Viper Powersports, Inc. Exhibit 10.4 to Form 10-SB






Exhibit 10.4  



STANDBY EQUITY DISTRIBUTION AGREEMENT


          THIS
AGREEMENT dated as of
the 25th day of August 2005 (the “Agreement”) between CORNELL CAPITAL PARTNERS, LP, a Delaware
limited partnership (the “Investor”), and VIPER POWERSPORTS INC., a corporation organized and existing
under the laws of the State of Nevada (the “Company”).


          WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the
Company shall issue and sell to the Investor, from time to time as provided
herein, and the Investor shall purchase from the Company up to Fifteen Million
Dollars ($15,000,000) of the Company’s common stock, par value $0.001 per share
(the “Common Stock”); and


          WHEREAS, such investments will
be made in reliance upon the provisions of Regulation D (“Regulation D”)
of the Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the “Securities Act”), and or upon such other exemption from
the registration requirements of the Securities Act as may be available with
respect to any or all of the investments to be made hereunder.


          WHEREAS, the Company has
engaged Monitor Capital Inc. (the “Placement Agent”), to act as the
Company’s exclusive placement agent in connection with the sale of the
Company’s Common Stock to the Investor hereunder pursuant to the Placement
Agent Agreement dated the date hereof by and among the Company, the Placement
Agent and the Investor (the “Placement Agent Agreement”).


          NOW,
THEREFORE, the
parties hereto agree as follows:


ARTICLE I.
 Certain Definitions


          Section
1.1. “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.


          Section
1.2. “Advance Date” shall mean the date the David Gonzalez Attorney
Trust Account is in receipt of the funds from the Investor and David Gonzalez,
Esq., is in possession of free trading shares from the Company and therefore an
Advance by the Investor to the Company can be made and David Gonzalez, Esq. can
release the free trading shares to the Investor. The Advance Date shall be the
first (1st) Trading Day after expiration of the applicable Pricing
Period for each Advance.


          Section
1.3. “Advance Notice” shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the Investor
and the Advance Date.


          Section
1.4.  “Advance Notice Date” shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement.
No Advance Notice Date shall be less than five (5) Trading Days after the prior
Advance Notice Date.















          Section
1.5. “Bid Price” shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if the
Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc.


          Section
1.6. “Closing” shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.


          Section
1.7. “Commitment Amount” shall mean the aggregate amount of up to
Fifteen Million Dollars ($15,000,000) which the Investor has agreed to provide
to the Company in order to purchase the Company’s Common Stock pursuant to the
terms and conditions of this Agreement.


          Section
1.8. “Commitment Period” shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of Fifteen
Million Dollars ($15,000,000), (y) the date this Agreement is terminated
pursuant to Section 2.4, or (z) the date occurring twenty-four (24) months
after the Effective Date.


          Section
1.9. “Common Stock” shall mean the Company’s common stock, par
value $0.001 per share.


          Section
1.10. “Condition Satisfaction Date” shall have the meaning set
forth in Section 7.2.


          Section
1.11. “Damages” shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney’s fees
and disbursements and costs and expenses of expert witnesses and
investigation).


          Section
1.12. “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).


          Section
1.13. “Escrow Agreement” shall mean the escrow agreement among the
Company, the Investor, and David Gonzalez, Esq., dated the date hereof.


          Section
1.14. “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.


          Section
1.15. “Material Adverse Effect” shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any of its
obligations under this Agreement or the Registration Rights Agreement in any
material respect.


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          Section
1.16. “Market Price” shall mean the lowest VWAP of the Common Stock
during the Pricing Period.


          Section
1.17. “Maximum Advance Amount” shall be Five Hundred Thousand
Dollars ($500,000) per Advance Notice.


          Section
1.18. “NASD” shall mean the National Association of Securities
Dealers, Inc.


          Section
1.19. “Person” shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.


          Section
1.20. “Placement Agent” shall mean Monitor Capital Inc., a
registered broker-dealer.


          Section
1.21. “Pricing Period” shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.


          Section
1.22. “Principal Market” shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin Board or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.


          Section
1.23. “Purchase Price” shall be set at ninety six percent (96%) of
the Market Price during the Pricing Period.


          Section
1.24. “Registrable Securities” shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration Statement
has not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or
any similar provision then in force) under the Securities Act (“Rule 144”) or
(iii) which have not been otherwise transferred to a holder who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend. 


          Section
1.25. “Registration Rights Agreement” shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.


          Section
1.26. “Registration Statement” shall mean a registration statement
on Form S-l or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in accordance
with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.


3















          Section
1.27. “Regulation D” shall have the meaning set forth in the
recitals of this Agreement.


          Section
1.28. “SEC” shall mean the Securities and Exchange Commission.


          Section
1.29. “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.


          Section
1.30. “SEC Documents” shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.


          Section
1.31. “Trading Day” shall mean any day during which the New York
Stock Exchange shall be open for business.


          Section
1.32. “VWAP” shall mean the volume weighted average price of the
Company’s Common Stock as quoted by Bloomberg, LP.


ARTICLE II.

Advances


          Section
2.1. Investments.


               
(a) Advances. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on any
Advance Notice Date the Company may request an Advance by the Investor by the
delivery of an Advance Notice. The number of shares of Common Stock that the
Investor shall receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price. No fractional shares shall be
issued. Fractional shares shall be rounded to the next higher whole number of
shares. The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.


          Section
2.2. Mechanics.


               (a) Advance
Notice. At any time during the Commitment Period, the Company may deliver
an Advance Notice to the Investor, subject to the conditions set forth in
Section 7.2; provided, however, the amount for each Advance as designated by the
Company in the applicable Advance Notice, shall not be more than the Maximum
Advance Amount. The aggregate amount of the Advances pursuant to this Agreement
shall not exceed the Commitment Amount. The Company acknowledges that the
Investor may sell shares of the Company’s Common Stock corresponding with a
particular Advance Notice on the day the Advance Notice is received by the
Investor. There shall be a minimum of five (5) Trading Days between each
Advance Notice Date.


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               (b) Date
of Delivery of Advance Notice. An Advance Notice shall be deemed delivered
on (i) the Trading Day it is received by facsimile or otherwise by the Investor
if such notice is received prior to 12:00 noon Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise
after 12:00 noon Eastern Time on a Trading Day or at any time on a day which is
not a Trading Day. No Advance Notice may be deemed delivered on a day that is
not a Trading Day.


          Section
2.3. Closings. On each Advance Date, which shall be the first (1st)
Trading Day after expiration of the applicable Pricing Period for each Advance,
(i) the Company shall deliver to David Gonzalez, Esq. (the “Escrow Agent”)
shares of the Company’s Common Stock, representing the amount of the Advance by
the Investor pursuant to Section 2.1 herein, registered in the name of the
Investor which shall be delivered to the Investor, or otherwise in accordance
with the Escrow Agreement and (ii) the Investor shall deliver to Escrow Agent
the amount of the Advance specified in the Advance Notice by wire transfer of
immediately available funds which shall be delivered to the Company, or
otherwise in accordance with the Escrow Agreement. In addition, on or prior to
the Advance Date, each of the Company and the Investor shall deliver to the
other through the Investor’s counsel, all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement in order
to implement and effect the transactions contemplated herein. Payment of funds
to the Company and delivery of the Company’s Common Stock to the Investor shall
occur in accordance with the conditions set forth above and those contained in
the Escrow Agreement; provided, however, that to the extent the Company
has not paid the fees, expenses, and disbursements of the Investor, the
Investor’s counsel, or the Company’s counsel in accordance with Section 12.4,
the amount of such fees, expenses, and disbursements may be deducted by the
Investor (and shall be paid to the relevant party) from the amount of the
Advance with no reduction in the amount of shares of the Company’s Common Stock
to be delivered on such Advance Date.


          Section
2.4. Termination of Investment. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of fifty
(50) Trading Days, other than due to the acts of the Investor, during the
Commitment Period, or (ii) the Company shall at any time fail materially to
comply with the requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written notice from the Investor, provided,
however, that this termination provision shall not apply to any period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC.


          Section
2.5. Agreement to Advance Funds. The Investor agrees to advance the
amount specified in the Advance Notice to the Company after the completion of
each of the following conditions and the other conditions set forth in this
Agreement:


               (a) the
execution and delivery by the Company, and the Investor, of this Agreement and
the Exhibits hereto;


5















               (b) The
Escrow Agent shall have received the shares of Common Stock applicable to the
Advance in accordance with Section 2.3. Such shares shall be free of
restrictive legends.


               (c) the
Company’s Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement
shall have been declared effective by the SEC;


               (d) the
Company shall have obtained all material permits and qualifications required by
any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom.   The sale and issuance of the Registrable Securities shall be
legally permitted by all laws and regulations to which the Company is subject;


               (e) the
Company shall have filed with the Commission in a timely manner all reports,
notices and other documents required of a “reporting company” under the
Exchange Act and applicable Commission regulations;


               (f) the
fees as set forth in Section 12.4 below shall have been paid or can be withheld
as provided in Section 2.3; and


               (g) the
conditions set forth in Section 7.2 shall have been satisfied.


               (h) the
Company shall have provided to the Investor an acknowledgement, from the
Company’s independent certified public accountants as to its ability to provide
all consents required in order to file a registration statement in connection
with this transaction;


               (i) The
Company’s transfer agent shall be DWAC eligible.


          Section
2.6. Lock Up Period. On the date hereof, the Company shall obtain
from each officer and director a lock-up agreement, as defined below, in the
form annexed hereto as Schedule 2.6 agreeing to only sell in compliance with the
volume limitation of Rule 144.


          Section
2.7. Hardship. In the event the Investor sells shares of the
Company’s Common Stock after receipt of an Advance Notice and the Company fails
to perform its obligations as mandated in Section 2.3, and specifically the
Company fails to deliver to the Escrow Agent on the Advance Date the shares of
Common Stock corresponding to the applicable Advance, the Company acknowledges
that the Investor shall suffer financial hardship and therefore shall be liable
for any and all losses, commissions, fees, or financial hardship caused to the
Investor.


ARTICLE III.

Representations and
Warranties of Investor


          Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:


          Section
3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to purchase and hold the
securities issuable hereunder. The decision to invest and the execution and
delivery of this Agreement by such Investor, the performance by such Investor
of its obligations hereunder and the consummation by such Investor of the
transactions contemplated hereby have been duly authorized and requires no
other proceedings on the part of the Investor. The undersigned has the right,
power and authority to execute and deliver this Agreement and all other instruments
(including, without limitations, the Registration Rights Agreement), on behalf
of the Investor. This Agreement has been duly executed and delivered by the
Investor and, assuming the execution and delivery hereof and acceptance thereof
by the Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms.


6
















          Section
3.2. Evaluation of Risks. The Investor has such knowledge and experience
in financial, tax and business matters as to be capable of evaluating the
merits and risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with this
transaction. It recognizes that its investment in the Company involves a high
degree of risk.


          Section
3.3. No Legal Advice From the Company. The Investor acknowledges that it
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with his or its own legal counsel and investment and tax
advisors. The Investor is relying solely on such counsel and advisors and not
on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.


          Section
3.4. Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment purposes. The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not to
sell, hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption
from such laws is available.


          Section
3.5. Accredited Investor. The Investor is an “Accredited Investor” as
that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.


          Section
3.6. Information. The Investor and its advisors (and its counsel), if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and information it deemed material to making an
informed investment decision. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management.
Neither such inquiries nor any other due diligence investigations conducted by
such Investor or its advisors, if any, or its representatives shall modify,
amend or affect the Investor’s right to rely on the Company’s representations
and warranties contained in this Agreement. The Investor understands that its
investment involves a high degree of risk. The Investor is in a position
regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and
enables such Investor to obtain information from the Company in order to
evaluate the merits and risks of this investment. The Investor has sought such
accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to this transaction.


7
















          Section
3.7. Receipt of Documents. The Investor and its counsel have received
and read in their entirety: (i) this Agreement and the Exhibits annexed hereto;
(ii) all due diligence and other information necessary to verify the accuracy
and completeness of such representations, warranties and covenants; (iii)
answers to all questions the Investor submitted to the Company regarding an
investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.


          Section
3.8. Registration Rights Agreement and Escrow Agreement. The parties
have entered into the Registration Rights Agreement and the Escrow Agreement,
each dated the date hereof.


          Section
3.9. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.


          Section
3.10. Not an Affiliate. The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or
any “Affiliate” of the Company (as that term is defined in Rule 405 of the
Securities Act).


          Section
3.11. Trading Activities. The Investor’s trading activities with respect
to the Company’s Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company’s Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company, the Investor agrees that it shall
not, and that it will cause its affiliates not to, engage in any short sales of
or hedging transactions with respect to the Common Stock, provided that the Company acknowledges and
agrees that upon receipt of an Advance Notice the Investor has the right to
sell the shares to be issued to the Investor pursuant to the Advance Notice
during the applicable Pricing Period.


ARTICLE
IV. 

Representations and Warranties of the Company


          Except
as stated below, on the disclosure schedules attached hereto or in the SEC
Documents (as defined herein), the Company hereby represents and warrants to,
and covenants with, the Investor that the following are true and correct as of
the date hereof:


          Section
4.1. Organization and Qualification. The Company is duly incorporated or
organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite corporate power to own its properties and to
carry on its business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole.


8















          Section
4.2. Authorization, Enforcement, Compliance with Other Instruments. (i)
The Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Placement Agent Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by the Company’s Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Placement Agent Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and assuming the execution and delivery thereof and acceptance by the
Investor and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors’ rights and remedies.


          Section
4.3. Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 100,000,000 shares of Common Stock, par value $0.001
per share and 20,000,000 shares of Preferred Stock, $0.001 par value per share
(“Preferred Stock”), of which 8,991,418 shares of Common Stock and 783,000
shares of Preferred Stock were issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. No shares
of Common Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. As of the date
hereof, (i) other than as disclosed in the March 31, 2005 audit 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, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) other
than the Series A Preferred Note outstanding to David Palmund there are no
outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-8 and (iv) other than with regard to the PIPE
transaction being conducted by Bathgate there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except pursuant to
the Registration Rights Agreement). There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by this
Agreement or any related agreement or the consummation of the transactions
described herein or therein. The Company has furnished to the Investor true and
correct copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s By-laws, as in effect on the date hereof
(the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.


9















          Section
4.4. No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
material property or asset of the Company or any of its subsidiaries is bound
or affected and which would cause a Material Adverse Effect. Neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which
might give rise to any of the foregoing.


          Section
4.5. Financial Statements. As of their respective dates, the financial
statements of the Company (the “Financial Statements”) for the two most
recently completed fiscal years and any subsequent interim period complied as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and, fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). No other information provided by or on
behalf of the Company to the Investor contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.


10














          Section
4.6. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its
property is bound and neither the execution, nor the delivery by the Company,
nor the performance by the Company of its obligations under this Agreement or
any of the exhibits or attachments hereto will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on any
assets or properties of the Company under its Certificate of Incorporation,
By-Laws, any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company is a
party or by which it is bound, or any statute, or any decree, judgment, order,
rules or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties, in each case which default,
lien or charge is likely to cause a Material Adverse Effect on the Company’s
business or financial condition.


          Section
4.7. Absence of Events of Default. Except for matters described in this
Agreement, no Event of Default, as defined in the respective agreement 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 (as so defined), has
occurred and is continuing, which would have a Material Adverse Effect on the
Company’s business, properties, prospects, financial condition or results of
operations.


          Section
4.8 Intellectual Property Rights. The Company and its subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.


          Section
4.9. Employee Relations. Neither the Company nor any of its subsidiaries
is involved in any labor dispute nor, to the knowledge of the Company or any of
its subsidiaries, is any such dispute threatened. None of the Company’s or its
subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.


          Section
4.10 Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable material foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.


11














          Section
4.11 Title. The Company has good and marketable title to its properties
and material assets owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than such as are not
material to the business of the Company. Any real property and facilities held
under lease by the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.


          Section
4.12. Insurance. The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its subsidiaries, taken as a whole.


          Section
4.13. Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.


          Section
4.14. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.


          Section
4.15. No Material Adverse Breaches, etc. Neither the Company nor any of
its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the future to have a
Material Adverse Effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries.


12














          Section
4.16. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company’s subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a Material Adverse
Effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a Material Adverse Effect on the business,
operations, properties, financial condition or results of operation of the
Company and its subsidiaries taken as a whole.


          Section
4.17. Subsidiaries. Other than Viper Motorcycle Company, a wholly-owned
Minnesota corporation, the Company does not presently own or control, directly
or indirectly, any interest in any other corporation, partnership, association
or other business entity.


          Section
4.18 Tax Status. The Company and each of its subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.


          Section
4.19. Certain Transactions. None of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.


          Section
4.20. Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.


          Section
4.21. Use of Proceeds. The Company shall use the net proceeds from this
offering for general corporate purposes, including, without limitation, the
payment of loans incurred by the Company. However, in no event shall the
Company use the net proceeds from this offering for the payment (or loan to any
such person for the payment) of any judgment, or other liability, incurred by any executive officer,
officer, director or employee of the Company, except for any liability owed to
such person for services rendered, or if any judgment or other liability is
incurred by such person originating from services rendered to the Company, or
the Company has indemnified such person from liability.


13















          Section
4.22. Further Representation and Warranties of the Company. For so long
as any securities issuable hereunder held by the Investor remain outstanding,
the Company acknowledges, represents, warrants and agrees that it will maintain
the listing of its Common Stock on the Principal Market.


          Section
4.23. Opinion of Counsel. Investor shall receive an opinion letter from
counsel to the Company on the date hereof.


          Section
4.24. Opinion of Counsel. The Company will obtain for the Investor, at
the Company’s expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without
restriction.


          Section
4.25. Dilution. The Company is aware and acknowledges that issuance of
shares of the Company’s Common Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.


ARTICLE
V. 

Indemnification


          The
Investor and the Company represent to the other the following with respect to
itself: 


          Section
5.1.     Indemnification.


                    (a)
    In consideration of the Investor’s execution and delivery of this Agreement,
and in addition to all of the Company’s other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless the Investor,
and all of its officers, directors, partners, employees and agents (including,
without limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the “Investor Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Investor Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
the Investor Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement or the Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Investor
Indemnitee not arising out of any action or inaction of an Investor Indemnitee,
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Investor Indemnitees. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law.


14















                    (b)
In consideration of the Company’s execution and delivery of this Agreement, and
in addition to all of the Investor’s other obligations under this Agreement,
the Investor shall defend, protect, indemnify and hold harmless the Company and
all of its officers, directors, shareholders, employees and agents (including,
without limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the “Company Indemnitees”) from and
against any and all Indemnified Liabilities incurred by the Company Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement, the Registration Rights Agreement, or any
instrument or document contemplated hereby or thereby executed by the Investor,
(b) any breach of any covenant, agreement or obligation of the Investor(s)
contained in this Agreement, the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Investor, or (c) any cause of action, suit or claim brought or made against
such Company Indemnitee based on misrepresentations or due to a breach by the
Investor and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the
extent that the foregoing undertaking by the Investor may be unenforceable for
any reason, the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.


                    (c)
The obligations of the parties to indemnify or make contribution under this
Section 5.1 shall survive termination.


ARTICLE
VI. 

Covenants of the Company


          Section
6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall
comply in all material respects with the terms thereof.


          Section
6.2. Listing of Common Stock. Prior to an Advance hereunder the Company
shall maintain the Common Stock’s authorization for quotation on the National
Association of Securities Dealers Inc.’s Over the Counter Bulletin Board.


          Section
6.3. Exchange Act Registration. Prior to an Advance hereunder the
Company will cause its Common Stock to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other documents
required of it as a reporting company under the Exchange Act and will not take
any action or file any document (whether or not permitted by Exchange Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said Exchange Act.


15














          Section
6.4. Transfer Agent Instructions. Upon effectiveness of the Registration
Statement the Company shall deliver instructions to its transfer agent to issue
shares of Common Stock to the Investor free of restrictive legends on or before
each Advance Date


          Section
6.5. Corporate Existence .The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.


          Section
6.6. Notice of Certain Events Affecting Registration; Suspension of Right to
Make an Advance. The Company will immediately notify the Investor upon its
becoming aware of the occurrence of any of the following events in respect of a
registration statement or related prospectus relating to an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other Federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other Federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in the Registration Statement
or related prospectus of any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents
so that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(v) the Company’s reasonable determination that a post-effective amendment to
the Registration Statement would be appropriate; and the Company will promptly
make available to the Investor any such supplement or amendment to the related
prospectus. The Company shall not deliver to the Investor any Advance Notice
during the continuation of any of the foregoing events.


          Section
6.7. Restriction on Sale of Capital Stock. During the Commitment Period,
the Company shall not, without the prior written consent of the Investor, (i)
issue or sell any Common Stock or Preferred Stock without consideration or for
a consideration per share less than the Bid Price of the Common Stock
determined immediately prior to its issuance, (ii) issue or sell any Preferred
Stock warrant, option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than such Common Stock’s
Bid Price determined immediately prior to its issuance, or (iii) file any
registration statement on Form S-8.


          Section
6.8. Consolidation; Merger .The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all the assets of the Company to another
entity (a “Consolidation Event”) unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.


16















          Section
6.9. Issuance of the Company’s Common Stock. The sale of the shares of
Common Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.


ARTICLE VII. 

Conditions for Advance and Conditions to Closing


          Section 7.1. Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common
Stock to the Investor incident to each Closing is subject to the satisfaction,
or waiver by the Company, at or before each such Closing, of each of the
conditions set forth below.


               (a)
Accuracy of the Investor’s Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects.


               (b)
Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Investor at or prior to such
Closing.


          Section
7.2. Conditions Precedent to the Right of the Company to Deliver an
Advance  Notice and the Obligation of
the Investor to Purchase Shares of Common Stock. The right of the Company
to deliver an Advance Notice and the obligation of the Investor hereunder to
acquire and pay for shares of the Company’s Common Stock incident to a Closing
is subject to the fulfillment by the Company, on (i) the date of delivery of
such Advance Notice and (ii) the applicable Advance Date (each a “Condition
Satisfaction Date”), of each of the following conditions:


               (a)
Registration of the Common Stock with the SEC. The Company shall have
filed with the SEC a Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC’s concerns have been addressed and the Investor is reasonably satisfied
that the SEC no longer is considering or intends to take such action), and (ii)
no other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first
Advance Notice Date.


               (b)
Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom. The sale and issuance of the
shares of Common Stock shall be legally permitted by all laws and regulations
to which the Company is subject.


17















               (c)
Fundamental Changes. There shall not exist any fundamental changes to
the information set forth in the Registration Statement which would require the
Company to file a post-effective amendment to the Registration Statement.


               (d)
Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement (including, without limitation, the
conditions specified in Section 2.5 hereof) and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.


               (e)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.


               (f)
No Suspension of Trading in or Delisting of Common Stock. The trading of
the Common Stock is not suspended by the SEC or the Principal Market (if the
Common Stock is traded on a Principal Market). The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market (if the Common Stock
is traded on a Principal Market). The Company shall not have received any notice
threatening the continued listing of the Common Stock on the Principal Market
(if the Common Stock is traded on a Principal Market).


               (g)
Maximum Advance Amount. The amount of an Advance requested by the
Company shall not exceed the Maximum Advance Amount. In addition, in no event
shall the number of shares issuable to the Investor pursuant to an Advance
cause the aggregate number of shares of Common Stock beneficially owned by the
Investor and its affiliates to exceed nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company. For the purposes of this section
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act.


               (h)
No Knowledge. The Company has no knowledge of any event which would be
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective.


               (i)
Other. On each Condition Satisfaction Date, the Investor shall have
received the certificate executed by an officer of the Company in the form of
Exhibit A attached hereto.


18














ARTICLE VIII. 

Due Diligence Review; Non-Disclosure of Non-Public Information


          Section
8.1.  Due Diligence Review. Prior to the filing of the Registration
Statement the Company shall make available for inspection and review by the
Investor, its advisors and representatives, and any underwriter participating
in any disposition of the Registrable Securities on behalf of the Investor
pursuant to the Registration Statement, any such registration statement or
amendment or supplement thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company’s
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of the Registration Statement.


          Section
8.2.  Non-Disclosure of Non-Public Information.


               (a)
The Company shall not disclose non-public information to the Investor, its
advisors, or its representatives, unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public
information hereunder, require the Investor’s advisors and representatives to
enter into a confidentiality agreement in form reasonably satisfactory to the
Company and the Investor.


               (b)
Nothing herein shall require the Company to disclose non-public information to
the Investor or its advisors or representatives, and the Company represents
that it does not disseminate non-public information to any investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any event
or the existence of any circumstance (without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 8.2 shall be construed to mean
that such persons or entities other than the Investor (without the written consent
of the Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of material fact or omits a material fact required
to be stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.


19














ARTICLE IX. 

Choice of Law/Jurisdiction


          Section
9.1. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. The parties further agree that any action
between them shall be heard in Hudson County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Hudson County, New Jersey and the United States District Court of New Jersey,
sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.


ARTICLE X. 

Assignment; Termination


          Section
10.1. Assignment. Neither this Agreement nor any rights of the Company
hereunder may be assigned to any other Person.


          Section
10.2. Termination. The obligations of the Investor to make Advances
under Article II hereof shall terminate twenty-four (24) months after the
Effective Date.


ARTICLE XI.

Notices


          Section
11.1. Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return receipt requested; (iii) three
(3) days after being sent by U.S. certified mail, return receipt requested, or
(iv) one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:


	
   

  	
   

  
	
  If to the Company, to:

  	
  Viper Powersports Inc. 

  
	
   

  	
  1500 Rand Tower 

  
	
   

  	
  Minneapolis, MN 55402 

  
	
   

  	
  Attention:  John Lai,
  President 

  
	
   

  	
  Telephone:
   (612) 333-1313 

  
	
   

  	
  Facsimile:  (763)
  732-0781 

  



20














	
   

  	
   

  
	
  With a copy to:

  	
  Robert O. Knutson, Esq. 
9372 Creekwood Drive

  
	
   

  	
  Eden Prairie, MN 55347

  
	
   

  	
  Telephone: (952) 941-0908

  
	
   

  	
  Facsimile: (952) 941-2744

  
	
   

  	
   

  
	
  If to the Investor(s):

  	
  Cornell Capital Partners, LP

  
	
   

  	
  101 Hudson Street – Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Attention: Mark Angelo

  
	
   

  	
                   Portfolio Manager

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  
	
   

  	
   

  
	
  With a Copy to:

  	
  David Gonzalez, Esq.

  
	
   

  	
  101 Hudson Street – Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  



Each party shall provide five (5) days’ prior written
notice to the other party of any change in address or facsimile number.


ARTICLE
XII.

Miscellaneous


          Section
12.1. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.


          Section
12.2. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.


          Section
12.3. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor
and the Company shall be required to employ any other reporting entity.


21















          Section
12.4. Fees and Expenses. The Company hereby agrees to pay the following
fees:


               (a)
Structuring Fees. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company will pay a
structuring fee of Twenty Thousand Dollars ($20,000) to Yorkville Advisors
Management, LLC, which shall be paid on the date hereof. Subsequently on each
advance date, the Company will pay Yorkville Advisors Management, LLC a structuring
fee of Five Hundred Dollars ($500) directly out the proceeds of any Advances
hereunder.


               (b)
Due Diligence Fee. Company shall pay the Investor a non-refundable due
diligence fee of Five Thousand Dollars ($5,000) upon submission of the due
diligence documents to the Investor.


               (c)
Commitment Fees.


                    (i)
On each Advance Date the Company shall pay to the Investor, directly from the
gross proceeds held in escrow, an amount equal to four percent (4%) of the amount
of each Advance. The Company hereby agrees that if such payment, as is
described above, is not made by the Company on the Advance Date, such payment
will be made at the direction of the Investor as outlined and mandated by
Section 2.3 of this Agreement.


                    (ii)
Upon the execution of this Agreement the Company shall issue to the Investor
shares of the Company’s Common Stock in an amount equal to Seven Hundred Forty
Thousand Dollars (740,000) divided by closing Bid Price of the Company’s Common
Stock, as quoted by Bloomberg, LP on the date hereof (the “Investor’s Shares”).


                    (iii)
Investor’s Warrants. Upon the execution of this Agreement the Company
shall issue to the Investor a warrant to purchase one million seven hundred
fifty thousand (1,750,000) shares of the Company’s Common Stock for a period of
three (3) years at an exercise price of $4.60 per share (the “Investor’s
Warrant”). The shares issuable upon conversion of the Investor’s Warrant shall
have “piggy-back” and demand registration rights (the “Warrant Shares”).


                    (iv)
Fully Earned. The Investor’s Shares and the Investor’s Warrant will be
deemed fully earned as of the date hereof.


                    (iv)
Registration Rights. The Investor’s Shares and the Warrant Shares will
have “piggy-back” registration rights.


          Section
12.5. Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any person claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.


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          Section
12.6. Confidentiality. If for any reason the transactions contemplated
by this Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party’s domain prior to the date hereof, and
except as required by court order) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information without retaining copies thereof, previously furnished by it as a
result of this Agreement or in connection herein.


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


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          IN
WITNESS WHEREOF, the
parties hereto have caused this Standby Equity Distribution Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first
set forth above.


	
   

  	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
  VIPER
  POWERSPORTS INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  

  
	
   

  	
   

  	
  


  
	
   

  	
  Name:

  	
  John Lai

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
  CORNELL
  CAPITAL PARTNERS, LP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yorkville
  Advisors, LLC

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  

  
	
   

  	
   

  	
  


  
	
   

  	
  Name:

  	
  Mark Angelo

  
	
   

  	
  Title:

  	
  Portfolio Manager

  



24















EXHIBIT
A


ADVANCE NOTICE/COMPLIANCE CERTIFICATE


VIPER
POWERSPORTS INC.


          The
undersigned, ________________ hereby certifies, with respect to the sale of shares of Common Stock of
VIPER POWERSPORTS INC. (the “Company”), issuable in connection with this Advance Notice and Compliance
Certificate dated __________________ (the “Notice”),
delivered pursuant to the
Standby Equity Distribution Agreement (the “Agreement”),
as follows:


          1.          The
undersigned is the duly elected ________________ of the Company.


          2.          There
are no fundamental changes to the
information set forth in the Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.


          3.          The
Company has performed in all material respects all covenants and agreements to be performed by the Company on or prior to the
Advance Date related to the Notice and has complied in all material
respects with all obligations and conditions contained in the Agreement.


          4.          The
undersigned hereby represents, warrants and
covenants that it has made all filings
(“SEC Filings”) required to be made by it pursuant to applicable securities
laws (including, without limitation,
all filings required under the Securities Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K, etc. All SEC
Filings and other public disclosures made by the Company, including, without limitation, all press releases,
analysts meetings and calls, etc. (collectively, the “Public
Disclosures”), have been reviewed and approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified
public accountants. None of the
Company’s Public Disclosures contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.


          5.          The
Advance requested is________________.


          The
undersigned has executed this Certificate this ____________ day of _________________.


	
   

  	
   

  	
   

  
	
   

  	
  VIPER
  POWERSPORTS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  


  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  








25 















SCHEDULE
2.6


VIPER POWERSPORTS INC.


          The
undersigned hereby agrees that for a period commencing on August _____, 2005 and expiring on the termination of the Standby
Equity Distribution Agreement dated August _____, 2005 between the Company
and the Investor (the “Lock-up Period”), he, she or it will not, directly or indirectly, without the prior written
consent of the Investor, issue, offer, agree or offer to sell, sell, grant an option for the purchase
or sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber or dispose of any
securities of the Company, including common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for
or evidencing any right to purchase or subscribe for any common stock (whether or not beneficially owned
by the undersigned), or any beneficial interest therein (collectively, the “Securities”) except in accordance with the
volume limitations set forth in Rule 144(e) of the General Rules and
Regulations under the Securities Act of 1933, as amended.


          In
order to enable the aforesaid covenants to be enforced, the undersigned hereby consents to the placing
of legends and/or stop-transfer orders with the transfer agent of the Company’s securities
with respect to any of the Securities registered in the name of the undersigned or
beneficially owned by the undersigned, and the undersigned hereby confirms the undersigned’s investment
in the Company.


Dated: ______________,
2005


	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  


  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  


  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
  


  
	
   

  	
  City,
  State, Zip Code:

  	
   

  
	
   

  	
   

  	
  


  
	
   

  	
   

  	
   

  
	
   

  	
  


  
	
   

  	
  Print
  Social Security Number 

  or
  Taxpayer I.D. Number

  



26