or other governmental action
to close.


 


“Transaction
Documents” means this Agreement, the Note, the Security Documents and all exhibits and schedules thereto and hereto
and any other documents or agreements executed in connection with the transactions contemplated hereunder.


 


ARTICLE
II.


PURCHASE
AND SALE


 


2.1 Closing.
The purchase and sale of the Note (the “Closing”) shall take place on the date hereof (“Closing Date”),
or at such time or on such other date mutually agreed upon by the Company and the Purchaser, subject to the conditions precedent
for the Closing as set forth in Section 2.3, and to each party’s obligations hereunder having been satisfied or waived.
At the Closing, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchaser,
agrees to purchase, the Note, and make an initial advance thereunder.


 


2.2 Deliveries.


 


(a) On
the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following:


 


 (i) this Agreement, duly executed by the Company;




 


(ii) the
Note, registered in the name of the Purchaser;


 


(iii) the
Security Documents, including, without limitation, the Security Agreement and the IP Security Agreement, duly executed by the
Company and each Subsidiary; and


 


(iv) the
Subsidiary Guarantee, duly executed by each Subsidiary of the Company.


 


(b) On
the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:


 


 (i) this Agreement, duly executed by the Purchaser; and




 




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(ii) the
Security Documents to which the Purchaser is a party and required by law to be signed by such Party in order to be binding.


 


2.3 Closing
Conditions.


 


(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:


 


(i) the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein;


 


(ii) all
obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and


 


(iii) at
the Closing, the delivery by the Purchaser of the items set forth in Section 2.2(b) of this Agreement.


 


(b) The
respective obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being
met:


 


(i) the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein;


 


(ii) all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed; and


 


(iii) at
the Closing, the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.


 


ARTICLE
III.


REPRESENTATIONS
AND WARRANTIES


 


3.1 Representations
and Warranties of the Company. The Company hereby represents and warrants as of the Closing Date (except for the representations
and warranties that speak as of a specific date, which shall be made as of such date), to the Purchaser that, except as set forth
in the Disclosure Schedules delivered to the Purchaser herewith (the “Disclosure Schedules”) or disclosed in
the SEC Reports:


 


(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.


 




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(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither
the Company nor any Subsidiary is in violation or default of any of the provisions of its respective articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.


 


(c) Authorization;
Enforcement. The Company and the Subsidiaries have 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 their obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Documents by the Company and the Subsidiaries and the consummation
by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the
Company and the Subsidiaries and no further action is required by the Company, the Subsidiaries, their board of directors or their
stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document has been
(or upon delivery will have been) duly executed by the Company and the Subsidiaries, as applicable, and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and binding obligation of the Company and the Subsidiaries enforceable
against the Company and the Subsidiaries in accordance with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.


 


(d) No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the Subsidiaries and the
consummation by the Company and the Subsidiaries of the other transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of
the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, loan or credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected (other than Liens in favor of the Purchaser), or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case
of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.


 




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(e) Filings,
Consents and Approvals. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental
authority or other Person in connection with the execution, delivery and performance by the Company and the Subsidiaries of the
Transaction Documents, other than (i) the filing of a Current Report on 8-k by the Company to report the entry into of the Transaction
Documents, and (ii) filings required under the terms of the Security Documents (collectively, the “Required Approvals”).


 


(f) Capitalization.
The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company
(whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) has been
set forth in the SEC Reports and has changed since the date set forth in such SEC Reports only to reflect the automatic conversion
of the Company’s Super Voting Preferred Stock in the manner set forth in the SEC Reports, and stock option exercises and
grants that have not, individually or in the aggregate, had a material effect on the issued and outstanding capital stock, options
and other securities and have not otherwise been required to be reported by the Company under the Exchange Act. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in
compliance in all material respects with all applicable federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Company.
Except as set forth in the SEC Reports: (i) no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any Liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company, or contracts, commitments, understandings
or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness
of the Company or by which the Company is or may become bound; and (iv) there are no outstanding securities or instruments of
the Company or which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security of the Company.


 




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(g) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as applicable, 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 the light of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports 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 and except that unaudited financial statements may not contain all 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.


 


(h) Material
Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date hereof or disclosed on Schedule 3.1(h), (i) there has been
no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company and the Subsidiaries have not incurred any liabilities (contingent or otherwise) other than (A) those that have
been incurred since the date of the most recent balance sheet included in the SEC Reports in the ordinary course of business,
and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or to be disclosed
in filings made with the SEC, and (iii) the Company and the Subsidiaries have not altered their method of accounting. Except for
the issuance of the Note or as set forth on Schedule 3.1(h), no event, liability or development has occurred or exists
with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that
would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed on or prior to the date that this representation is made.


 


(i) Litigation.
There is no suit, action, claim, arbitration, proceeding or investigation pending or, to the knowledge of the Company, threatened
against, relating to or involving the Company, any Subsidiary, or real or personal property of the Company or any Subsidiary,
before any Governmental Entity or other third party. To the knowledge of the Company, there is no basis for any such suit, action,
proceeding or investigation. The Commission has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.


 




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(j) Labor.
No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the
Company. The Company is not a party to any collective bargaining agreement or employs any member of a union. No executive officer
(as defined in Rule 501(f) of the Securities Act) of the Company has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with the Company. The Company is in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions
of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.


 


(k) Legal
Compliance. To the knowledge of the Company, the Company and the Subsidiaries are in compliance in all material respects with
all applicable laws (including, without limitation, applicable laws relating to zoning, environmental matters and the safety and
health of employees), ordinances, regulations and orders of all Governmental Entities. Neither the Company nor any of the Subsidiaries
has been charged with and, to the knowledge of the Company, is not now under investigation with respect to, a violation of any
applicable law, regulation, ordinance, order or other requirement of a Governmental Entity. Neither the Company nor any of its
Subsidiaries is a party to or bound by any order, judgment, decree or injunction of any Governmental Entity.


 


(l) Title
to Assets. The Company and the Subsidiaries have good, clear and marketable title to all the tangible properties and tangible
assets reflected in their latest balance sheet as being owned by them or acquired after the date thereof which are, individually
or in the aggregate, material to the Company’s business (except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all Liens other than Permitted Liens. The Company and the Subsidiaries
do not own any real property. The Company and/or the Subsidiaries, as applicable, have a valid leasehold interest in its leased
real property, and such leases are in full force and effect.


 


(m)  Intellectual
Property.


 


(i) All
Intellectual Property of the Company and its Subsidiaries necessary or desirable to operate the Company’s businesses as
currently conducted and as currently proposed to be conducted (the “Company Intellectual Property”) is currently
in compliance with all legal requirements (including timely filings, proofs and payments of fees). No Company Intellectual Property
which is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and,
to the Company’s knowledge, no such action is threatened.


 




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(ii) All
of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary
for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition
price of less than $20,000 per license) (collectively, “License Agreements”) are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the Company’s knowledge, the other parties thereto,
enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally,
and there exists no event or condition which will result in a material violation or breach of or constitute (with or without due
notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement.


 


(iii) To
the Company’s Knowledge, the Company and its Subsidiaries own or have the valid right to use all of the Company Intellectual
Property, free and clear of all Liens, other than Permitted Liens. To the Company’s knowledge, the Company and its Subsidiaries
have a valid and enforceable right to use all third party Intellectual Property used or held for use in the respective businesses
of the Company and its Subsidiaries.


 


(iv) To
the Company’s knowledge, the conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third party, and, to the Company’s knowledge, the
Company Intellectual Property as currently proposed to be conducted are not being Infringed by any third party. There is no litigation
or order pending or outstanding or, to the Company’s knowledge, threatened or imminent, that seeks to limit or challenge
or that concerns the ownership, use, validity or enforceability of any Company Intellectual Property or the Company’s and
its Subsidiaries’ use of any Intellectual Property owned by a third party, and, to the Company’s knowledge, there
is no valid basis for the same.


 


(v) The
Company and its Subsidiaries have taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in
the Company Intellectual Property. Each employee, consultant and contractor who has had access to confidential information which
is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted
or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such confidential information
and has executed appropriate agreements that are substantially consistent with the Company’s standard forms thereof.


 


(n) Transactions
with Affiliates and Employees. The Company and its Subsidiaries are not a party to any contract, lease, license, commitment
or arrangement, written or oral, which would be required to be disclosed pursuant to Item 404(a) or (c) of Regulation S-K as promulgated
by the Commission that are not disclosed in the SEC Reports, and there are no loans outstanding to or from any Person specified
in Item 404(a) of Regulation S-K from or to the Company or the Subsidiaries.


 




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(o) Certain
Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated
by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents.


 


(p) Private
Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Note by the Company to the Purchaser as contemplated hereby.


 


(q) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Note, will not be
or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as
amended.


 


(r) Exchange
Act Registration. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken
no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.


 


(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) Foreign
Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials
or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.


 


3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:


 




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(a) Organization;
Authority. The Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents
have been duly authorized by all necessary corporate or similar action on the part of the Purchaser. Each Transaction Document
to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its
terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.


 


(b) Own
Account. The Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Note and will acquire the other Securities
as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities law, has no present intention of distributing the Securities
in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of the Securities (this representation and warranty not limiting
the Purchaser’s right to sell the Securities pursuant to any registration statement filed under the Securities Act or otherwise
in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities
law.


 


(c) Purchaser
Status. At the time the Purchaser was offered the Note, it was, and at the date hereof it is, and on each date on which it
or its permitted assignee converts any Securities it or such permitted assignee, as the case may be, will be an “accredited
investor” as defined in Rule 501 under the Securities Act.


 


(d) Experience
of The Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.


 


(e) General
Solicitation. The Purchaser is not purchasing the Note as a result of any advertisement, article, notice or other communication
regarding the Note published in any newspaper, magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.


 




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ARTICLE
IV.


OTHER
AGREEMENTS OF THE PARTIES


 


4.1 Transfer
Restrictions.


 


(a) Compliance
with Laws. The Securities may only be disposed of in compliance with state and federal securities laws. In connection with
any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate
of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory
to the Company, to the effect that such transfer does not require registration of such transfer under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement.


 


(b) Legends.
The Purchaser agrees that the certificates for the Securities shall bear a legend substantially as follows:


 


“THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY EVIDENCE REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE FORM AND SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”


 


Certificates
evidencing the Securities shall not contain any legend (i) while a registration statement covering the resale of such security
is effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144, (iii) if such Securities
are eligible for sale under Rule 144(b)(1) or (iv) if such legend is not required under applicable requirements of the Securities
Act.


 


4.2 Security.
The Company’s and any Subsidiaries’ obligations under the Note and other Transaction Documents shall be secured by
all the assets of the Company and its Subsidiaries. As of the Closing, the Purchaser shall be granted a security interest in all
the assets of the Company, including, without limitation, all of its Intellectual Property Rights and its ownership of any and
all Subsidiaries, and in the assets of any such Subsidiaries, to be memorialized in the Security Documents. The Company shall
execute such other agreements, documents and financing statements reasonably requested by Purchaser, which will be filed at the
Company’s expense with the applicable jurisdictions and authorities. The Company shall also execute all such documents reasonably
necessary in the opinion of the Purchaser to memorialize and further protect the security interests described herein.


 


4.3 Additional
Guarantors. The Company shall cause each of its Subsidiaries, including those formed or acquired on or after the date hereof,
to execute and deliver to the Purchaser a Subsidiary Guarantee and a Security Agreement in conformity with those executed and
delivered at the Closing.


 


 




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ARTICLE
V.


MISCELLANEOUS


 


5.1 Fees
and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of
this Agreement.


 


5.2 Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.


 


5.3 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (a) the date of transmission or delivery, if such notice or communication
is delivered via facsimile at the facsimile number, or delivered by a U.S. nationally recognized overnight courier service to
the address, set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Business Day, (b) the
next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number, or delivered by such courier service to the address, set forth on the signature pages attached hereto on a day that is
not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, or (c) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature
pages attached hereto.


 


5.4 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.


 


5.5 Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.


 


5.6 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
the Purchaser (other than by merger). The Purchaser may assign any or all of its rights under this Agreement to any Person to
whom the Purchaser assigns or transfers the Note, provided that such transferee agrees in writing to be bound, with respect to
the transferred Note, by the provisions of the Transaction Documents that apply to the “Purchaser.”


 




    	14



    	 	 	 



    

 


5.7 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.


 


5.8 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively
in the state and federal courts sitting in the County of Los Angeles. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the County of Los Angeles for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is
an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.


 


5.9 Survival.
The representations and warranties shall survive the Closing and the delivery of the Note for the applicable statute of limitations.


 


5.10 Execution.
This Agreement may be executed in counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or
by e-mail delivery of a “.pdf” or other document image format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile
or “.pdf” or other document image format data file signature page were an original thereof.


 




    	15



    	 	 	 



    

 


5.11 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.


 


5.12 Construction.
The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.


 


5.13 Waiver
of Jury Trial. In any action, suit or proceeding in any jurisdiction brought by any party against any other party, the parties
each knowingly and intentionally, to the greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably
and expressly waives forever trial by jury.


 


(Signature
Pages Follow)


 




    	16



    	 	 	 



    

 


IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


  


	SALEEN
    AUTOMOTIVE, Inc.	 	Address for Notice:
	 	 	 
	 	 	2735 Wardlow Road
	 	 	 	Corona,
    CA 92882
	By:	/s/
    Steve Saleen	 	Fax:
    (888) 729-4827
	Name:	Steve Saleen	 	
	Title: 	Chief Executive Officer	 	 




 


With
a copy to (which shall not constitute notice):


 


Fox
Rothschild LLP


100 Park Avenue, 15th Floor


New
York, New York 10017


Attn:
Alison Newman, Esq.


 


	SM Funding GROUP, Inc.	 	Address
    for Notice:
	 	 	 	 
	By:	/s/
    David Bergstein	 	Fax: 310-388-5363
	Name:	David Bergstein	 	 
	Title: 	CEO	 	 


 


With
a copy to (which shall not constitute notice):


 


Law
Offices of Aaron A. Grunfeld & Assoc.


11111
Santa Monica Blvd., Suite 1840


Los
Angeles, California 90025


Attn:
Aaron A. Grunfeld, Esq.


 




    	 



     

    

 


EXHIBIT
A


 


12.0%
SENIOR SECURED CONVERTIBLE NOTE


 




    	 



     

    


 


EXHIBIT
B


 


SECURITY
AGREEMENT


 




    	 



     

    

 


EXHIBIT
C


 


INTELLECTUAL
PROPERTY SECURITY AGREEMENT


 




    	 



     

    

 


EXHIBIT
D


 


SUBSIDIARY
GUARANTEE