UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Amendment No. 1)
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31,
2014
OR
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to
_________
SALEEN AUTOMOTIVE, INC.
(Exact Name of Registrant as Specified in Charter)
Nevada |
|
333-176388 |
|
45-2808694 |
(State or Other Jurisdiction |
|
(Commission |
|
(I.R.S. Employer |
of Incorporation) |
|
File No.) |
|
Identification No.) |
2735
Wardlow Road
Corona, California |
|
|
|
92882 |
(Address of Principal
Executive Offices) |
|
|
|
(Zip Code) |
(800)
888-8945
Registrant’s
telephone number, including area code:
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes
[X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [ ] |
Accelerated
filer [ ] |
Non-accelerated
filer [ ] |
Smaller
reporting company [X] |
Indicate
by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes
[ ] No [X]
As
of February 13, 2015, there were 170,460,122 shares of the issuer’s common stock, $0.001 par value per share, outstanding.
Explanatory Note
The purpose of this Amendment
No. 1 to the registrant’s quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2014, filed with the Securities
and Exchange Commission on February 17, 2015 (the “Form 10-Q”), is solely to file Exhibits 10.1 through 10.14 to the
Form 10-Q. No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing
date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date and does not modify
or update in any way disclosures made in the Form 10-Q.
SALEEN
AUTOMOTIVE, INC.
FORM
10-Q
INDEX
PART
II – OTHER INFORMATION
ITEM
6. EXHIBITS
EXHIBIT
INDEX
Exhibit
Number |
|
Description
of Exhibit |
|
|
|
10.1 |
|
Form
of Securities Purchase Agreement between Saleen Automotive, Inc. and KBM Worldwide. |
10.2 |
|
Form
of Convertible Promissory Note issued by Saleen Automotive, Inc. to KBM Worldwide, Inc. |
10.3 |
|
Securities
Purchase Agreement dated October 14, 2014, between Saleen Automotive, Inc. and LG Capital Funding, LLC. |
10.4 |
|
Form
of Convertible Note issued by Saleen Automotive, Inc. to LG Capital Funding, LLC. |
10.5 |
|
Form
of 10% Convertible Note issued by Saleen Automotive, Inc. to JSJ Investments Inc. dated October 15, 2014. |
10.6 |
|
Form
of 10% Convertible Note issued by Saleen Automotive, Inc. to JSJ Investments Inc. dated December 2, 2014. |
10.7 |
|
Securities
Purchase Agreement dated December 3, 2014, between Saleen Automotive, Inc. and Rock Capital, LLC. |
10.8 |
|
Form
of Convertible Note issued by Saleen Automotive, Inc. to Rock Capital, LLC. |
10.9 |
|
Convertible
Note dated December 3, 2014 issued by Saleen Automotive, Inc. to Vista Capital Investments, LLC |
10.10 |
|
Securities
Purchase Agreement dated December 3, 2014, between Saleen Automotive, Inc. and Coventry Enterprises, LLC. |
10.11 |
|
Form
of Convertible Note issued by Saleen Automotive, Inc. to Coventry Enterprises, LLC. |
10.12 |
|
Securities
Purchase Agreement dated October 28, 2014, between Saleen Automotive, Inc. and Typenex Co-Investment, LLC. |
10.13 |
|
Convertible
Note dated October 28, 2014 issued by Saleen Automotive, Inc. to Typenex Co-Investment, LLC. |
10.14 |
|
Convertible
Note dated November 6, 2014 issued by Saleen Automotive, Inc. to JMJ Financial. |
31.1 |
|
Certification
by Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.+ |
31.2 |
|
Certification
by Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.+ |
32.1 |
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.+ |
32.2 |
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.+ |
101.INS** |
|
XBRL Instance.++ |
101.SCH** |
|
XBRL Taxonomy Extension Schema.++ |
101.CAL** |
|
XBRL Taxonomy Extension Calculation.++ |
101.DEF** |
|
XBRL Taxonomy Extension Definition.++ |
101.LAB** |
|
XBRL Taxonomy Extension Labels.++ |
101.PRE** |
|
XBRL Taxonomy Extension Presentation.++ |
** XBRL information is furnished and not filed
or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject
to liability under these sections.
+
Filed with the Form 10-Q.
++
Furnished with the Form 10-Q.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Saleen
Automotive, Inc. |
|
a
Nevada Corporation |
|
|
Date: February
19, 2015 |
/S/
Steve Saleen |
|
Steve
Saleen |
|
Chief
Executive Officer |
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 11, 2014, by and between SALEEN AUTOMOTIVE,
INC., a Nevada corporation, with headquarters located at 2735 Wardlow Road, Corona, CA 92882 (the “Company”),
and KBM WORLDWIDE, INC., a New York corporation, with its address at 80 Cuttermill Road, Suite 410, Great Neck, NY 11021
(the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8%
convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $123,500.00 (together
with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of common stock, $0,001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note,
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1.
Purchase and Sale of Note.
a.
Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees
to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature
pages hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00
noon, Eastern Standard Time on or about September 15, 2014, or such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to
by the parties.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any,
as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of
the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement,
such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with
the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
(an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that
may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to
the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g.
Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the
1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline,
it will be considered an Event of Default pursuant to Section 3.2 of the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition
or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement,
the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the
issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise there of) have been duly
authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of
Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its
authorized representative, and such authorized representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute,
a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Capitalization.
As of the date hereof, the authorized capital stock of the Company consists of: (i) 500,000,000 authorized shares of Common Stock,
$0.001 par value per share, of which 152,154,872 shares are issued and outstanding; and (ii) 1,000,000 authorized shares of Preferred
Stock, $0.001 par value per share, of which no shares are issued and outstanding; no shares are reserved for issuance pursuant
to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable
for, or convertible into or exchangeable for shares of Common Stock and 13,500,000 shares are reserved for issuance upon conversion
of the Note. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights
of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company.
As of the effective date of this Agreement, and except as disclosed in the SEC Documents (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, 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, (ii) there are no agreements
or arrangements under which the Company or any of its, Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion
Shares. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as
in effect on the date hereof (“Certificate of Incorporation”), 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 of the Company
and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of
this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.
d. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
(subject to Rule 144) with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights
of shareholders of the Company and will not impose personal liability upon the holder thereof.
e.
Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
f. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance
of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of
its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company
or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company
nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or
both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has
taken any action or failed to take any action that would 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 by which
any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any,
are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under
the 1933 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, governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the
Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue
the Conversion Shares upon conversion of the Note. 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. If the
Company is listed on the OTCBB, the Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board
(the “OTCBB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable
future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. SEC
Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver to the Buyer
true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the
financial statements of the Company included in the SEC Documents 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 United States generally accepted accounting principles, consistently applied, during the periods
involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to June 30, 2014, and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934 Act.
h. Absence
of Certain Changes. Since June 30, 2014, there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting
status of the Company or any of its Subsidiaries.
i.
Absence of Litigation. Except as listed in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers
or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and
summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company
or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to
use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct
its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property
or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of their Intellectual Property.
k.
No Materially Adverse Contracts, 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. Neither the Company nor any of its Subsidiaries is a party
to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse
Effect.
1.
Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other
tax returns, reports and declarations required by any jurisdiction to which it is subject (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) and has paid all taxes and other governmental assessments and charges (except for past due payroll tax disclosed
in the SEC Documents) 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 provisions 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. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing
authority.
m.
Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries
makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries
could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers,
directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries
(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.
n.
Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s
reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the
1933 Act).
o.
Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting
solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of
its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice
or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to
the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of
the Company and its representatives.
p.
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.
q.
No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
r.
Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”),
and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of
the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of
the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since June 30, 2014, neither the Company nor any of its Subsidiaries
has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse
Effect.
s.
Environmental Matters.
(i)
There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other
than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained
on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials
were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during
the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the
Company’s or any of its Subsidiaries’ business.
(iii) There
are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
t.
Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would
not have a Material Adverse Effect. 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 would not have a Material Adverse Effect.
u.
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 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 have a Material Adverse Effect. Upon written
request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general liability coverage.
v.
Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, 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.
w.
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or
employee.
x.
[INTENTIONALLY DELETED].
y.
No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement
will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment
Company”). The Company is not controlled by an Investment Company.
z.
Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an Event of default under Section 3.4 of the Note.
4.
COVENANTS.
a. Best
Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. Form
D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing
pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to
obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior
to the Closing Date.
c. Use
of Proceeds. The Company shall use the proceeds for general working capital purposes.
d. Right
of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing
of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR Notice”),
including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered
into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following delivery of
such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering
(the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First
Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity (or debt with an equity
component) financing in an amount less than $100,000 (“Future Offering(s)”) during the period beginning on the Closing
Date and ending six (6) months following the Closing Date. Notwithstanding anything contained herein to the contrary, the Company
shall not consummate any Future Offering with an investor, or an affiliate of such investor (collectively “Prospective Investor”),
identified on an ROFR Notice whereby the Buyer exercised its Right of First Refusal for a period of forty (45) days following
such exercise; and any subsequent offer by a Prospective Investor is subject to this Section 4(d) and the Right of First Refusal.
In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to
the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended
terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two (72)
hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms
as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments to the
terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or
in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or
in connection with the disposition or acquisition of a business, product or license by the Company. The Right of First Refusal
also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.
e. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate
payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission
of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses
shall not exceed $3,500.
f. Financial
Information. Upon written request the Company agrees to send or make available the following reports to the Buyer until the
Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available
or gives to such shareholders.
g. [INTENTIONALLY
DELETED]
h. [INTENTIONALLY
DELETED]
i.
j.
Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i)
assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith
and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the Pink Sheets, OTCQX, OTCBB, Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
k.
No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
l.
Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other
remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the
Note.
m.
Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934
Act.
n.
Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company
and the Buyer agree 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 of the Company,
5.
Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion
Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction
as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof
(in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which
the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular
date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise
be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii)
it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically
or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant
to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer
agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw
any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion
of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect
in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus
delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with
(i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a
public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected
or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit
the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates,
free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions
of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security
being required.
6.
Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note
to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion:
a.
The Buyer shall have executed this Agreement and delivered the same to the Company.
b. The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The
representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.
7.
Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a.
The Company shall have executed this Agreement and delivered the same to the Buyer.
b. The
Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance
with Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company’s Transfer Agent.
d. The
representations and warranties of the Company shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited
to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions
relating to the transactions contemplated hereby.
e. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. No
event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g. The
Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not
have been suspended by the SEC or the OTCBB.
h.
The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing
Date.
8.
Governing Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover
from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction
Document 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.
b. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.
d.
Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. 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 Buyer 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 majority in interest of the Buyer.
f.
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If
to the Company, to:
SALEEN
AUTOMOTIVE, INC.
2735 Wardlow Road
Corona, CA 92882
Attn:
STEVE SALEEN, Chief Executive Officer
facsimile:[enter fax number]
If
to the Buyer:
KBM
WORLDWIDE, INC.
80 Cuttermill Road - Suite 410
Great Neck, NY 11021
Attn:
Seth Kramer, President
e-mail: info@kwbmlaw.com
With
a copy by fax only to (which copy shall not constitute notice):
Naidich Wurman Birnbaum & Maday LLP
Att: Judah A. Eisner,
Esq.
Attn: Bernard S. Feldman, Esq.
facsimile: 516-466-3555
e-mail: dyork@nwbmlaw.com
Each
party shall provide notice to the other party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term
is defined under the 1934 Act, without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their* respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i.
Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement
shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The
Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses
as they are incurred.
j.
Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any
press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press
release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k.
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
l.
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express then mutual intent, and no rules of strict construction will be applied against any party.
m.
Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.
SALEEN
AUTOMOTIVE, INC. |
|
|
|
By: |
/S/
Steve Saleen |
|
|
STEVE
SALEEN |
|
|
Chief
Executive Officer |
|
KBM
WORLDWIDE, INC. |
|
|
|
By: |
/s/
Seth Kramer |
|
Name: |
Seth
Kramer |
|
Title: |
President |
|
|
80
Cuttermill Road - Suite 410 |
|
|
Great
Neck, NY 11021 |
|
AGGREGATE
SUBSCRIPTION AMOUNT: |
|
|
|
|
|
Aggregate
Principal Amount of Note: |
|
$123,500.00 |
|
|
|
Aggregate
Purchase Price: |
|
$123,500.00 |
|
|
|
Tranche
#1 K-1301 (SLNN) |
|
|
September
11, 2014 |
|
|
sms@thesaleens.com |
|
|
Inihiser@saleen.com |
|
|
October
2, 2014
Direct
Transfer, LLC.
500
Perimeter Park Drive Suite D
Morrisville,
NC 27560
Ladies
and Gentlemen:
SALEEN
AUTOMOTIVE, INC., a Nevada corporation (the “Company”) and KBM WORLDWIDE, INC., a New York corporation (the
“Investor”) have entered into a Securities Purchase Agreement dated as of October 2, 2014 (the
“Agreement”) providing for the issuance of the 8% Convertible Promissory Note in the principal amount of
$55,000.00 (the “Note”).
A
copy of the Note is attached hereto. You should familiarize yourself with your issuance and delivery obligations, as Transfer
Agent, contained therein. The shares to be issued are to be registered in the names of the registered holder of the securities
submitted for conversion or exercise.
You
are hereby irrevocably authorized and instructed to reserve a sufficient number of shares of common stock (“Common
Stock”) of the Company (initially, 10,000,000 shares for the subject Note combined with 18,000,000 of Common Stock
presently reserved for two (2) prior convertible promissory notes in favor of the Investor dated September 11, 2014 and
September 16, 2014 equals an aggregate total of 28,000,000 shares of Common Stock which should be held in reserve for the
Investor as of this date) for issuance upon full conversion of the Note in accordance with the terms thereof. The amount of
Common Stock so reserved may be increased, from time to time, by written instructions of the Company and the
Investor.
The
ability to convert the Note in a timely manner is a material obligation of the Company pursuant to the Note. Your firm is hereby
irrevocably authorized and instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor
without any further action or confirmation by the Company (from the reserve, but in the event there are insufficient reserve
shares of Common Stock to accommodate a Conversion Notice (defined below) your firm and the Company agree that the Conversion
Notice should be completed using authorized but unissued shares of Common Stock that the Company has in its treasury): (A) upon
your receipt from the Investor of: (i) a notice of conversion (“Conversion Notice”) executed by the Investor; and
(ii) an opinion of counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable transactions
(and satisfactory to the transfer agent), to the effect that the shares of Common Stock of the Company issued to the Investor
pursuant to the Conversion Notice are not “restricted securities” as defined in Rule 144 and should be issued to the
Investor without any restrictive legend; and (B) the number of shares to be issued is less than 4.99% of the total issued common
stock of the Company.
The
Company hereby requests that your firm act immediately, without delay and without the need for any action or confirmation by the
Company with respect to the issuance of Common Stock pursuant to any Conversion Notices received from the Investor. Your firm
will not delay in processing any Conversion Notices owing to the fact that the Company is in arrears of its fees and other monies
owed to your firm, provided that the Investor agrees that each time a Conversion Notice is delivered to your firm, the Investor
agrees to pay the cost of processing the Conversion Notice a sum not to exceed $150.00 for each such transaction.
The
Company shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them
harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements
of its attorneys) incurred by or asserted against you or any of them arising out of or in connection the instructions set forth
herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending
yourself or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters
in ‘respect of which it is determined that you have acted with gross negligence or in bad faith. You shall have no liability
to the Company in respect to any action taken or any failure to act in respect of this if such action was taken or omitted to
be taken in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The
Board of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s
irrevocable agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein
contained on the terms herein set forth.
The
Company agrees that in the event that the Transfer Agent resigns, is terminated or removed as the Company’s transfer agent,
the Company shall engage a suitable replacement transfer agent that will agree to serve as transfer agent for the Company and
be bound by the terns and conditions of these Irrevocable Instructions. Furthermore, the Company and the Transfer Agent hereby
agree that the Transfer Agent shall, in any event, continue to act as the Company’s transfer agent and issue shares to the
Investor if required pursuant to a Notice of Conversion (at the expense of the Investor) until such time as the suitable replacement
transfer agent and the Company shall have executed and delivered to the Transfer Agent and the Investor a letter that such replacement
transfer agent agrees to be bound by the terms and conditions of these Irrevocable Instructions.
The
Investor is intended to be and is a third party beneficiary hereof, and no amendment or modification to the instructions set forth
herein may be made without the consent of the Investor.
|
Very
truly yours, |
|
|
|
SALEEN AUTOMOTIVE,
INC. |
|
|
|
/s/
STEVE SALEEN |
|
STEVE SALEEN |
|
Chief Executive
Officer |
Acknowledged
and Agreed: |
|
Direct Transfer,
LLC. |
|
Very
truly yours, |
|
|
|
SALEEN AUTOMOTIVE,
INC. |
|
|
|
|
|
STEVE SALEEN |
|
Chief Executive
Officer |
Acknowledged
and Agreed: |
|
Direct Transfer,
LLC. |
By: |
/s/
Eddie Tobler |
|
Name: |
Eddie Tobler |
|
Title: |
VP Stock Transfer |
|
OFFICER’S
CERTIFICATE
The
undersigned, STEVE SALEEN, Chief Executive Officer of SALEEN AUTOMOTIVE, INC., a Nevada Corporation (the “Company”),
in connection with the authorization and issuance of 8% Convertible Promissory Note in the aggregate principal amount of $55,000.00
in accordance with the Securities Purchase Agreement dated October 2, 2014 by and among the Company and each of the purchasers
set forth on the signature pages thereto (the “Purchase Agreement”), hereby certifies that:
1. I
am the duly appointed Chief Executive Officer of the Company.
2. The
representations and warranties made by the Company in Section 3 of the Purchase Agreement are true and correct in all material
respects as of the date of this Officer’s Certificate. The capitalization of the Company described in Section 3(c) of the
Purchase Agreement has not changed as of the date hereof.
3. As
of the date hereof, the Company has satisfied and duly performed all of the conditions and obligations specified in Section 7
of the Purchase Agreement to be satisfied on or prior to the Closing Date (as defined in the Purchase Agreement) or such conditions
and obligations have been waived expressly in writing signed by the purchaser.
4. The
Company has complied with or, if compliance prior to Closing (as defined in the Purchase Agreement) is not required, promptly
following the Closing the Company will comply with, the filing requirements in respect of this transaction under (a) Regulation
D under the Securities Act of 1933, as amended (the “1933 Act”) (and applicable Blue Sky regulations) and (b) the
Securities Exchange Act of 1934, as amended.
5. There
has been no adverse change in the business, affairs, prospects, operations, properties, assets or condition of the Company since
June 30, 2014, the date of the Company’s most recent reviewed financial statements delivered to the Buyers (as defined in
the Purchase Agreement), other than losses and matters which would not, individually or in the aggregate, have a Material Adverse
Effect (as defined in the Purchase Agreement).
6. The
Company is qualified as a foreign corporation in all jurisdictions in which the Company owns or leases properties, or conducts
any business except where failure of the Company to be so qualified would not have a Material Adverse Effect (as defined in the
Purchase Agreement).
IN
WITNESS WHEREOF, the undersigned has executed this Officer’s Certificate as of October 2, 2014.
|
/s/
STEVE SALEEN |
|
STEVE SALEEN |
|
Chief Executive
Officer |
|
Funding date _________ |
|
Time:_______________ |
DISBURSEMENT
AUTHORIZATION
TO: |
KBM
WORLDWIDE, INC. |
|
|
FROM: |
SALEEN
AUTOMOTIVE, INC. |
|
Tranche
#3 K-1345 (SLNN) |
|
2735 Wardlow Road |
|
Corona, CA 92882 |
|
|
DATE: |
October
2, 2014 |
|
|
RE: |
Disbursement of
Funds |
In
connection with the funding of an aggregate of $55,000.00 pursuant to that certain Securities Purchase
Agreement dated as of October 2, 2014 (the “Agreement”), you are hereby directed to disburse such funds as
follows:
1. $51,000.00
to SALEEN AUTOMOTIVE, INC. in accordance with the wire transfer instructions attached as Schedule A hereto;
and
2. $4,000.00 to Naidich
Wurman Birnbaum & Maday, LLP in accordance with
the wire transfer instructions attached as Schedule B hereto; and
Upon
receipt of such funds, you may release from escrow the Note, the Purchase Agreement and the instructions to Transfer Agent (each
as defined in the Agreement).
|
/s/
STEVE SALEEN |
|
STEVE SALEEN |
|
Chief Executive
Officer |
Schedule
A
Bank
name: |
Chase
Bank |
Bank Address: |
3152 W. Balboa,
Newport Beach, CA 92663 |
Routing #: |
322271627 |
Account #: |
532571085 |
Beneficiary: |
Saleen Automotive,
Inc. |
Schedule
B
ACCOUNT
NAME: |
NAIDICH
WURMAN BIRNBAUM & MADAY, LLP |
|
|
ACCOUNT NO.: |
|
|
|
ABA ROUTING
NO.: |
|
|
|
BANK: |
|
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal
Amount: $55,000.00 |
Issue
Date: October 2, 2014 |
Purchase
Price: $55,000.00 |
|
CONVERTIBLE
PROMISSORY NOTE
FOR
VALUE RECEIVED, SALEEN AUTOMOTIVE, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises
to pay to the order of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the
sum of $55,000.00 together with any interest as set forth herein, on July 6, 2015 (the “Maturity Date”), and to pay
interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum
from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein.
Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent
(22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing
on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”)
in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made
at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of
this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the
same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which
is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall
mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note
was originally issued (the “Purchase Agreement”).
This
Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The
following terms shall apply to this Note:
ARTICLE
I. CONVERSION RIGHTS
1.1
Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the
date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date
and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each
in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid
principal amount of this Note into fully paid and nonassessable shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed
or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations
on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice
of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice)
to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term
“Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this
Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on
such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s
option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the greater of (i)
the Variable Conversion Price or (ii) the “Fixed Conversion Price” (as defined herein) (subject in each case to equitable
adjustments for stock splits, stock dividends recapitalization,). The “Variable Conversion Price” shall mean 61% multiplied
by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price” means the average of
the lowest five (5) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date,
the closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market
(the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder
(i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security
on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of
such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such
security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such
date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and
the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required
in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock
is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common
Stock is then being traded. Fixed Conversion Price shall mean $0.00009.
(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than
a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined
below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion
Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which
a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination
or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
1.3
Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all
times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note
(based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount
shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that
upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall
issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into
which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision
so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer
agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this
Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this
Note.
If,
at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of
the Note.
1.4
Method of Conversion.
(a) Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time
to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable
means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower.
(b) Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder
first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order
of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes)
may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount
stated on the face hereof.
(c) Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities
or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are
to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates
for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.
(e) Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of
accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.
If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder
to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person
or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of
any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the
Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be
the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.
(f) Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section
1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system.
(g) Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the
month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first
day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible
into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right
to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section
1.4(g) are justified.
1.5
Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act
(or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in
Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who
is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of
this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in
the following form, as appropriate:
“neither
the issuance and sale of the securities represented by this certificate nor the securities into which these securities are exercisable
have been registered under the securities act of 1933, as amended, or applicable state securities laws. the securities may not
be offered for sale, sold, transferred or assigned (i) in the absence of (a) an effective registration statement for the securities
under the securities act of 1933, as amended, or (b) an opinion of counsel (which counsel shall be selected by the holder), in
a generally acceptable form, that registration is not required under said act or (ii) unless sold pursuant to rule 144 or rule
144a under said act. notwithstanding the foregoing, the securities may be pledged in connection with a bona fide margin account
or OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not
accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section
3.2 of the Note.
1.6
Effect of Certain Events.
(a) Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more
than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be
deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder
upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III)
or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.
(b) Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of
all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any-securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least
fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor
or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment
Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such
Distribution.
(d) Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance.
The
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants,
rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”)
(such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price
then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the
“price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i)
the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options,
plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible
or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming
full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities
issuable upon exercise of such Options.
Additionally,
the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and
the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the
events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.
1.7 Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note
and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the
Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded
(the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined
in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or
any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in
lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.
1.8 Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder
of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted, In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower’s failure to convert this Note.
1.9
Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on
the Issue Date and ending on the date which is thirty (30) days following the Issue Date, the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment
Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower
is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days
from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower
exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to 110%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment
Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section 1.9.
Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one
(31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Borrower
shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to
prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional
Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3)
Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make
payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the
Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower
exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second
Optional Prepayment Amount”) equal to 115%, multiplied by the sum of: (w) the then outstanding principal amount of this
Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus
(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay
the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days
following the Issue Date and ending on the date which is ninety (90) days following the Issue Date, the Borrower shall have the
right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding
Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Third Optional Prepayment Amount”) equal to 120%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus
(z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment
Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following
the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from
the Issue Date and ending one hundred twenty (120) days following the Issue Date, the Borrower shall have the right, exercisable
on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal
and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the
Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note,
and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.
On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to
or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one
(121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment
Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following
the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one
(151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the “Sixth Optional Prepayment Amount”) equal to 135%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Sixth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
After
the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.
ARTICLE
II. CERTAIN COVENANTS
2.1 Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property
or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional
shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect
of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.
2.2 Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower
or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written
consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation
of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit
or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date
hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors
or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to
repay this Note.
2.4 Sale
of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.5 Advances
and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $100,000.
ARTICLE
III. EVENTS OF DEFAULT
If
any of the following events of default (each, an “Event of Default”) shall occur:
3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this
Note, whether at maturity, upon acceleration or otherwise.
3.2 Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form)
any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer
agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or
directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement,
statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure
3.9 Failure
to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).
3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period
from one years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement.
3.14 [INTENTIONALLY
DELETED]
3.15 Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.16 Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all
applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the
Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the
Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other
Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the
benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however,
the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions
will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable
and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum
(as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE
SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER,
AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation
of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon
when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8,
3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the
“Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III
(other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the
Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount
of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the
“Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or
(x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal
amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively
be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity
value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default
Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion
Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of
a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied
by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts
payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder
shall be entitled to exercise all other rights and remedies available at law or in equity.
If
the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable,
then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then
in effect.
ARTICLE
IV. MISCELLANEOUS
4.1 Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. Ail rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If
to the Borrower, to:
SALEEN
AUTOMOTIVE, INC.
2735
Wardlow Road
Corona,
CA 92882
Attn:
STEVE SALEEN, Chief Executive Officer
facsimile:
With
a copy by fax only to (which copy shall not constitute notice):
[enter
name of law firm]
Attn:
[attorney name]
[enter
address line 1]
[enter
city, state, zip]
facsimile:
[enter fax number]
If
to the Holder:
KBM
WORLDWIDE, INC.
80
Cuttermill Road - Suite 410
Great
Neck, NY 11021
Attn:
Seth Kramer, President
e-mail:
info@kbmworldwide.com
With
a copy by fax only to (which copy shall not constitute notice):
Naidich
Wurman Birnbaum & Maday, LLP
Att:
Judah A. Eisner, Esq.
Attn:
Bernard S. Feldman, Esq.
facsimile:
516-466-3555
e-mail:
dyork@nwbmlaw.com
4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in wilting signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other
Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended
or supplemented.
4.4 Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.
4.5 Cost
of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.
4.6 Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The
parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder
waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees
and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document 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.
4.7 Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower
and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase
Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
4.9 Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders
who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities
or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation,
dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to
the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier),
of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known
at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially
simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that
the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this October 2,
2014,
SALEEN
AUTOMOTIVE, INC.
By: |
/s/
STEVE SALEEN |
|
|
STEVE
SALEEN |
|
|
Chief
Executive Officer |
|
EXHIBIT
A — NOTICE OF CONVERSION
The
undersigned hereby elects to convert $___________________ principal amount of the Note (defined below) into that number of
shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of
SALEEN AUTOMOTIVE, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note
of the Borrower dated as of October 2, 2014 (the “Note”), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
Box
Checked as to applicable instructions:
[ ] |
The
Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the
undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
|
|
|
Name
of DTC Prime Broker:
Account Number: |
|
|
[ ] |
The
undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock
set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately
below or, if additional space is necessary, on an attachment hereto: |
KBM
WORLDWIDE, INC.
80
Cuttermill Road - Suite 410
Great
Neck, NY 11021
Attention:
Certificate Delivery
e-mail:
info@kbmworldwide.com
|
Date of Conversion: |
_____________________________ |
|
Applicable Conversion
Price: |
$____________________________ |
|
Number of Shares
of Common Stock to be Issued Pursuant to Conversion of the Notes: |
_____________________________ |
|
Amount of Principal
Balance Due remaining Under the Note after this conversion: |
_____________________________ |
KBM
WORLDWIDE, INC.
By: |
|
|
Name: |
Seth Kramer |
|
Title: |
President |
|
|
|
|
Date: |
|
|
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 2, 2014, by and between SALEEN AUTOMOTIVE,
INC., a Nevada corporation, with headquarters located at 2735 Wardlow Road, Corona, CA 92882 (the “Company”),
and KBM WORLDWIDE, INC., a New York corporation, with its address at 80 Cuttermill Road, Suite 410, Great Neck, NY 11021
(the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8%
convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $55,000.00 (together
with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1.
Purchase and Sale of Note.
a.
Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees
to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature
pages hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price,
c. Closing
Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00
noon, Eastern Standard Time on or about October 6, 2014, or such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to
by the parties.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any,
as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of
the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement,
such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with
the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
(an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d.
Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will
continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if
any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions
of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and
will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure
to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section
3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware
of any facts that may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or re- sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to
the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g.
Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the
1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates for such Securities):
“neither
the issuance and sale of the securities represented by this certificate nor the securities into which these securities are exercisable
have been registered under the securities act of 1933, as amended, or applicable state securities laws. the securities may not
be offered for sale, sold, transferred or assigned (i) in the absence of (a) an effective registration statement for the securities
under the securities act of 1933, as amended, or (b) an opinion of counsel (which counsel shall be selected by the holder), in
a generally acceptable form, that registration is not required under said act or (ii) unless sold pursuant to rule 144 or rule
144 a under said act. notwithstanding the foregoing, the securities may be pledged in connection with a bona fide margin account
or other loan or financing arrangement secured by the securities.”
The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline,
it will be considered an Event of Default pursuant to Section 3.2 of the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition
or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization:
Enforcement, (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed
in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Capitalization.
As of the date hereof, the authorized capital stock of the Company consists of: (i) 500,000,000 authorized shares of Common
Stock, $0.001 par value per share, of which 152,154,872 shares are issued and outstanding; and (ii) 1,000,000 authorized
shares of Preferred Stock, $0.001 par value per share, of which no shares are issued and outstanding; no shares are reserved
for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to
securities (other than the Note and two (2) prior convertible note(s) in favor of the Buyer:
| (a) | Prior
convertible promissory note in favor of the Buyer dated September 11, 2014 in the amount
of $123,500.00 for which 13,500,000 shares of Common Stock are presently reserved; and |
| | |
| (b) | Prior
convertible promissory note in favor of the Buyer dated September 16, 2014 in the amount
of $32,500.00 for which 4,500,000 shares of Common Stock are presently reserved; and |
exercisable
for, or convertible into or exchangeable for shares of Common Stock and 10,000,000 shares are reserved for issuance upon conversion
of the Note. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights
of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company.
As of the effective date of this Agreement, and except as disclosed in the SEC Documents (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, 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, (ii) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion
Shares. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as
in effect on the date hereof (“Certificate of Incorporation”), 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 of the Company
and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of
this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.
d. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
(subject to Rule 144) with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights
of shareholders of the Company and will not impose personal liability upon the holder thereof
e. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
f. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance
of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of
its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company
or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company
nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or
both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has
taken any action or failed to take any action that would 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 by which
any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any,
are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under
the 1933 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, governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the
Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue
the Conversion Shares upon conversion of the Note, 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. If the
Company is listed on the OTCBB, the Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board
(the “OTCBB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable
future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g.
SEC Documents: Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver to the Buyer
true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the
financial statements of the Company included in the SEC Documents 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 United States generally accepted accounting principles, consistently applied, during the periods
involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to June 30, 2014, and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934 Act.
h. Absence
of Certain Changes. Since June 30, 2014, there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting
status of the Company or any of its Subsidiaries.
i. Absence
of Litigation. Except as listed in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers
or directors in their capacity as such, that could have a Material Adverse Effect, Schedule 3(i) contains a complete list and
summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company
or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect, The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to
use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct
its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property
or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of their Intellectual Property.
k.
No Materially Adverse Contracts, 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. Neither the Company nor any of its Subsidiaries is a party
to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse
Effect.
l.
Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other
tax returns, reports and declarations required by any jurisdiction to which it is subject (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) and has paid all taxes and other governmental assessments and charges (except for past due payroll tax disclosed
in the SEC Documents) 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 provisions 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. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing
authority.
m.
Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries
makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could
obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors,
or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (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.
n.
Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s
reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the
1933 Act).
o.
Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting
solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of
its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice
or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to
the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of
the Company and its representatives.
p.
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.
q.
No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
r.
Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”),
and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of
the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of
the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since June 30, 2014, neither the Company nor any of its Subsidiaries
has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse
Effect.
s.
Environmental Matters.
(i)
There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other
than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained
on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials
were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during
the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the
Company’s or any of its Subsidiaries’ business.
(iii) There
are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
t.
Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would
not have a Material Adverse Effect. 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 would not have a Material Adverse Effect.
u.
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 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 have a Material Adverse Effect. Upon written
request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general liability coverage.
v.
Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, 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.
w.
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or
employee.
x.
[INTENTIONALLY DELETED].
y.
No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement
will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment
Company”). The Company is not controlled by an Investment Company.
z.
Breach of Representations and Warranties by the Company. If the. Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an Event of default under Section 3.4 of the Note.
4.
COVENANTS.
a. Best
Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. Form
D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing
pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to
obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior
to the Closing Date.
c. Use
of Proceeds. The Company shall use the proceeds for general working capital purposes.
d. Right
of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing
of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR Notice”),
including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered
into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following delivery of
such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering
(the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First
Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity (or debt with an equity
component) financing in an amount less than $100,000 (“Future Offering(s)”) during the period beginning on the Closing
Date and ending six (6) months following the Closing Date. Notwithstanding anything contained herein to the contrary, the Company
shall not consummate any Future Offering with an investor, or an affiliate of such investor (collectively “Prospective Investor”),
identified on an ROFR Notice whereby the Buyer exercised its Right of First Refusal for a period of forty (45) days following
such exercise; and any subsequent offer by a Prospective Investor is subject to this Section 4(d) and the Right of First Refusal.
In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to
the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended
terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two (72)
hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms
as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments to the
terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving
(i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or
in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or
in connection with the disposition or acquisition of a business, product or license by the Company. The Right of First Refusal
also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.
e. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate
payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission
of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses
shall not exceed $4,000.
f. Financial
Information. Upon written request the Company agrees to send or make available the following reports to the Buyer until the
Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available
or gives to such shareholders.
g. [INTENTIONALLY
DELETED]
h. [INTENTIONALLY
DELETED]
i. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the Pink Sheets, OTCQX, OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
j.
No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
k.
Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other
remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the
Note.
1.
Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934
Act.
m.
Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company
and the Buyer agree 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 of the Company.
5.
Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion
Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction
as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof
(in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which
the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular
date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise
be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii)
it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)
(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs
its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or
to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer
upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the
Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect
that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer
is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose
of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions
of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security
being required.
6.
Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note
to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion:
a. The
Buyer shall have executed this Agreement and delivered the same to the Company.
b. The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The
representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.
7.
Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The
Company shall have executed this Agreement and delivered the same to the Buyer.
b. The
Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance
with Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company’s Transfer Agent.
d. The
representations and warranties of the Company shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date, The Buyer
shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited
to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions
relating to the transactions contemplated hereby.
e. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. No
event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g. The
Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not
have been suspended by the SEC or the OTCBB.
h.
The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.
8.
Governing Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document 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.
b. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. 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 Buyer 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 majority in interest of the Buyer,
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If
to the Company, to:
SALEEN
AUTOMOTIVE, INC.
2735
Wardlow Road
Corona,
CA 92882
Attn:
STEVE SALEEN, Chief Executive Officer
facsimile: [enter fax number]
If
to the Buyer:
KBM
WORLDWIDE, INC.
80
Cuttermill Road - Suite 410
Great
Neck, NY 11021
Attn:
Seth Kramer, President
e-mail:
info@kwbmlaw.com
With
a copy by fax only to (which copy shall not constitute notice):
Naidich
Wurman Birnbaum & Maday LLP
Att:
Judah A. Eisner, Esq.
Attn:
Bernard S. Feldman, Esq.
facsimile:
516-466-3555
e-mail:
dyork@nwbmlaw.com
Each
party shall provide notice to the other party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term
is defined under the 1934 Act, without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival,
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and ail their officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
j.
Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any
press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press
release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release
prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k.
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
1.
No Strict Construction, The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
m.
Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.
SALEEN
AUTOMOTIVE, INC.
By: |
/s/
STEVE SALEEN |
|
|
STEVE
SALEEN |
|
|
Chief
Executive Officer |
|
KBM
WORLDWIDE, INC.
By: |
|
|
Name: |
Seth Kramer |
|
Title: |
President |
|
80
Cuttermill Road - Suite 410
Great
Neck, NY 11021
AGGREGATE
SUBSCRIPTION AMOUNT: |
|
Aggregate
Principal Amount of Note: | |
$ | 55,000.00 | |
| |
| | |
Aggregate Purchase
Price: | |
$ | 55,000.00 | |
Tranche
#3 K-1345 ( SLNN)
October
2, 2014
sms@thesaleens.com
CORPORATE
RESOLUTION OF THE BOARD OF DIRECTORS
OF
SALEEN
AUTOMOTIVE, INC.
We,
the undersigned, do hereby certify that at a meeting of the Board of Directors of SALEEN AUTOMOTIVE, INC., a corporation organized
under the laws of the State of Nevada (the “Corporation”), duly held on October 2, 2014 at_______________________ which
said meeting no less than two directors were present and voting throughout, the following resolution, upon motions made, seconded
and carried, was duly adopted and is now in full force and effect:
WHEREAS, the
Board of Directors of the Corporation deem it in the best interests of the Corporation to enter into the Securities
Purchase Agreement dated October 2, 2014 (the “Agreement”), in connection with the issuance of an 8% convertible
note of the Corporation, in the aggregate principal amount of $55,000.00 (the “Note”), convertible into shares of
common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such Note, along with an irrevocable letter agreement with Direct Transfer, LLC., the
Corporation’s transfer agent, with respect to the reserve of shares of common stock of the Corporation to be issued
upon any conversion of the Note; the issuance of such shares of common stock in connection with a conversion of the Note; and
the indemnification of Direct Transfer, LLC. for all loss, liability, or expense in carrying out the authority and direction
contained in the irrevocable letter agreement (the “Letter Agreement”);
NOW,
THEREFORE, BE IT:
RESOLVED,
that the Corporation is hereby authorized to enter into the Agreement, the Note and the Letter Agreement which provides in
pertinent part: (i) reserve shares of common stock of the Corporation to be issued upon any conversion of the Note; (ii) issue
such shares of common stock in connection with a conversion of the Note (issuance upon receipt of a notice of conversion of the
holder of the Note) without any further action or confirmation by the Corporation; and the Corporation indemnifies Direct Transfer,
LLC. for all loss, liability, or expense in carrying out the authority and direction contained in the Letter Agreement:
RESOLVED,
that any executive officer of the Corporation be, and hereby is, authorized, empowered and directed, from time to time, to
take such additional action and to execute, certify and deliver to the transfer agent of the Corporation, as any appropriate or
proper to implement the provisions of the foregoing resolutions:
The
undersigned, do hereby certify that we are members of the Board of Directors of the Corporation; that the attached is a true and
correct copy of resolutions duly adopted and ratified at a meeting of the Board of Directors of the Corporation duly convened
and held in accordance with its by-laws and the laws of the State of Nevada, as transcribed by us from the minutes; and that the
same have not in any way been modified, repealed or rescinded and are in full force and effect.
IN
WITNESS WHEREOF, We have hereunto set our hands as Chief Executive Officer and Members of the Board of Directors of the Corporation.
Dated:
October 2, 2014 .
/s/
STEVE SALEEN |
|
STEVE
saleen, |
|
Chief Executive
Officer/ Member of the Board |
|
Signature: |
|
|
|
Member
of the Board |
|
Print
Name: |
|
|
that
the same have not in any way been modified, repealed or rescinded and are in full force and effect,
IN
WITNESS WHEREOF, We have hereunto set our hands as Chief Executive Officer and Members of the Board of’ Directors of the
Corporation.
Dated;
October 2, 2014
|
|
STEVE
SALEEN, |
|
Chief
Executive Officer/ Member of the Board |
|
Signature: |
|
|
|
Member
of the Board |
|
Print
Name: |
|
|
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 14, 2014, by and between Saleen Automotive,
Inc., a Nevada corporation, with headquarters located at 2375 Wardlow Road, Corona, CA 92882 (the “Company”),
and LG CAPITAL FUNDING, LLC, a New York limited liability company, with its address at 1218 Union Street, Suite #2, Brooklyn,
NY 11225 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $110,250.00
(with the first note being in the amount of $55,125.00 and the second note being in the amount of $55,125.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Notes shall contain a
5% original issue discount such that the purchase price of each Note shall be $52,500.00. The first of the two notes (the “First
Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially
be paid for by the issuance of an offsetting $55,125.00 secured note issued to the Company by the Buyer (“Buyer Note”),
provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second
Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1.
Purchase and Sale of Note.
a.
Purchase of Note. On each Closing Date (as defined below), the Company shall issue
and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately
below the Buyer’s name on the signature pages hereto.
_______
Company
Initials
b. Form
of Payment. On the Closing Date (as defined below), (i)
the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase
Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below
the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of
the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing
Date. The date and time of the first issuance and sale
of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about October 14, 2014, or such other mutually
agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date at such location as may be agreed to by the parties. Subsequent Closings shall occur when the Buyer Note is repaid.
The Closing of the Second Note shall be on or before the dates specified in the Buyer Note.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants
to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock
being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”)
for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered
or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that
may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws,
and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under
the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be
in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted
by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under
the 1933 Act (or a successor rule) (“Rule 144”) of the Buyer who agrees to sell or otherwise transfer the Securities
only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144,
or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”),
and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance
and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some
other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein
to the contrary, the Securities may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may
be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that
can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144 A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business
days, it will be considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly
authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid
and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants
to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries,
if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it
is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
b. Authorization;
Enforcement, (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion
or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization
of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered
by the Company by its authorized representative, and such authorized representative is the true and official representative with
authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and
(iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute,
a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized
and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not
be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability
upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The
Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this
Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of
this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company or any of its subsidiaries is a party, or (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except
for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually
or in the aggregate, have a material adverse effect). 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 is not in violation of the listing requirements of the OTCQB marketplace (the “OTCQB”) and does not reasonably
anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable future, nor are the Company’s securities
“chilled” by DTC. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s
public filings, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could
have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge
of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it
would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase
of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security
or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance
of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of
the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the
Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good
and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which
is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(i) or such as would not have a material adverse effect. 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 would not have a material adverse effect.
j.
Bad Actor. No officer or director of the Company would be disqualified under Rule
506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September
19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.
k.
Breach of Representations and Warranties by the Company. If the Company breaches
any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer
pursuant to this Agreement, it will be considered an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate
payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission
of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’s expenses
shall be $2,500 in legal fees (and similar amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement market,
the Nasdaq stock market (“Nasdaq”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange
(“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company
shall promptly provide to the Buyer copies of any notices it receives from the OTCQB and any other markets on which the Common
Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.
c. Corporate
Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets,
except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the
surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements
and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for
trading on the OTCQB, Nasdaq, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would require registration of the Securities being
offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants
set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a.
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or
in the federal courts located in the state and county of New York. The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction
or venue or based upon forum non conveniens. The Company and Buyer waive trial
by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document 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.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement,
once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. 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 Buyer 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 majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the
Company, to:
Saleen Automotive,
Inc.
2375 Wardlow Road
Corona, CA 92882
Attn: Steve Saleen, CEO
If to the
Buyer:
LG CAPITAL
FUNDING, LLC
1218 Union Street, Suite #2
Brooklyn, NY 11225
Attn: Joseph Lerman, Manager
Each party
shall provide notice to the other party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement
or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer
may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
k.
No Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against
any party.
1.
Remedies. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled,
in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS
WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
Saleen Automotive, Inc.
By: |
/s/
Steve Saleen |
|
|
Steve
Saleen |
|
|
Chief
Executive Officer |
|
LG
CAPITAL FUNDING, LLC. |
|
|
|
By: |
|
|
Name: |
Joseph
Lerman |
|
Title: |
Manager |
|
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of Note: |
$110,250.00 |
Aggregate
Purchase Price:
Note 1:
$55,125.00 less $2,625 in OID, $2,500.00 in legal fees, and $5,000 in fees to Carter Terry & Company
Note 2:
$55,125.00 less $2,625 in OID, $2,500.00 in legal fees, and $5,000 in fees to Carter Terry & Company
EXHIBIT
A
144
NOTE - $55,125
EXHIBIT
B
BACK
END NOTE 1
$55,125
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US
$55,125.00
SALEEN
AUTOMOTIVE, INC.
8%
CONVERTIBLE REDEEMABLE NOTE
DUE
OCTOBER 14, 2015
FOR
VALUE RECEIVED, Saleen Automotive, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and
its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Five
Thousand One Hundred Twenty Five Dollars exactly (U.S. $55,125.00) on October 14, 2015 (“Maturity Date”) and
to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on October 14, 2014. This
Note contains a 5% original issue discount such that the purchase price of the note is $52,500.00. The interest will be paid to
the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.
The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if
changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company
will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the
last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment
of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the
sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph
4(b) herein.
This
Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that
Holder shall pay any tax or other governmental charges payable in connection therewith.
Initials
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible
hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to 61% of the average of the 2 lowest trading prices
(with a floor of $0.00005 per share) of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which
the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”),
for the eighteen prior trading days including the day upon which a Notice of Conversion is received by the
Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after
4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have
not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by
the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice
of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company,
executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied
by proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 51% instead of 61% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion
if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would
exceed 9.9% of the outstanding shares of the Common Stock of the Company.
Initials
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by
the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the
Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest
Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date
of such notice.
(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 135%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
180 days after the issuance date, then at 150% of the face amount plus any accrued interest. This Note may not be prepaid after
the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right
to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common
Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with
or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely
to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale
Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal
amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert
the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock
immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares
of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other
change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise
of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
Initials
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy
relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
un-vacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
(i)
The Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades
on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
Board;
Initials
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(1)
The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m)
The Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then,
or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have
been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option
of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without
presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24%
per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the
10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%.
In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not
paid at maturity, the outstanding principal due under this Note shall increase by 10%.
If
the Holder or the Company shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation,
engaging an attorney, then if the Holder or the Company prevails in such action, the Holder or the Company shall be reimbursed
by the Company or the Holder for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired
thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
Initials
11. The
Company represents that it has been a “shell” issuer and that at least 12 months have passed such that the Company
is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion
to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 8,816,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs
associated with issuing and delivering the shares. The company should at all times reserve a minimum of four times the amount
of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve
such amounts.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and
the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of
New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
Initials
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated:
October 14, 2014
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SALEEN
AUTOMOTIVE, INC. |
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By: |
/s/
Steve Saleen |
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Steve
Saleen, Chief Executive Officer |
Initials
EXHIBIT
A
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ _______ of the above Note into _________ Shares of Common Stock
of Saleen Automotive, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date
of Conversion: __________________________________________________________
Applicable
Conversion Price: ___________________________________________________
Signature:
__________________________________________________________________
[Print
Name of Holder and Title of Signer]
SSN
or EIN: _______________________________
Shares
are to be registered in the following name: __________________________________________________
Name:
_____________________________________________________________________
Address:
___________________________________________________________________
Tel:
_____________________________________
Fax:
_____________________________________
SSN
or EIN: _______________________________
Shares
are to be sent or delivered to the following account:
Account
Name: ________________________________________________________
Address:
___________________________________________________________________
Initials
NEITHER
THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”)
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE
SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
10%
CONVERTIBLE NOTE
Maturity
Date of April 15, 2015
$50,000
October 15, 2014 *the “Issuance Date”
FOR
VALUE RECEIVED, Saleen Automotive Inc., a Nevada Corporation (the “Company”) doing business in Corona.
CA hereby promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the
“Holder”) the principal amount of Fifty Thousand Dollars ($50,000), on demand of the Holder at any time on
or after April 15, 2015 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at
the rate of Ten Percent (10%) per annum (the “Interest Rate”) from the date hereof (the “Issuance
Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise;
provided, that any amount of principal or interest on this Note which is not paid when due shall bear interest at such rate on
the unpaid principal balance hereof plus Default Interest from the due date thereof until the same is paid in full. Interest shall
commence accruing on the issuance Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed
and shall accrue daily and, after the Maturity Date, compound quarterly.
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1. |
Payments of
Principal and Interest. |
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a. |
Payment
of Principal. Until the 120th day after the Issuance
Date, the Note will have a 135% cash redemption premium, and may be paid without consent of the Holder. Thereafter, up to
and upon the Maturity Date, this note has a cash redemption premium of 150% of the principal amount only upon approval and
acceptance by JSJ Investments Inc. This provision only may be exercised if the consent of the Holder is obtained. The principal
balance of this Note shall be paid to the Holder hereof on demand. |
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b. |
Default
Interest. Any amount of principal on this Note which is
not paid when due shall bear Ten Percent (10%) interest per annum from the date thereof until the same is paid
(“Default interest”) and the Holder,
at the Holder’s sole discretion, may include any accrued but unpaid Default Interest in the Conversion Amount. |
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c. |
General
Payment Provisions. This Note shall be made in lawful money
of the United States of America by check to such account as the Holder may from time to time designate by written notice to
the Company in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day
which is a Business Day and, in the case of any interest payment date which is not the date on which this Note is paid in
full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest
due on such date. For purposes of this Note, “Business Day”
shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or
required by law or executive order to remain closed. |
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2. |
Conversion
of Note. At any time prior to the Maturity Date, or after
the Maturity Date, the Conversion Amount of this Note shall be convertible into shares of the Company’s common stock,
share (the “Common Stock”),
on the terms and conditions set forth in this Paragraph 2. |
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a. |
Certain
Defined Terms. For purposes of this Note, the following
terms shall have the following meanings: |
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i. |
“Conversion
Amount” means the sum of (A) the principal amount
of this Note to be converted with respect to which this determination is being made. (B) Interest; and (C) Default Interest,
if any, on unpaid interest and principal, if so included at the Holder’s sole discretion. |
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ii.
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“Conversion
Price” means the lower of: (i) a 42% discount to the
lowest trading price during the previous twenty (20) trading days to the date of Conversion; or (ii) a 42% discount to the
lowest trading price during the previous twenty (20) trading days before the date that this note was executed. |
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iii. |
“Person”
means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. |
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iv. |
“Shares”
means the Shares of the Company into which any balance on
this Note may be converted upon submission of a Conversion Notice. |
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b. |
Holder’s
Conversion Rights. At any time or times on or after the
Issuance Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal amount of this Note into
fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price. |
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c. |
Fractional
Shares. The Company shall not issue any fraction of a share
of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock,
the Company share round such fraction of a share of Common Stock up to the nearest whole share. |
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d. |
Conversion
Amount. The Conversion Amount shall be converted pursuant
to Rule 144(b)(1)(ii) and Rule 144(d)(l)(ii) as promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, into free trading shares at the Conversion Price. |
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e. |
Mechanics
of Conversion. The conversion of this Note shall be conducted
in the following manner: |
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i. |
Holder’s
Conversion Requirements. To convert this Note into shares
of Common Stock on any date set forth in the Conversion Notice by the Holder (the “Conversion
Date”), the Holder hereof shall transmit by
email, facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern Time on such date or on the next business
day, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit 1 (the
“Conversion Date”) to the Company. |
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ii. |
Company’s
Response. Upon receipt by the Company of a copy of a Conversion
Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion
Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of such Conversion Notice to such Holder
indicating that the Company will process such Conversion Notice in accordance with the terms herein. Within two (2) Business
Days after the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares
to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, it shall,
within two (2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next
day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number
of shares of Common Stock to which the Holder shall be entitled. |
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iii. |
Record
Holder. The person or persons entitled to receive the shares
of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date. |
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iv. |
Timely
Response by Company. Upon receipt by Company of a Conversion
Notice, Company shall respond in a timely manner to Holder by provision within two business days of the Shares requested in
the Conversion Notice. |
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v. |
Penalty
for Delinquent Response. If Company fails to deliver for
whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the
Shares as requested in a Conversion Notice and within three business days of the receipt thereof, there shall accrue a penalty
of Additional Shares due to Holder equal to 25% of the number stated in the Conversion Notice beginning on the Fourth business
day after the date of the Notice. The Additional Shares shall be issued and the amount of the Note retired will not be reduced
beyond that stated in the Conversion Notice. Each additional 5 business days beyond the Fourth business day after the date
of this Notice shall accrue an additional 25% penalty for delinquency, without any corresponding reduction in the amount due
under the Note, for so long as Company fails to provide the Shares so demanded. |
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vi. |
Conversion
Right Unconditional. If the Holder shall provide a Notice
of Conversion as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional,
irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company. |
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vii. |
Transfer
Agent Fees and Legal Fees. The issuance of the certificates
shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory
fees required for execution of this Convertible Note and processing of any Notice of Conversion, including but not limited
to the cost of obtaining a legal opinion with regard to the conversion. The Holder will deduct legal fees in the amount of
$1,000 from the principal payment of the Convertible Note. The Holder will deduct 3rd party due diligence fees
in the amount of $5,000 due Carter, Terry, & Co. |
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3. |
Other
Rights of Holders: Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s
assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common
Stock is referred to herein as “Organic Change.”
Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company Is not a surviving
entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change
(in each case, the “Acquiring Entity”)
a written agreement (in form and substance reasonably satisfactory to the Holder) to deliver to Holder in exchange for this
Note, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to
this Note, and reasonably satisfactory to the Holder. Prior to the consummation of any other Organic Change, the Company shall
make appropriate provision (in form and substance reasonably satisfactory to the Holders of a majority of the Conversion Amount
of the Notes then outstanding) to ensure that each of the Holders will thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable
upon the conversion of such Holder’s Note, such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such Holder’s Note as of the date of such Organic Change (without taking
into account any limitations or restrictions on the convertibility of the Note). All provisions of this Note must be included
to the satisfaction of Holder in any new Note created pursuant to this section. |
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4. |
Representations
and Warranties of the Company. In connection with the transactions
provided for herein, the Company hereby represents and warrants to the Holders the following. |
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a. |
Organization,
Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its
business or properties. |
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b. |
Authorization.
All corporate action has been taken on the part of the Company,
its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement. The Company
has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this
Agreement, valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Notes have been
authorized or will be authorized prior to the issuance of such shares. |
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c. |
Fiduciary
Obligations. The Company hereby represents that it intends
to use the proceeds of the Notes primarily for the operations of its business and not for any personal, family, or household
purpose. The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the
execution of this Agreement based upon a reasonable belief that the loan provided for herein is appropriate for the Company
after reasonable inquiry concerning its financial objectives and financial situation. |
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5. |
Covenants
of the Company. So long as the Company shall have any obligations
under this Note, the Company shall not without the Holder’s written consent pay, declare or set apart for such payment
any dividend or other distribution (whether in cash, property, or other securities) on share of capital stock solely in the
form of additional shares of Common Stock, except as contemplated under the Company’s existing Omnibus Stock Option
Plan. |
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a. |
So
long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s written consent
redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction
or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such
shares. |
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b. |
So
long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s written consent
sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business. Any consent
to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof. |
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6. |
Reservation
of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep
available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Note,
such number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal
amount of the Note then outstanding. The initial number of shares of Common Stock reserved for conversions of the Notes shall
be calculated as three times the number of shares necessary to convert the entire value of the Note on the day it was executed,
and each increase in the number of shares so reserved shall be allocated pro rata among the Holders of the Note based on the
principal and interest amount of the Notes held by each Holder at the time of issuance of the Notes or increase in the number
of reserved shares, as the case may be. In the event a Holder shall sell or otherwise transfer any of such Holder’s
Note, each transferee shall be allocated a pro rata portion of the number of reserved shares of Common Stock reserved for
such transferor. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Note shall be allocated
to the remaining Holders, pro rata based on the principal amount of the Note then held by such Holders. |
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7. |
Voting
Rights. Holders of this Note shall have no voting rights, except as required by law. |
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8. |
Reissuance
of Note. In the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented
by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the
Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not
been so converted or redeemed and which is in substantially the same form as this Note, as set forth above. |
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a. |
Event
of Default. An “Event
of Default”
is: (i) default for ten (10) days in payment of interest or Default Interest on this Note; (ii) default in payment of the
principal amount of this Note when due; (iii) failure by the Company for thirty (30) days after notice to it to comply with
any other material provision of this Note; (iv) breach of any covenants, warranties, or representations by the Company herein;
(v) cessation of operations by the Company or a material subsidiary; (vi) if the Company pursuant to or within the meaning
of any Bankruptcy Law; (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary
case; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general
assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the
same become due; or (vi) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is
for relief against the Company in an involuntary case; (2) appoints a Custodian of the Company or for all or substantially
all of its property; or (3) orders the liquidation of the Company or any subsidiary, and the order or decree remains unstayed
and in effect for thirty (30) days. The Term “Bankruptcy Law”
means Title 11,
U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “Custodian”
means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. |
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b. |
Remedies.
if an Event of Default occurs and is continuing, the Holder
of this Note may declare all of this Note, including any interest and Default Interest and other amounts due, to be due and
payable immediately. |
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10. |
Vote
to Change the Terms of this Note. This Note and any provision
hereof may only be amended by an instrument in writing signed by the Company and holders of a majority of the aggregate Conversion
Amount of the Notes then outstanding. |
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11. |
Lost
or Stolen Note. Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company
and, in the case of mutilation, upon surrender and cancellation of the Notes, the Company shall execute and deliver a new
Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated
to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount into Common
Stock. |
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12. |
Payment
of Collection, Enforcement and Other Costs. If: (i) this
Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding;
or (ii) an attorney is retained to represent the Holder of this Note in any bankruptcy, reorganization, receivership or other
proceedings affecting creditors’ rights and involving a claim under this Note, then the Company shall pay to the Holder
all reasonable attorneys’ fees, costs and expenses incurred in connection therewith, in addition to all other amounts
due hereunder. |
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13. |
Cancellation.
After all principal and accrued interest at any time owed
on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company
for cancellation and shall not be reissued. |
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14. |
Waiver
of Notice. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note. |
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15. |
Governing
Law. This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed
by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier
a copy thereof to such party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. |
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16. |
Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise
to such remedy and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company
to comply with the terms of this Note. The Company covenants to each Holder of Notes that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof
and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance
thereof). |
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17.
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Specific Shall
Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed
against any person as the drafter hereof. |
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18. |
Failure or Indulgence
Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. |
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19. |
Partial Payment.
In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration
actually paid by lender such that the company is only required to repay the amount funded and the company is not required
to repay any unfunded portion of this note. |
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20. |
Entire Agreement.
This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects
herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by the Parties. |
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21. |
Representations
and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors,
employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement.
The Company further acknowledges that there have been no representations or warranties about future financing or subsequent
transactions between the parties. |
IN
WITNESS WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.
COMPANY: |
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Signature: |
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By: |
/s/ Steve Saleen |
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Title: |
CEO |
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Address: |
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Email: |
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Phone: |
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HOLDER: |
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Signature: |
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Sameer Hirji, President
JSJ Investments Inc.
2665 Villa Creek Drive, Suite 214
Dallas TX 75234
888-503-2599
Exhibit
I
Conversion
Notice
Reference
is made to the Convertible Note issued by Saleen Automotive Inc. (the “Note”), dated October 15, 2014
in the principal amount of $50,000 with 10% interest. This note currently holds a
principal balance of $50,000 and accrued interest in the amount of $_____. The features of conversion stipulate a
Conversion Price the lower of (i) a 42% discount to the lowest trading price during the previous twenty (20) trading days to
the date of Conversion; or (ii) a 42% discount to the lowest trading price during the previous twenty (20) trading days
before the date that this note was executed, pursuant to the provisions of Section 2(a)(2) in the Note.
In
accordance with and pursuant to the Note, the undersigned hereby elects to convert $_____ of the PRINCIPAL/INTEREST balance of
the Note, indicated below into shares of Common Stock (the “Common Stock”), of the Company, by tendering the Note
specified as of the date specified below.
Date
of Conversion:_______
Please
confirm the following information:
Conversion
Amount: $________________
Conversion
Price: $ ____________________________________ __ ( ___ % discount from $ _____)
Number
of Common Stock to be issued:___________________________________________________
Current
Issued/Outstanding:.___________________________________________________________
PLEASE
ISSUE THE COMMON STOCK INTO WHICH THE NOTE IS BEING CONVERTED IN THE NAME OF THE HOLDER OF THE NOTE AND TRANSFER THE SHARES
ELECTRONICALLY TO:
[BROKER
INFORMATION]
HOLDER
AUTHORIZATION:
JSJ
INVESTMENTS INC.
2665
VILLA CREEK DRIVE, SUITE 214
DALLAS,
TX 75234
888-503-2599
Tax
ID: 20-2122354
Sameer
Hirji, President
Date:
[Continued
on Next Page]
PLEASE
BE ADVISED, pursuant to Section 2(e)(2) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice,
the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice,
SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING
THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance with the terms herein. Within two (2) Business Days after
the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares to the Broker
indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, they shall, within two
(2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address
as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common
Stock to which the Holder shall be entitled.”
Signature:
Steve
Saleen
CEO
Saleen
Automotive Inc.
NEITHER
THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”)
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED: (i) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE
SECURITIES LAWS; OR (ii) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED UNDER THE 1933 ACT OR; (iii) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
10%
CONVERTIBLE NOTE
Maturity
Date of June 2,2015
$50,000
December 2,2014 *the “Issuance Date”
FOR
VALUE RECEIVED, Saleen Automotive Inc., a Nevada Corporation (the “Company”) doing business in Corona, CA hereby promises
to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “Holder”)
the principal amount of Fifty Thousand Dollars ($50,000), on demand of the Holder at any time on or after June 2, 2015 (the “Maturity
Date”), and to pay interest on the unpaid principal balance hereof at the rate of Ten Percent (10%) per annum (the “Interest
Rate”) from the date hereof (the “Issuance Date”) until the same becomes due and payable, whether at maturity
or upon acceleration or by prepayment or otherwise; provided, that any amount of principal or interest on this Note which is not
paid when due shall bear interest at such rate on the unpaid principal balance hereof plus Default Interest from the due date
thereof until the same is paid in full. Interest shall commence accruing on the Issuance Date, shall be computed on the basis
of a 365-day year and the actual number of days elapsed and shall accrue daily and, after the Maturity Date, compound quarterly.
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1. |
Payments
of Principal and Interest. |
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a. |
Payment
of Principal. Until the 120th day after the Issuance Date, the Note will have a 135% cash redemption premium, and may be paid
without consent of the Holder. Thereafter, up to and upon the Maturity Date, this note has a cash redemption premium of 150%
of the principal amount only upon approval and acceptance by JSJ Investments Inc. This provision only may be exercised if
the consent of the Holder is obtained. The principal balance of this Note shall be paid to the Holder hereof on demand. |
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b. |
Default
Interest. Any amount of principal on this Note which is not paid when due shall bear Ten Percent (10%) interest per annum
from the date thereof until the same is paid (“Default Interest”) and the Holder, at the Holder’s sole discretion,
may include any accrued but unpaid Default Interest in the Conversion Amount. |
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c. |
General
Payment Provisions. This Note shall be made in lawful money of the United States of America by check to such account as the
Holder may from time to time designate by written notice to the Company in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below),
the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. For purposes of this Note, “Business Day”
shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or
required by law or executive order to remain closed. |
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2. |
Conversion
of Note. At any time prior to the Maturity Date, or after the Maturity Date, the Conversion Amount of this Note shall be convertible
into shares of the Company’s common stock, share (the “Common Stock”), on the terms and conditions set forth
in this Paragraph 2. |
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a. |
Certain
Defined Terms. For purposes of this Note, the following terms shall have the following meanings: |
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i. |
“Conversion
Amount” means the sum of (A) the principal amount of this Note to be converted with respect to which this determination
is being made, (B) Interest; and (C) Default Interest, if any, on unpaid interest and principal, if so included at the Holder’s
sole discretion. |
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ii. |
“Conversion
Price” means the lower of: (i) a 42% discount to the lowest trading price during the previous twenty (20) trading days
to the date of Conversion; or (ii) a 42% discount to the lowest trading price during the previous twenty (20) trading days
before the date that this note was executed. At no time will the Conversion Price be lower than $0.00001. |
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iii. |
“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof. |
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iv. |
“Shares”
means the Shares of the Company into which any balance on this Note may be converted upon submission of a Conversion Notice. |
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b. |
Holder’s
Conversion Rights. At any time or times on or after the Issuance Date, the Holder shall be entitled to convert all of the
outstanding and unpaid principal amount of this Note into fully paid and nonassessable shares of Common Stock in accordance
with the stated Conversion Price. |
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c. |
Fractional
Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock
up to the nearest whole share. |
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d. |
Conversion
Amount. The Conversion Amount shall be converted pursuant to Rule 144(b)(i)(ii) and Rule 144(d)(1)(ii) as promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended, into free trading shares at the Conversion
Price. |
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e. |
Mechanics
of Conversion. The conversion of this Note shall be conducted in the following manner: |
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i. |
Holder’s
Conversion Requirements. To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by
the Holder (the “Conversion Date”), the Holder hereof shall transmit by email, facsimile or otherwise deliver,
for receipt on or prior to 11:59 p.m., Eastern Time on such date or on the next business day, a copy of a fully executed notice
of conversion in the form attached hereto as Exhibit 1 (the “Conversion Date”) to the Company. |
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ii. |
Company’s
Response. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in no
event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier,
a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion
Notice in accordance with the terms herein. Within two (2) Business Days after the date of the Conversion Confirmation, the
Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should
the Company be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date of the
Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder
shall be entitled. |
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iii. |
Record
Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall
be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. |
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iv. |
Timely
Response by Company. Upon receipt by Company of a Conversion Notice, Company shall respond in a timely manner to Holder by
provision within two business days of the Shares requested in the Conversion Notice. |
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v. |
Penalty
for Delinquent Response. If Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company,
its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice and within three business days
of the receipt thereof, there shall accrue a penalty of Additional Shares due to Holder equal to 25% of the number stated
in the Conversion Notice beginning on the Fourth business day after the date of the Notice. The Additional Shares shall be
issued and the amount of the Note retired will not be reduced beyond that stated in the Conversion Notice. Each additional
5 business days beyond the Fourth business day after the date of this Notice shall accrue an additional 25% penalty for delinquency,
without any corresponding reduction in the amount due under the Note, for so long as Company fails to provide the Shares so
demanded. |
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vi. |
Conversion
Right Unconditional. If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations
to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment,
or alleged breach by the Holder of any obligation to the Company. |
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vii. |
Transfer
Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company
shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Convertible Note and
processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to
the conversion. The Holder will deduct legal fees in the amount of $1,000 from the principal payment of the Convertible Note.
The Holder will deduct 3rd party due diligence fees in the amount of $5,000 due Carter, Terry, & Co. |
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3. |
Other
Rights of Holders: Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person
or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to
herein as “Organic Change.” Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following
which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance
reasonably satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to this Note, and reasonably satisfactory to
the Holder. Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and
substance reasonably satisfactory to the Holders of a majority of the Conversion Amount of the Notes then outstanding) to
ensure that each of the Holders will thereafter have the right to acquire and receive in lieu of or in addition to (as the
case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such Holder’s
Note, such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect
to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the conversion
of such Holder’s Note as of the date of such Organic Change (without taking into account any limitations or restrictions
on the convertibility of the Note). All provisions of this Note must be included to the satisfaction of Holder in any new
Note created pursuant to this section. |
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4. |
Representations
and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and
warrants to the Holders the following. |
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a. |
Organization,
Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as
now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or properties. |
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b. |
Authorization.
All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement. The Company has taken all corporate action required to make all of
the obligations of the Company reflected in the provisions of this Agreement, valid and enforceable obligations. The shares
of capital stock issuable upon conversion of the Notes have been authorized or will be authorized prior to the issuance of
such shares. |
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c. |
Fiduciary
Obligations. The Company hereby represents that it intends to use the proceeds of the Notes primarily for the operations of
its business and not for any personal, family, or household purpose. The Company hereby represents that its board of directors,
in the exercise of its fiduciary duty, has approved the execution of this Agreement based upon a reasonable belief that the
loan provided for herein is appropriate for the Company after reasonable inquiry concerning its financial objectives and financial
situation. |
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5. |
Covenants
of the Company. So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s
written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property,
or other securities) on share of capital stock solely in the form of additional shares of Common Stock, except as contemplated
under the Company’s existing Omnibus Stock Option Plan. |
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a. |
So
long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s written consent
redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction
or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such
shares. |
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b. |
So
long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s written consent
sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business. Any consent
to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof. |
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6. |
Reservation
of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Note, such number
of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount of the
Note then outstanding. The initial number of shares of Common Stock reserved for conversions of the Notes shall be calculated
as three times the number of shares necessary to convert the entire value of the Note on the day it was executed, and each
increase in the number of shares so reserved shall be allocated pro rata among the Holders of the Note based on the principal
and interest amount of the Notes held by each Holder at the time of issuance of the Notes or increase in the number of reserved
shares, as the case may be. In the event a Holder shall sell or otherwise transfer any of such Holder’s Note, each transferee
shall be allocated a pro rata portion of the number of reserved shares of Common Stock reserved for such transferor. Any shares
of Common Stock reserved and allocated to any Person which ceases to hold any Note shall be allocated to the remaining Holders,
pro rata based on the principal amount of the Note then held by such Holders. |
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7. |
Voting
Rights. Holders of this Note shall have no voting rights, except as required by law. |
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8. |
Reissuance
of Note. In the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented
by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the
Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not
been so converted or redeemed and which is in substantially the same form as this Note, as set forth above. |
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a. |
Event
of Default. An “Event of Default” is: (i) default for ten (10) days in payment of interest or Default Interest
on this Note; (ii) default in payment of the principal amount of this Note when due; (iii) failure by the Company for thirty
(30) days after notice to it to comply with any other material provision of this Note; (iv) breach of any covenants, warranties,
or representations by the Company herein; (v) cessation of operations by the Company or a material subsidiary; (vi) if the
Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case; (B) consents to the entry
of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing
that it is generally unable to pay its debts as the same become due; or (vi) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that: (1) is for relief against the Company in an involuntary case; (2) appoints a Custodian
of the Company or for all or substantially all of its property; or (3) orders the liquidation of the Company or any subsidiary,
and the order or decree remains unstayed and in effect for thirty (30) days. The Term “Bankruptcy Law” means Title
11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “Custodian” means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law. |
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b. |
Remedies.
If an Event of Default occurs and is continuing, the Holder of this Note may declare all of this Note, including any interest
and Default Interest and other amounts due, to be due and payable immediately. |
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10. |
Vote
to Change the Terms of this Note. This Note and any provision hereof may only be amended by an instrument in writing signed
by the Company and holders of a majority of the aggregate Conversion Amount of the Notes then outstanding. |
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11. |
Lost
or Stolen Note. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation
of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company
in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Notes,
the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided,
however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert
such remaining principal amount into Common Stock. |
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12. |
Payment
of Collection, Enforcement and Other Costs. If: (i) this Note is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding; or (ii) an attorney is retained to represent the Holder of this
Note in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving
a claim under this Note, then the Company shall pay to the Holder all reasonable attorneys’ fees, costs and expenses
incurred in connection therewith, in addition to all other amounts due hereunder. |
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13. |
Cancellation.
After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall automatically
be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. |
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14. |
Waiver
of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement of this Note. |
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15. |
Governing
Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to
provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by sending by certified mail or overnight courier a copy thereof to such party at the address for such 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 manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. |
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16. |
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a Holder’s right to pursue actual damages for any failure
by the Company to comply with the terms of this Note. The Company covenants to each Holder of Notes that there shall be no
characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the
Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the
performance thereof). |
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17. |
Specific
Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general
provision contained herein. This Note shall be deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof. |
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18. |
Failure
or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. |
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19. |
Partial
Payment. In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the
consideration actually paid by lender such that the company is only required to repay the amount funded and the company is
not required to repay any unfunded portion of this note. |
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20. |
Entire
Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the
subjects herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by the
Parties. |
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21. |
Representations
and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees,
agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement. The Company
further acknowledges that there have been no representations or warranties about future financing or subsequent transactions
between the parties. |
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22. |
Notices.
All notices and other communications given or made to the Company pursuant hereto shall
be in writing (including facsimile or similar electronic transmissions) and shall be
deemed effectively given: (i) upon personal delivery, (ii) when sent by electronic mail
or facsimile, as deemed received by the close of business on the date sent, (iii) five
(5) days after having been sent by registered or certified mail, return receipt requested,
postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery. All communications shall be sent either by email,
or fax, or to the address specified on the signature page. The physical address, email
address, and phone number provided on the signature page shall be considered valid pursuant
to the above stipulations; should the Company’s contact information change from
that listed on the signature page, it is incumbent on the Company to inform the Holder.
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23. |
Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the rest of the Agreement shall be enforceable in accordance with its terms. |
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24. |
Usury.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to
claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal
or interest on this Note. |
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25. |
Successors
and Assigns. This Agreement shall be binding upon successors and assigns. |
—
SIGNATURE PAGE TO FOLLOW—
IN
WITNESS WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.
COMPANY: |
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/s/
Steve Saleen |
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Signature: |
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By: |
Steve Saleen |
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Title: |
CEO |
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Address: |
2735 Ward Low |
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Corona, CA 92882 |
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Email: |
steve@saleen.com |
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Phone: |
714.400.2121 |
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HOLDER: |
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Signature: |
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/s/ Sameer
Hirji |
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Sameer
Hirji, President |
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JSJ
Investments Inc. |
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2665
Villa Creek Drive, Suite 214 |
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Dallas
TX 75234 |
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888-503-2599 |
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Exhibit
1
Conversion
Notice
Reference
is made to the Convertible Note issued by Saleen Automotive Inc. (the “Note”), dated December 2, 2014 in the principal
amount of $50,000 with 10% interest. This note currently holds a principal balance of $50,000 and accrued interest in the amount
of $ . The features of conversion stipulate a Conversion Price the lower of (i) a 42% discount to the lowest trading price
during the previous twenty (20) trading days to the date of Conversion; or (ii) a 42% discount to the lowest trading price during
the previous twenty (20) trading days before the date that this note was executed, pursuant to the provisions of Section 2(a)(2)
in the Note.
In
accordance with and pursuant to the Note, the undersigned hereby elects to convert $_________________ of the PRINCIPAL/INTEREST
balance of the Note, indicated below into shares of Common Stock (the “Common Stock”), of the Company, by tendering
the Note specified as of the date specified below.
Date
of Conversion: _______________ |
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Please
confirm the following information: |
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Conversion
Amount: $ _________________________ |
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Conversion
Price: $ ____________________ ( ______% discount from $ ____________________) |
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Number
of Common Stock to be issued: ________________________________________________________________ |
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Current
Issued/Outstandina: ________________________________________________________________________ |
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PLEASE
ISSUE THE COMMON STOCK INTO WHICH THE NOTE IS BEING CONVERTED IN THE NAME OF THE HOLDER OF THE NOTE AND TRANSFER THE SHARES
ELECTRONICALLY TO: |
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[BROKER
INFORMATION] |
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HOLDER
AUTHORIZATION: |
JSJ
INVESTMENTS INC. |
2665
VILLA CREEK DRIVE, SUITE 214 |
DALLAS,
TX 75234 |
888-503-2599 |
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Tax
ID: 20-2122354 |
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Sameer
Hirji, President |
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Date: |
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[Continued
on Next Page] |
PLEASE
BE ADVISED, pursuant to Section 2(e)(2) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice, the
Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice,
SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING
THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance with the terms herein. Within two (2) Business Days after
the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares to the Broker
indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, they shall, within two
(2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address
as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common
Stock to which the Holder shall be entitled.”
Signature: |
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/s/ Steve Saleen |
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Steve
Saleen |
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CEO |
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Saleen
Automotive Inc. |
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SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 3, 2014, by and between Saleen Automotive,
Inc., a Nevada corporation, with headquarters located at 2375 Wardlow Road, Corona, CA 92882 (the “Company”), and
ROCK CAPITAL, LLC, a Washington limited liability company, with its address at 3820 East Mercer Way, Mercer Island WA 98040
(the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $61,000.00
(with the first note being in the amount of $30,500.00 and the second note being in the amount of $30,500.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common stock, $0,001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Notes shall contain a 5%
original issue discount such that the purchase price of each Note shall be $28,975.00. The first of the two notes (the “First
Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially
be paid for by the issuance of an offsetting $30,500.00 secured note issued to the Company by the Buyer (“Buyer Note”),
provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second
Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1.
Purchase and Sale of Note.
a.
Purchase of Note. On each Closing Date (as defined below), the Company shall issue
and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately
below the Buyer’s name on the signature pages hereto.
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Company Initials |
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b. Form
of Payment. On the Closing Date (as defined below), (i)
the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase
Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below
the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of
the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing
Date. The date and time of the first issuance and sale
of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about December 3, 2014, or such other mutually
agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date at such location as may be agreed to by the parties. Subsequent Closings shall occur when the Buyer Note is repaid.
The Closing of the Second Note shall be on or before the dates specified in the Buyer Note.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants
to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock
being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”)
for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered
or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that
may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale
or resale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities
laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of
counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect
that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration,
which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”) of the Buyer who agrees to
sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d)
the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or
a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an
opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made
only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities
under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may
be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that
can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business
days, it will be considered an Event of Default under the Note.
h. Authorization:
Enforcement, This Agreement has been duly and validly
authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid
and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants
to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries,
if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it
is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
b. Authorization;
Enforcement, (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion
or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization
of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered
by the Company by its authorized representative, and such authorized representative is the tine and official representative with
authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and
(iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute,
a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized
and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not
be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability
upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The
Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this
Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of
this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company or any of its subsidiaries is a party, or (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except
for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually
or in the aggregate, have a material adverse effect). 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 is not in violation of the listing requirements of the OTCQB marketplace (the “OTCQB”) and does not reasonably
anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable future, nor are the Company’s securities
“chilled” by DTC. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s
public filings, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could
have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge
of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it
would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase
of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security
or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance
of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of
the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the
Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good
and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which
is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(i) or such as would not have a material adverse effect. 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 would not have a material adverse effect.
j.
Bad Actor. No officer or director of the Company would be disqualified under Rule
506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September
19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.
k.
Breach of Representations and Warranties by the Company. If the Company breaches
any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer
pursuant to this Agreement, it will be considered an Event of default under the Note.
4. COVENANTS.
a.
Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred
by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and
consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments
or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions
of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company
must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and
expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation
with respect to this transaction is to reimburse Buyer’s expenses shall be $1,750 in legal fees (and similar amounts for
the Second Note) which shall be deduced from each Note when funded.
b.
Listing. The Company shall promptly secure the listing of the Conversion Shares
upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion
of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of
its Common Stock on the OTCQB or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), the New York
Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority
(“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it
receives from the OTCQB and any other markets on which the Common Stock is then listed regarding the continued eligibility of
the Common Stock for listing on such markets.
c. Corporate
Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets,
except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the
surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements
and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for
trading on the OTCQB, Nasdaq, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would require registration of the Securities being
offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants
set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an event of default under the Note.
5. Governing
Law: Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by
either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts
of New York or in the federal courts located in the state and county of New York. The parties to this Agreement hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer
waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees
and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document 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.
b. Counterparts:
Signatures by Facsimile. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement,
once executed by a
Each party
shall provide notice to the other party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement
or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer
may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
k.
No Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against
any party.
1.
Remedies. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled,
in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS
WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
Saleen
Automotive, Inc. |
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By: |
/s/
Steve Saleen |
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Steve Saleen |
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Chief Executive Officer |
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ROCK CAPITAL, LLC. |
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By: |
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Name: |
Kenneth Lustig |
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Title: |
Manager |
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AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate Principal
Amount of Note: |
$61,000.00 |
Aggregate
Purchase Price:
Note 1:
$30,500.00 less $1,525 in OID, $1,750.00 in legal fees, and $2,225 in fees to Brighton Capital, Ltd.
Note 2:
$30,500.00 less $1,525 in OID, $1,750.00 in legal fees, and $2,225 in fees to Brighton Capital, Ltd.
EXHIBIT
A
144
NOTE - $30,500
EXHIBIT
B
BACK
END NOTE 1
$30,500
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US
$30,500.00
SALEEN
AUTOMOTIVE, INC.
8%
CONVERTIBLE REDEEMABLE NOTE
DUE
DECEMBER 3, 2015
FOR
VALUE RECEIVED, Saleen Automotive, Inc. (the “Company”) promises to pay to the order of ROCK CAPITAL, LLC and its
authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Thirty Thousand
Five Hundred Dollars exactly (U.S. $30,500.00) on December 3, 2015 (“Maturity Date”) and to pay interest on
the principal amount outstanding hereunder at the rate of 8% per annum commencing on December 3, 2014. This Note contains a 5%
original issue discount such that the purchase price of the note is $28,975.00. The interest will be paid to the Holder in whose
name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of,
and interest on, this Note are payable at 3820 East Mercer Way, Mercer Island, WA 98040, initially, and if changed, last appearing
on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest
payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing
on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such
check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This
Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that
Holder shall pay any tax or other governmental charges payable in connection therewith.
Initials
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws, Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due
presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is
duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue,
and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing
to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a),
and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being
converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including
receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a) The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the
shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares
of the Company’s common stock (the “Common Stock”) without restrictive legend of any nature, at a price
(“Con version Price”) for each share of Common Stock equal to the higher of (i) 58%
of the average of the 2 lowest trading prices of the Common Stock as reported on the National Quotations
Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in
the future (“Exchange”), for the eighteen prior trading days including the day upon which
a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic
method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include
the same day closing price) or (ii) $0.00005. If the shares have not been delivered within 3 business days, the
Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock
to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such
shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s
intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences
a DTC “Chill” on its shares, the conversion price shall be decreased to 48% instead of 58% while that “Chill”
is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares
of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the
Common Stock of the Company.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by
the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the
Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest
Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date
of such notice.
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(c)
During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows:
(i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal
amount of this Note along with any interest that has accrued during that period, (ii) if the redemption is after the 91st day
this Note is in effect, but less than the 180th day this Note is in effect, then for an amount equal to 145% of the
unpaid principal amount of this Note along with any accrued interest. This Note may not be redeemed after 180 days. The redemption
must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid
and the Company may not redeem this Note.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common
Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with
or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely
to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale
Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal
amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert
the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock
immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares
of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other
change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise
of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
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6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature (except as disclosed
in the Company’s SEC filings); (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution;
(4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property
or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary
petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of two hundred fifty thousand dollars
($250,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired
thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it it has previously been a “shell” issuer and that more than 12 months have passed since
the Company has reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will
instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept
such opinion from Holder’s counsel with such costs paid by the Holder.
12. The
Company shall issue irrevocable transfer agent instructions reserving 6,500,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs
associated with issuing and delivering the shares. The company should at all times reserve a minimum of three times the amount
of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve
such amounts.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and
the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of
New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
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IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated:
December 3, 2014
|
SALEEN
AUTOMOTIVE, INC. |
|
|
|
|
By: |
/s/
Steve Saleen |
|
|
Steve
Saleen, Chief Executive Officer |
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EXHIBIT
A
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $_________ of the above Note into____________ Shares of Common
Stock of Saleen Automotive, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date
of Conversion: __________________________________________________________________ |
|
Applicable
Conversion Price: ___________________________________________________________ |
|
Signature: _________________________________________________________________________ |
|
[Print
Name of Holder and Title of Signer] |
|
Address: __________________________________________________________________________ |
|
__________________________________________________________________________ |
|
|
|
SSN
or EIN: __________________________ |
|
Shares
are to be registered in the following name: ____________________________________________ |
|
|
|
Name: ____________________________________________________________________________ |
|
Address:___________________________________________________________________________ |
|
Tel: _________________________________ |
|
Fax: _________________________________ |
|
SSN
or EIN: ___________________________ |
|
|
|
Shares
are to be sent or delivered to the following account: |
|
|
|
Account
Name: _____________________________________________________________________ |
|
Address: __________________________________________________________________________ |
|
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NEITHER THIS NOTE NOR THE
SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD 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.
Saleen
Automotive, Inc.
Convertible
Note
Issuance
Date: December 3, 2014 |
Original
Principal Amount: $250,000 |
Note No.
SLNN-1 |
Consideration
Paid at Close: $40,000 |
FOR
VALUE RECEIVED, Saleen Automotive, Inc., a Nevada corporation (the “Company”),
hereby promises to pay to the order of Vista Capital Investments, LLC or registered assigns (the “Holder”)
the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion
or otherwise, the “Principal”) when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any outstanding Principal at the applicable Interest
Rate from the date set out above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof).
The
Original Principal Amount is $250,000 (two hundred fifty thousand) plus accrued and unpaid interest and any other fees. The Consideration
is $225,000 (two hundred twenty five thousand) payable by wire transfer (there exists a $25,000
prorated original issue discount (the “OID”)). The Holder shall pay $40,000 of Consideration upon closing
of this Note. The Holder may pay additional Consideration to the Company in such amounts and at such dates as Holder may choose
in its sole discretion. For purposes hereof, the term “Outstanding Balance” means the Original Principal Amount, as
reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued
but unpaid interest, collection and enforcements costs, and any other fees or charges incurred under this Note. The Original Principal
Amount due to Holder shall be prorated based on the Consideration paid by Holder (plus an approximate 10% Original Issue Discount
that is prorated based on the Consideration paid by the Holder as well as any other interest or fees) such that the Company is
only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note.
(1)
GENERAL TERMS
(a)
Payment of Principal. The “Maturity
Date” shall be two years from the date of each payment of Consideration, as may be extended at the option of
the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing
on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would
result in an Event of Default.
(b)
Interest. A one-time interest charge of twelve percent (12%) (“Interest
Rate”) shall be applied on the Issuance Date to the Original Principal Amount. Interest hereunder shall be paid
on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the
records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion
Price provided the Equity Conditions are satisfied.
(2)
EVENTS OF DEFAULT.
(a)
An “Event of Default”, wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) The
Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note
(including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder) or any other
Transaction Document;
(ii) A
Conversion Failure as defined in section 3(b)(ii)
(iii) The
Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of
the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the
Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company
any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary
of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding
is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed
receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty
one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the
Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company
shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the
foregoing;
(iv) [Intentionally
Blank]
(v) The
Common Stock is suspended or delisted for trading on the Over the Counter Bulletin Board market (the “Primary
Market”).
(vi) The
Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer.
(vii) The
Company loses its status as “DTC Eligible.”
(viii)
The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities
& Exchange Commission.
(b)
Upon the occurrence of any Event of Default, the Outstanding Balance shall immediately increase to 120% of the Outstanding Balance
immediately prior to the occurrence of the Event of Default (the “Default Effect”). The Default Effect shall automatically
apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
(3)
CONVERSION OF NOTE. This Note shall be convertible into shares of the Company’s
Common Stock, on the terms and conditions set forth in this Section 3.
(a) Conversion
Right. Subject to the provisions of Section 3(c), at
any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid
Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b),
at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount
pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company
shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred
or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating
to the conversion of this Note.
(i) “Conversion
Amount” means the portion of the Original Principal Amount and Interest to be converted, plus any penalties,
redeemed or otherwise with respect to which this determination is being made.
(ii) “Conversion
Price” shall equal 60% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately
preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment
as provided in this Note. The Conversion Price shall not be lower than $0.00005 (the “Conversion Floor”). In the event
of a reverse stock split, the Conversion Floor shall not be adjusted.
(b) Mechanics
of Conversion.
(i)
Optional Conversion. To convert any Conversion Amount into shares of Common Stock
on any date (a “Conversion Date”), the Holder shall (A) transmit by
email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an
executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion
Notice”) to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice
(the “Share Delivery Date”), the Company shall (A) if legends are
not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities
Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company’s
(“DTC”) Fast Automated Securities Transfer Program, credit such aggregate
number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account
with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled
which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered
for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business
Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding
Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this
Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of
a Conversion Notice.
(ii) Company’s
Failure to Timely Convert. If within two (2) Trading
Days after the Company’s receipt of the facsimile or email copy of a Conversion Notice the Company shall fail to issue and
deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is
entitled upon such holder’s conversion of any Conversion Amount (a “Conversion
Failure”), the Original Principal Amount of the Note shall increase by $2,000 per day until the Company issues
and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (under Holder’s and Company’s
expectation that any damages will tack back to the Issuance Date). Company will not be subject
to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares
in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling
all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares
and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to
the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the
original date of the Note).
(iii) DWAC/FAST
Eligibility. If the Company fails for any reason to deliver
to the Holder the Shares by DWAC/FAST electronic transfer (such as by delivering a physical stock certificate), or if there is
a Conversion Failure as defined in Section 3(b)(ii), and if the Holder incurs a Market Price Loss, then at any time subsequent
to incurring the loss the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect
of the Market Price Loss and the Company must make the Holder whole by either of the following options at Holder’s election:
Market
Price Loss = [(High trade price for the period between the day of conversion and the day the shares clear in the Holder’s
brokerage account) x (Number of shares receivable from the conversion)] - [(Net Sales price realized by Holder) x (Number of shares
receivable from the conversion)].
Option
A - Pay Market Price Loss in Cash. The Company must pay the Market Price Loss by cash payment, and any such cash payment must
be made by the third business day from the time of the Holder’s written notice to the Company.
Option
B - Add Market Price Loss to Outstanding Balance. The Company must pay the Market Price Loss by adding the Market Price Loss to
the Outstanding Balance (under Holder’s and the Company’s expectation that any Market Price Loss amounts will tack
back to the Issuance Date).
In
the case that conversion shares are not deliverable by DWAC/FAST electronic transfer an additional 10% discount to the Conversion
Price will apply.
(iv) DTC
Eligibility & Sub-Penny. If the Company fails to
maintain its status as “DTC Eligible” for any reason, or, if the Conversion Price is less than $0.01, the Principal
Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that
any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be redefined to equal
the lesser of (a) $0.025 or (b) 50% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately
preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment
as provided in this Note.
(v)
Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion
of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this
Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided
the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note
upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted
and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note upon conversion.
(c) Limitations
on Conversions or Trading.
(i)
Beneficial Ownership. The Company shall not effect any conversions of this Note
and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest
hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together
with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the
rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving
effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue
would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without
regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority
and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and
to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion
of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. If the Holder has
delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or
its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall
notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount
hereunder shall remain outstanding under this Note. The provisions of this Section may be waived at any time by Holder upon written
notification to the Company.
(d) Other
Provisions.
(i) Share
Reservation. The Company shall at all times reserve and keep
available out of its authorized Common Stock a number of shares equal to at least 3 (three) times the full number of shares of
Common Stock issuable upon conversion of all outstanding amounts under this Note; and within 3 (three) Business Days following
the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company
shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The
Company will at all times reserve at least 30,000,000 shares of Common Stock for conversion.
(ii) Prepayment. At
any time within the 90 day period immediately following the Issuance Date, the Company shall have the option, upon 10 business
days’ notice to Holder, to pre-pay the entire remaining outstanding principal amount of this Note in cash, provided that
(i) the Company shall pay the Holder 145% of the Outstanding Balance, (ii) such amount must be paid in cash on the next business
day following such 10 business day notice period, and (iii) the Holder may still convert this Note pursuant to the terms hereof
at all times until such prepayment amount has been received in full. Except as set forth in this Section the Company may not prepay
this Note in whole or in part.
(iii) Terms
of Future Financings. So long as this Note is outstanding,
upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such
security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then
the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become
a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable
to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods,
interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
(iv) All
calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.
(v) Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein
for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period
specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide
other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
(4) SECTION
3(A)(9) OR 3(A)(10) TRANSACTION. So long as this Note
is outstanding, the Company shall not enter into any transaction or arrangement structured in accordance with, based upon, or
related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”)
or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Company does enter into,
or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding,
a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed
and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance
of this Note.
(5) [Intentionally
Blank]
(6) REISSUANCE
OF THIS NOTE.
(a) Assignability. The
Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit
of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s
approval.
(b) Lost,
Stolen or Mutilated Note. Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case
of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case
of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing
the outstanding Principal.
(7)
NOTICES. Any notices, consents, waivers or other communications required or permitted
to be given under the terms hereof 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 confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading 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 those set forth in the communications and documents that each
party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has specified by written notice given to each other party
three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient
of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided
by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
The addresses
for such communications shall be:
If to the Company, to:
|
Steve
Saleen |
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2735
Wardlow Rd |
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Corona,
CA 92882 |
|
|
|
|
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Attn: Steve Saleen |
|
|
Email: |
|
If to the Holder
|
VISTA CAPITAL
INVESTMENTS, LLC |
|
|
|
|
|
|
|
|
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Attn: |
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Email: |
|
(8)
APPLICABLE LAW AND VENUE. This Note shall be governed by and construed in accordance
with the laws of the State of Nevada, without giving effect to conflicts of laws thereof. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or
in the federal courts located in the city and county of San Diego, in the State of California. Both parties and the individuals
signing this Agreement agree to submit to the jurisdiction of such courts.
(a)
WAIVER. Any waiver by the Holder of a breach of any provision of this Note shall
not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not
be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other
term of this Note. Any waiver must be in writing.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date
set forth above.
|
COMPANY: |
|
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SALEEN
AUTOMOTIVE, INC. |
|
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By: |
/s/
Steve Saleen |
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Name: |
Steve Saleen |
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Title: |
Chief Executive
Officer |
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HOLDER: |
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VISTA
CAPITAL INVESTMENTS, LLC |
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By: |
/s/
David Clark |
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Name: |
David Clark |
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Title: |
Principal |
[Signature
Page to Convertible Note No. SLNN-1]
EXHIBIT
A
NOTICE
OF CONVERSION
[Company
Contact, Position]
Saleen Automotive,
Inc.
[Company
Address]
[Contact
Email Address]
The
undersigned hereby elects to convert a portion of the $ _________ Convertible Note _________ issued to Vista Capital Investments,
LLC on _________ into Shares of Common Stock of ________________ according to the conditions set forth in such Note as of the
date written below.
By
accepting this notice of conversion, you are acknowledging that the number of shares to be delivered represents less than 10%
(ten percent) of the common stock outstanding. If the number of shares to be delivered represents more than 9.99% of the common
stock outstanding, this conversion notice shall immediately automatically extinguish and debenture Holder must be immediately
notified.
Date
of Conversion: |
|
|
Conversion
Amount: |
|
|
Conversion
Price: |
|
|
Shares
to be Delivered: |
|
|
Shares
delivered in name of:
VISTA
CAPITAL INVESTMENTS, LLC
|
|
Signature: |
By: |
|
Title: |
|
Vista Capital
Investments, LLC |
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December
3, 2014, by and between Saleen Automotive, Inc., a Nevada corporation, with
headquarters located at 2375 Wardlow Road, Corona, CA 92882 (the “Company”), and COVENTRY
ENTERPRISES, LLC, with its address at 338 80 S.W. 8th Street, Suite 2000, Miami, FL 33130 11225 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $125,000.00
(with the first note being in the amount of $62,500.00 and the second note being in the amount of $62,500.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Notes shall contain a 5%
original issue discount such that the purchase price of each Note shall be $59,375.00. The first of the two notes (the “First
Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially
be paid for by the issuance of an offsetting $62,500.00 secured note issued to the Company by the Buyer (“Buyer Note”),
provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second
Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly)
hereby agree as follows:
1.
Purchase and Sale of Note.
a.
Purchase of Note. On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature
pages hereto.
Company Initials
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount
equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company
shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing
Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about December 3, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by
this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
Subsequent Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates
specified in the Buyer Note.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an
“Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire
the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute
a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to
the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may
be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that
can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for
sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such
holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act,
which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business
days, it will be considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and
other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted.
b. Authorization;
Enforcement, (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed
in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance
of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of
its subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company
or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a material adverse effect). 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 is not in violation of the listing requirements of the OTCQB marketplace
(the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable
future, nor are the Company’s securities “chilled” by DTC. The Company and its subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or
their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete
list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives
or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision
to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. 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 would not have a material adverse effect.
j.
Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended
on the basis of being a “bad actor” as that term is established in the September 19, 2013 Small Entity Compliance Guide
published by the Securities and Exchange Commission.
k.
Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties
set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will
be considered an Event of default under the Note.
4.
COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation
services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents,
fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the
Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement
to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer.
The Company’s obligation with respect to this transaction is to reimburse Buyer’s expenses shall be $3,500 in legal fees (and
similar amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so
long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so
long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or
any equivalent replacement market, the Nasdaq stock market (“Nasdaq”), the New York Stock Exchange
(“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory
Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of
any notices it receives from the OTCQB and any other markets on which the Common Stock is then listed regarding the continued
eligibility of the Common Stock for listing on such markets.
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially
all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCQB, Nasdaq, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5.
Governing Law; Miscellaneous.
a.
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document 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.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. 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 Buyer 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 majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If
to the Company, to:
Saleen Automotive, Inc.
2375 Wardlow Road
Corona, CA 92882
Attn: Steve Saleen, CEO
If
to the Buyer:
COVENTRY
ENTERPRISES, LLC
80
S.W. 8th Street, Suite 2000
Miami, FL 33130
Attn: Jack Bodenstein
Each
party shall provide notice to the other party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without
the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
k.
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
1.
Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being required.
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.
Saleen
Automotive, Inc.
By: |
/s/
Steve Saleen |
|
|
Steve Saleen |
|
|
Chief Executive
Officer |
|
COVENTRY
ENTERPRISES, LLC. |
|
|
|
By: |
|
|
Name: |
Jack Bodenstein |
|
Title: |
Manager |
|
AGGREGATE
SUBSCRIPTION AMOUNT: |
|
|
|
Aggregate
Principal Amount of Note: |
$125,000.00 |
|
|
Aggregate
Purchase Price: |
|
|
|
Note
1: $62,500.00 less $3,125 in OID, $3,500.00 in legal fees, and $5,875 in fees to Brighton Capital, Ltd. |
|
Note
2: $62,500.00 less $3,125 in OID, $3,500.00 in legal fees, and $5,875 in fees to Brighton Capital, Ltd. |
EXHIBIT
A
144
NOTE - $62,500
EXHIBIT
B
BACK
END NOTE 1
$62,500
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”).
US
$62,500.00
SALEEN
AUTOMOTIVE, INC.
8%
CONVERTIBLE REDEEMABLE NOTE
DUE
DECEMBER 3, 2015
FOR
VALUE RECEIVED, Saleen Automotive, Inc. (the “Company”) promises to pay to the order of COVENTRY ENTERPRISES, LLC
and its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Sixty
Two Thousand Five Hundred Dollars exactly (U.S. $62,500.00) on December 3, 2015 (“Maturity Date”) and to pay
interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on December 3, 2014. This Note contains
a 5% original issue discount such that the purchase price of the note is $59,375.00. The interest will be paid to the Holder in
whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal
of, and interest on, this Note are payable at 338 80 S.W. 8th Street, Suite 2000, Miami, FL 33130, initially, and if
changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company
will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the
last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment
of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the
sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph
4(b) herein.
Initials
This
Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible
hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to the higher of (i) 58% of the average of the 2 lowest trading
prices of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares
are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the
eighteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern
Standard or Daylight Savings Time if the Holder wishes to include the same day closing price) or (ii) $0.00005. If the
shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated
by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice
of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company,
executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied
by proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 48% instead of 58% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion
if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would
exceed 9.9% of the outstanding shares of the Common Stock of the Company.
Initials
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company
in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) During
the first 120 days the Note is in effect, it may be prepaid by making a premium payment of 125% multiplied by the principal amount,
along with any accrued interest. The note may NOT be prepaid after 120 days. Any prepayment must be funded within 3 days of prepayment
notice or the prepayments shall be void and the Company shall have no further right to prepay the note.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common
Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with
or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely
to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale
Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal
amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert
the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock
immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares
of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other
change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise
of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
Initials
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) make an assignment for the benefit of creditors or commence proceedings for its dissolution;
(3) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property
or business; (4) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary
petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of two hundred fifty thousand dollars
($250,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
Initials
(h) Intentionally
Deleted
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j)
Intentionally Deleted
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(1)
The Company shall not replenish the reserve set forth in Section
12, within 3 business days of the request of the Holder; or
(m)
The Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then,
or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have
been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option
of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without
presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24%
per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the
10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%.
In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not
paid at maturity, the outstanding principal due under this Note shall increase by 10%.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging
an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Initials
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired
thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and was previously a “shell” issuer and more than 12
months have passed since the Company became a “shell” issuer. Further. The Company will instruct its counsel to either
(i) write a “144- 3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from
Holder’s counsel, which cost, if any, shall be paid by the Holder.
12. The
Company shall issue irrevocable transfer agent instructions reserving 12,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs
associated with issuing and delivering the shares. The company should at all times reserve a minimum of four times the amount
of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve
such amounts.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and
the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of
New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
Initials
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated:
December 3, 2014
|
SALEEN AUTOMOTIVE, INC. |
|
|
|
By: |
/s/
Steve Saleen |
|
|
Steve
Saleen, Chief Executive Officer |
Initials
EXHIBIT
A
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $_________ of the above Note into ________ Shares of Common
Stock of Saleen Automotive, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date
of Conversion:
Applicable
Conversion Price:
Signature:
[Print
Name of Holder and Title of Signer]
SSN
or EIN:
Shares
are to be registered in the following name:
Name:
Address:
Tel:
Fax:
SSN
or EIN:
Shares are to be sent or delivered to the following account:
Account
Name:
Address:
Initials
Securities
Purchase Agreement
This Securities Purchase
Agreement (this “Agreement”), dated as of October 28, 2014, is entered into by and between Saleen
Automotive, Inc., a Nevada corporation (“Company”), and Typenex
Co-Investment, LLC, a Utah limited liability company, its successors and/or assigns (“Investor”).
A.
Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”).
B.
Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement,
a Secured Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $215,000.00
(the “Note”), convertible into shares of common stock, $0.001 par value per share, of Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C.
This Agreement, the Note, the Security Agreement (as defined below), the Investor Notes (as defined below), and all other certificates,
documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same
may be amended from time to time, are collectively referred to herein as the “Transaction Documents”.
D.
For purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion
of all or any portion of the Note; and “Securities” means the Note and the Conversion Shares.
NOW,
THEREFORE, Company and Investor hereby agree as follows:
1.
Purchase and Sale of Securities.
1.1.
Purchase of Securities. Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note.
In consideration thereof, Investor shall pay (i) the amount designated as the initial cash purchase price on Investor’s
signature page to this Agreement (the “Initial Cash Purchase Price”), and (ii) issue to Company the Investor
Notes (the sum of the initial principal amount of the Investor Notes, together with the Initial Cash Purchase Price, the “Purchase
Price”). The Purchase Price and the OID (as defined herein) are allocated to the Tranches (as defined in the Note) of
the Note as set forth in the table attached hereto as Exhibit B.
1.2.
Form of Payment. On the Closing Date, (i) Investor shall pay the Purchase Price to Company by delivering the following
at the Closing: (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately available funds
to Company, in accordance with Company’s written wiring instructions; (B) Investor Note #1 in the principal amount of $25,000.00
duly executed and substantially in the form attached hereto as Exhibit C (“Investor Note #1”); (C) Investor
Note #2 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit C (“Investor
Note #2”); (D) Investor Note #3 in the principal amount of $25,000.00 duly executed and substantially in the form attached
hereto as Exhibit C (“Investor Note #3”); (E) Investor Note #4 in the principal amount of $25,000.00
duly executed and substantially in the form attached hereto as Exhibit C (“Investor Note #4”); and (F)
Investor Note #5 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit
C (“Investor Note #5”, and together with Investor Note #1, Investor Note #2, Investor Note #3, and Investor
Note #4, the “Investor Notes”); and (ii) Company shall deliver the duly executed Note on behalf of Company,
to Investor, against delivery of such Purchase Price.
1.3.
Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below,
the date and time of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”)
shall be 5:00 p.m., Eastern Time on or about October 28, 2014, or such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at the offices of Investor unless
otherwise agreed upon by the parties.
1.4.
Collateral for the Note. The Note shall be secured by the collateral set forth in that certain Security Agreement attached
hereto as Exhibit D listing all of the Investor Notes as security for Company’s obligations under the Transaction
Documents (the “Security Agreement”).
1.5.
Collateral for Investor Notes. Initially, none of the Investor Notes will be secured, but all or any of the Investor Notes
may become secured subsequent to the Closing by such collateral and at such time as determined by Investor in its sole discretion.
In the event Investor desires to secure any of the Investor Notes, Company shall timely execute any and all amendments and documents
and take such other measures requested by Investor that are necessary or advisable in order to properly secure the applicable
Investor Notes.
1.6.
Original Issue Discount: Transaction Expenses. The Note carries an original issue discount of $10,000.00 (the “OID”).
In addition, Company agrees to pay $5,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence,
monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “Transaction
Expense Amount”), all of which amount is included in the initial principal balance of the Note. The Purchase Price,
therefore, shall be $200,000.00, computed as follows: $215,000.00 original principal balance, less the OID, less the Transaction
Expense Amount. The Initial Cash Purchase Price shall be the Purchase Price less the sum of the initial principal amounts of the
Investor Notes. The portion of the OID and the Transaction Expense Amount allocated to the Initial Cash Purchase Price are set
forth on Exhibit B.
2.
Investor’s Representations and Warranties. Investor represents and warrants to Company that: (i) this Agreement has
been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance
with its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
of the 1933 Act, and (iv) this Agreement and the Investor Notes have been duly executed and delivered on behalf of Investor.
3.
Representations and Warranties of Company. Company represents and warrants to Investor that: (i) Company is a corporation
duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary; (iii) Company has registered its Common Stock under Section 12(g) of the Securities Exchange
Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section
15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been
duly and validly authorized by Company; (v) this Agreement, the Note, the Security Agreement, and the other Transaction Documents
have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance
with their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency, moratorium,
and other similar laws affecting the enforcement of creditors’ rights generally; (vi) the execution and delivery of the
Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company
of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by
Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws,
each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company
is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock,
or (c) to Company’s knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction
over Company or any of Company’s properties or assets; (vii) no further authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender
of Company is required to be obtained by Company for the issuance of the Securities to Investor; (viii) none of Company’s
filings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which
they were made, not misleading; (ix) Company has filed all reports, schedules, forms, statements and other documents required
to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing
and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (x)
Company is not, nor has it at any time in the previous (12) months been, a “Shell Company,” as such type of “issuer”
is described in Rule 144(i)(l) under the 1933 Act; (xi) Company has taken no action which would give rise to any claim by any
person or entity for a brokerage commission, placement agent or finder’s fees or similar payments by Investor relating to
the Note or the transactions contemplated hereby; (xii) except for such fees arising as a result of any agreement or arrangement
entered into by Investor without the knowledge of Company (an “Investor’s Fee”), Investor shall have
no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type
contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify
and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, managers, agents, and partners,
and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’
fees) and expenses suffered in respect of any such claimed or existing fees (other than an Investor’s Fee, if any); (xiii)
when issued, each of the Securities will be validly issued, fully paid for and non-assessable, free and clear of all liens, claims,
charges and encumbrances; and (xiv) Company has performed due diligence and background research on Investor and its affiliates
including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Investor
may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things,
the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SEC
Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill); and FINRA Case #2011029203701. Company, being
aware of the foregoing matters, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions
contemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to performance
of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.
4.
Company Covenants. Until all of Company’s obligations hereunder are paid and performed in full, or within the timeframes
otherwise specifically set forth below, Company shall comply with the following covenants: (i) from the date hereof until the
date that is six (6) months after all the Conversion Shares either have been sold by Investor, or may permanently be sold by Investor
without any restrictions pursuant to Rule 144, Company shall timely make all filings required to be made by it under the 1933
Act, the 1934 Act, Rule 144 or any United States securities laws and regulations thereof applicable to Company or by the rules
and regulations of its principal trading market, and such filings shall conform to the requirements of applicable laws, regulations
and government agencies, and, unless such filings are publicly available on the SEC’s EDGAR system (via the SEC’s
web site at no additional charge), Company shall provide a copy thereof to Investor promptly after such filings; (ii) so long
as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days thereafter, Company shall file all
reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable action
under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule
144, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even if
the 1934 Act or the rules and regulations thereunder would permit such termination; (iii) the Common Stock shall be listed or
quoted for trading on any of (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX, (g) the OTCQB, or (h) the OTCPink; (iv) when issued, each of the Securities
(including, without limitation, the Conversion Shares), will be validly issued, fully paid for and non-assessable, free and clear
of all liens, claims, charges and encumbrances, (v) Company shall use the net proceeds received hereunder for working capital
and general corporate purposes only; provided, however, Company will not use such proceeds to pay fees payable (A) to any
broker or finder relating to the offer and sale of the Securities unless such broker, finder, or other party is a registered investment
adviser or registered broker-dealer and such fees are paid in full compliance with all applicable laws and regulations, or (B)
to any other party relating to any financing transaction effected prior to the date hereof; and (vi) from and after the date hereof
and until all of Company’s obligations hereunder and the Note are paid and performed in full, Company shall not transfer,
assign, sell, pledge, hypothecate or otherwise alienate or encumber the Investor Notes in any way without the prior written consent
of Investor.
5.
Conditions to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securities
to Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:
5.1.
Investor shall have executed this Agreement and the Investor Notes and delivered the same to Company.
5.2.
Investor shall have delivered the Initial Cash Purchase Price to Company in accordance with Section 1.2 above.
6.
Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities
at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that
these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:
6.1.
Company shall have executed this Agreement and delivered the same to Investor.
6.2.
Company shall have delivered to Investor the duly executed Note in accordance with Section 1.2 above.
6.3.
The Irrevocable Letter of Instructions to Transfer Agent substantially in the form attached hereto as Exhibit E shall have
been delivered to and acknowledged in writing by Company’s transfer agent (the “Transfer Agent”).
6.4.
Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto
as Exhibit F evidencing Company’s approval of the Transaction Documents.
6.5.
Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto
as Exhibit G to be delivered to the Transfer Agent.
6.6.
Company shall have delivered to Investor fully executed copies of the Security Agreement and all other Transaction Documents required
to be executed by Company herein or therein.
7.
Reservation of Shares. At all times during which the Note is convertible, Company will reserve from its authorized and
unissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Note. Company will at all times
reserve at least three (3) times the number of shares of Common Stock equal to the Outstanding Balance (as defined in and determined
pursuant to the Note) divided by the Conversion Price (as defined in and determined pursuant to the Note) (the “Share
Reserve”), but in any event not less than 8,000,000 shares of Common Stock shall be reserved at all times for such purpose
(the “Transfer Agent Reserve”). Company further agrees that it will cause the Transfer Agent to immediately
add shares of Common Stock to the Transfer Agent Reserve in increments of 1,000,000 shares as and when requested by Investor in
writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share
Reserve. In furtherance thereof, from and after the date hereof and until such time that the Note has been paid in full, Company
shall require the Transfer Agent to reserve for the purpose of issuance of Conversion Shares under the Note, a number of shares
of Common Stock equal to the Transfer Agent Reserve. Company shall further require the Transfer Agent to hold such shares of Common
Stock exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery of
a conversion notice under the Note. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant
to the Note to Investor out of its authorized and unissued shares, and not the Transfer Agent Reserve, to the extent shares of
Common Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve. The Transfer Agent shall
only issue shares out of the Transfer Agent Reserve to the extent there are no other authorized shares available for issuance
and then only with Investor’s written consent.
8.
Miscellaneous. The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction
Documents as if these terms were fully set forth therein.
8.1.
Original Signature Pages. Each party agrees to deliver its original signature pages to the Transaction Documents to the
other party within five (5) Trading Days of the date hereof. Notwithstanding the foregoing, the Transaction Documents shall be
fully effective upon exchange of electronic signature pages by the parties and payment of the Initial Cash Purchase Price by Investor.
For the avoidance of doubt, the failure by either party to deliver its original signature pages to the other party shall not affect
in any way the validity or effectiveness of any of the Transaction Documents, provided that such failure to deliver original signatures
shall be a breach of the party’s obligations hereunder.
8.2.
Cross Default. Any Event of Default (as defined in the Note) by Company under the Note shall be deemed a default under
this Agreement, and any default by Company under this Agreement will be deemed an Event of Default under the Note.
8.3.
Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah
for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict
of laws. Each party consents to and expressly agrees that exclusive venue for Arbitration (as defined in Exhibit H) of
any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shall
be in Salt Lake County or Utah County, Utah; provided, however, that notwithstanding anything herein to the contrary, enforcement
of Investor’s rights under the Security Agreement will occur in accordance with the Uniform Commercial Code of the applicable
state(s) under the Security Agreement and enforcement of Company’s rights over the Collateral will occur in accordance with
the laws of the state in which the Collateral is located). Without modifying the parties obligations to resolve disputes hereunder
pursuant to the Arbitration Provisions (as defined below), for any litigation arising in connection with any of the Transaction
Documents, each party hereto hereby (a) consents to and expressly submits to the exclusive personal jurisdiction of any state
or federal court sitting in Salt Lake County, Utah, (b) expressly submits to the exclusive venue of any such court for the purposes
hereof, and (c) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any
other claim or objection to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit,
action or proceeding is improper.
8.4.
Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit H) arising under this Agreement
or any other Transaction Document or other agreements between the parties and their affiliates to binding arbitration pursuant
to the arbitration provisions set forth in Exhibit H attached hereto (the “Arbitration Provisions”).
The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and
are severable from all other provisions of this Agreement. Any capitalized term not defined in the Arbitration Provisions shall
have the meaning set forth in this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company
has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to
do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any
dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take
a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing
representations and covenants of Company regarding the Arbitration Provisions.
8.5.
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any arithmetic calculation
under the Transaction Documents, including without limitation, calculating the Outstanding Balance, the Conversion Price, the
Conversion Shares, or the VWAP (as defined in the Note) (collectively, “Calculations”), Company or Investor
(as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via email or facsimile
with confirmation of receipt (a) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute
to Company or Investor (as the case may be) or (b) if no notice gave rise to such dispute, at any time after Investor learned
of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such determination or calculation
within two (2) Trading Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to Company
or Investor (as the case may be), then Investor shall, within two (2) Trading Days, submit via email or facsimile the disputed
Calculation to Unkar Systems Inc. (“Unkar Systems”). Company shall cause Unkar Systems to perform the determinations
or calculations (as the case may be) and notify Company and Investor of the results no later than ten (10) Trading Days from the
time it receives such disputed determinations or calculations (as the case may be). Unkar Systems’ determination of the
disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing such
Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest
from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery
Date shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set
forth in the Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent,
reputable investment bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all references
to “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accounting
firm so designated by Investor.
8.6.
Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another
party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to
be an executed original thereof.
8.7.
Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
8.8.
Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
8.9.
Entire Agreement: Amendments. This Agreement and the instruments and exhibits 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 Company nor 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 parties hereto.
8.10.
Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall
be deemed effectively given on the earliest of: (a) the date delivered, if delivered by personal delivery as against written receipt
therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (b) the earlier of
the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail,
or (c) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees
prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other
addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other
parties hereto):
If
to Company:
Saleen
Automotive, Inc.
Attn:
Steve Saleen
2375
Wardlow Road
Corona,
California 92882
If
to Investor:
Typenex
Co-Investment, LLC
Attn:
John Fife
303
East Wacker Drive, Suite 1200
Chicago,
Illinois 60601
With
a copy to (which copy shall not constitute notice):
Hansen
Black Anderson Ashcraft PLLC
Attn:
Jonathan K. Hansen
3051
West Maple Loop, Suite 325
Lehi,
Utah 84043
8.11.
Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be
performed by Investor hereunder may be assigned by Investor to a third party, including its financing sources, in whole or in
part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this
Agreement or delegate its duties hereunder without the prior written consent of Investor.
8.12.
Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall
survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees
to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising
as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
8.13.
Publicity. Company and Investor shall have the right to review a reasonable period of time before issuance of any press
releases by the other party with respect to the transactions contemplated hereby.
8.14.
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
8.15.
Investor’s Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this
Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition
to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction
Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to
time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s
failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult
(if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future
share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity
for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note and the other Transaction
Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s
expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period
under Rule 144). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and
not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in
equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such
liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the
Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of
the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents
shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that
the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.
8.16.
Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents,
if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance
would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as
defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage.
The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein
as the “Ownership Limitation Shares”. Company will reserve the Ownership Limitation Shares for the exclusive
benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares
that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company
shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in
the number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock will be determined
under Section 13(d) of the 1934 Act.
8.17.
Attorneys’ Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce
or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded
the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of
the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with
arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees
and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses
for frivolous or bad faith pleading. If (a) the Note is placed in the hands of an attorney for collection or enforcement prior
to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor
otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note; or (b) there occurs any
bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and
involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action
or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’
fees, expenses, deposition costs, and disbursements.
8.18.
Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by
the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any
other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in
writing.
8.19.
Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND
THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE
PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW
OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY
WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
8.20.
Time of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and
the other Transaction Documents.
[Remainder
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above
written.
SUBSCRIPTION
AMOUNT: |
|
|
|
Principal
Amount of Note: |
$215,000.00 |
|
|
Initial
Cash Purchase Price: |
$75,000.00 |
|
INVESTOR: |
|
|
|
|
Typenex
Co-Investment, LLC |
|
|
|
|
By: |
Red Cliffs Investments,
Inc., its Manager |
|
|
|
|
By: |
/s/
John M. Fife |
|
|
John M. Fife,
President |
|
COMPANY: |
|
|
|
|
Saleen
Automotive, Inc. |
|
|
|
|
By: |
/s/
Steve Saleen |
|
Printed
Name: |
|
|
Title: |
|
ATTACHED
EXHIBITS: |
|
|
Exhibit
A |
Note |
Exhibit
B |
Allocation
of Purchase Price |
Exhibit
C |
Form
of Investor Note |
Exhibit
D |
Security
Agreement |
Exhibit
E |
Irrevocable
Transfer Agent Instructions |
Exhibit
F |
Secretary’s
Certificate |
Exhibit
G |
Share
Issuance Resolution |
Exhibit
H |
Arbitration
Provisions |
EXHIBIT
H
ARBITRATION
PROVISIONS
1.
Dispute Resolution. For purposes of this Exhibit H. the term “Claims” means any disputes, claims,
demands, causes of action, liabilities, damages, losses, or controversies whatsoever arising from related to or connected with
the transactions contemplated in the Transaction Documents and any communications between the parties related thereto, including
without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration,
promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims, tort claims, contract
claims, or claims to void, invalidate or terminate the Agreement or any of the other Transaction Documents. The term “Claims”
specifically excludes a dispute over Calculations (as defined in the Agreement) enforcement of Investor’s rights and remedies
against the personal property described in the Security Agreement under the applicable provisions of the Uniform Commercial Code.
The parties hereby agree that the arbitration provisions set forth in this Exhibit H (“Arbitration Provisions”)
are binding on the parties hereto and are severable from all other provisions in the Transaction Documents. As a result, any attempt
to rescind the Agreement or declare the Agreement or any other Transaction Document invalid or unenforceable for any reason is
subject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of the
Agreement.
2.
Arbitration. Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”)
to be conducted in Salt Lake County, Utah or Utah County, Utah and pursuant to the terms set forth in these Arbitration Provisions.
The parties agree that the award of the arbitrator shall be final and binding upon the parties; shall be the sole and exclusive
remedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator; and shall
promptly be payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any costs
or fees, including without limitation attorneys’ fees, incident to enforcing the arbitrator’s award shall, to the
maximum extent permitted by law, be charged against the party resisting such enforcement. The award shall include Default Interest
(as defined in the Note) both before and after the award. Judgment upon the award of the arbitrator will be entered and enforced
by a state court sitting in Salt Lake County, Utah. The parties hereby incorporate herein the provisions and procedures set forth
in the Utah Uniform Arbitration Act, U.C.A.§ 78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration
Act”). Pursuant to Section 78B-11-105 of the Arbitration Act, in the event of conflict between the terms of these Arbitration
Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control.
3.
Arbitration Proceedings. Arbitration between the parties will be subject to the following procedures:
3.1
Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written notice
to the other party (“Arbitration Notice”) in the same manner that notice is permitted under Section 8.10 of
the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration will be deemed
initiated as of the date that the Arbitration Notice is deemed delivered under Section 8.10 of the Agreement (the “Service
Date”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant to
Section 8.10 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of the
controversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice must
be pleaded consistent with the Utah Rules of Civil Procedure.
3.2
Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such
three designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the avoidance
of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within ten (10) calendar
days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to
Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If
Company fails to select one of the Proposed Arbitrators in writing within such 10-day period, then Investor may select the arbitrator
from the Proposed Arbitrators by providing written notice of such selection to Company. If Investor fails to identify the Proposed
Arbitrators within the time period required above, then Company may at any time prior to Investor designating the Proposed Arbitrators,
select the names of three arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service
by written notice to Investor. Investor may then, within ten (10) calendar days after Company has submitted notice of its selected
arbitrators to Investor, select, by written notice to Company, one (1) of the selected arbitrators to act as the arbitrator for
the parties under these Arbitration Provisions. If Investor fails to select in writing and within such 10-day period one of the
three arbitrators selected by Company, then Company may select the arbitrator from its three previously selected arbitrators by
providing written notice of such selection to Investor. Subject to Paragraph 3.12 below, the cost of the arbitrator must be paid
equally by both parties; provided, however, that if one party refuses or fails to pay its portion of the arbitrator fee,
then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount added
to or subtracted from, as applicable, the award granted by the arbitrator. If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.
The date that the selected arbitrator agrees in writing to serve as the arbitrator hereunder is referred to herein as the “Arbitration
Commencement Date”.
Arbitration
Provisions, Page 1
3.3
An answer and any counterclaims to the Arbitration Notice, which must be pleaded consistent with the Utah Rules of Civil Procedure,
shall be required to be delivered to the other party within twenty (20) calendar days after the Service Date. Upon request, the
arbitrator is hereby instructed to render a default award, consistent with the relief requested in the Arbitration Notice, against
a party that fails to submit an answer within such time period.
3.4
The party that delivers the Arbitration Notice to the other party shall have the option to also commence legal proceedings with
any state court sitting in Salt Lake County, Utah (“Litigation Proceedings”), subject to the following: (i)
the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice,
provided that an additional cause of action to compel arbitration will also be included therein, (ii) so long as the other party
files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings
will be stayed pending an award of the arbitrator hereunder, (iii) if the other party fails to file an answer in the Litigation
Proceedings or an answer in the Arbitration Proceedings, then the party initiating Arbitration shall be entitled to a default
judgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (iv) any legal or procedural issue
arising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the Litigation
Proceedings. Any award of the arbitrator may be entered in such Litigation Proceedings pursuant to the Arbitration Act.
3.5
Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted in accordance with the
Utah Rules of Civil Procedure; provided, however, that incorporation of such rules will in no event supersede the Arbitration
Provisions set forth herein, including without limitation the time limitation set forth in Paragraph 3.9 below, and the following:
(a)
Discovery will only be allowed if the likely benefits of the proposed discovery outweigh the burden or expense, and the discovery
sought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration.
The party seeking discovery shall always have the burden of showing that all of the standards and limitations set forth in these
Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows:
(i)
To facts directly connected with the transactions contemplated by the Agreement.
(ii)
To facts and information that cannot be obtained from another source that is more convenient, less burdensome or less expensive.
(c)
No party shall be allowed (a) more than fifteen (15) interrogatories (including discrete subparts), (b) more than fifteen (15)
requests for admission (including discrete subparts), (c) more than ten (10) document requests (including discrete subparts),
or (d) more than three depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition.
3.6
Any party submitting any written discovery requests, including interrogatories, requests for production, subpoenas to a party
or a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, as determined by the
arbitrator, before the responding party has any obligation to produce or respond.
(a)
All discovery requests must be submitted in writing to the arbitrator and the other party before issuing or serving such discovery
requests. The party issuing the written discovery requests must include with such discovery requests a detailed explanation of
how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure.
Any party will then be allowed, within ten (10) calendar days of receiving the proposed discovery requests, to submit to the arbitrator
an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a written
challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s)
to one or more discovery requests, the arbitrator will make a finding as to the likely attorneys’ fees and costs associated
with responding to the discovery requests and issue an order that (A) requires the requesting party to prepay the attorneys’
fees and costs associated with responding to the discovery requests, and (B) requires the responding party to respond to the discovery
requests as limited by the arbitrator within a certain period of time after receiving payment from the requesting party. If a
party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so
within such 10-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated
with responding to such discovery requests, and (B) the responding party must respond to such discovery requests (as may be limited
by the arbitrator) within a certain period of time as determined by the arbitrator.
Arbitration
Provisions, Page 2
(b)
In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set
forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards.
If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil
Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request
in whole or in part.
(c)
Discovery deadlines will be set forth in a scheduling order issued by the arbitrator. The parties hereby authorize and direct
the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the arbitration
proceedings to be efficient and expeditious.
3.7
Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted by the deadlines established
by the arbitrator. Expert reports must contain the following: (a) a complete statement of all opinions the expert will offer at
trial and the basis and reasons for them; (b) the expert’s name and qualifications, including a list of all publications
within the preceding 10 years, and a list of any other cases in which the expert has testified at trial or in a deposition or
prepared a report within the preceding 10 years; and (c) the compensation to be paid for the expert’s study and testimony.
The parties are entitled to depose any other party’s expert witness one time for no more than 4 hours. An expert may not
testify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.
3.8
All information disclosed by either party during the Arbitration process (including without limitation information disclosed during
the discovery process) shall be considered confidential in nature. Each party agrees not to disclose any confidential information
received from the other party during the discovery process unless (i) prior to or after the time of disclosure such information
becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party, (ii)
such information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notified
the other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competent
jurisdiction prior to disclosure; or (iii) disclosed to the receiving party’s agents, representatives and legal counsel
on a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5)
of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosure
of privileged information and confidential information upon the written request of either party.
3.9
The parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carry
out the parties’ intent for the arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the
Arbitration Act, the parties hereby agree that an award of the arbitrator must be made within 150 days after the Arbitration Commencement
Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the
Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony,
and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 150-day
period. The Utah Rules of Evidence will apply to any final hearing before the arbitrator.
Arbitration
Provisions, Page 3
3.10
The arbitrator shall have the right to award or include in the arbitrator’s award any relief which the arbitrator deems
proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitrator
may not award exemplary or punitive damages.
3.11
If any part of these Arbitration Provisions is found to violate applicable law or to be illegal, then such provision shall be
modified to the minimum extent necessary to make such provision enforceable under applicable law.
3.12
The arbitrator is hereby directed to require the losing party to (i) pay the full amount of the costs and fees of the arbitrator,
and (ii) reimburse the prevailing party the reasonable attorneys’ fees, arbitrator costs, deposition costs, and other discovery
costs incurred by the prevailing party.
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Arbitration
Provisions, Page 4
SECURED
CONVERTIBLE PROMISSORY NOTE
Effective
Date: October 28, 2014 |
U.S.
$215,000.00 |
FOR
VALUE RECEIVED, saleen
automotive,
inc.,
a Nevada corporation (“Borrower”), promises to pay to typenex
Co-investment,
LLC, a Utah limited liability company, or its successors or assigns (“Lender”), $215,000.00 and any
interest, fees, charges, and late fees on the date that is twelve (12) months after the Purchase Price Date (as defined below)
(the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding
Balance (as defined below) (including all Tranches (as defined below), both Conversion Eligible Tranches (as defined below) and
Subsequent Tranches (as defined below) that have not yet become Conversion Eligible Tranches) at the rate of ten percent
(10%) per annum from the Purchase Price Date until the same is paid in full. This Secured Convertible Promissory Note (this
“Note”) is issued and made effective as of October 28, 2014 (the “Effective Date”). For purposes
hereof, the “Outstanding Balance” of this Note means, as of any date of determination, the Purchase Price (as
defined below), as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion, offset,
or otherwise, plus any original issue discount (“OID”), the Transaction Expense Amount (as defined below),
accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer,
stamp, issuance and similar taxes and fees related to Conversions (as defined below), and any other fees or charges (including
without limitation late charges) incurred under this Note. This Note is issued pursuant to that certain Securities Purchase Agreement
dated October 28, 2014, as the same may be amended from time to time (the “Purchase Agreement”), by and between
Borrower and Lender. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve
(12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized
terms used herein but not otherwise defined shall have the meaning ascribed thereto in the Purchase Agreement. Certain other capitalized
terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This
Note carries an OID of $10,000.00. In addition, Borrower agrees to pay $5,000.00 to Lender to cover Lender’s legal fees,
accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this
Note (the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of
this Note. The purchase price for this Note shall be $200,000.00 (the “Purchase Price”), computed as follows:
$215,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable
by delivery to Borrower at Closing of the Investor Notes and a wire transfer of immediately available funds in the amount of the
Initial Cash Purchase Price (as defined in the Purchase Agreement). For purposes hereof, the term “Purchase Price Date”
means the date the Initial Cash Purchase Price is delivered by Lender to Borrower.
Notwithstanding
any other provision contained in this Note, the conversion by Lender of any portion of the Outstanding Balance shall only be exercisable
in six (6) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in an amount equal to
$83,750.00 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other
Transaction Documents (as defined in the Purchase Agreement) (the “Initial Tranche”), and (ii) five (5) additional
Tranches, each in the amount of $26,250.00, plus any interest, costs, fees or charges accrued thereon or added thereto under the
terms of this Note and the other Transaction Documents (each, a “Subsequent Tranche”). The Initial Tranche
shall correspond to the Initial Cash Purchase Price, $3,750.00 of the OID and the Transaction Expense Amount, and may be converted
any time subsequent to the Purchase Price Date. The first Subsequent Tranche shall correspond to Investor Note #1 and $1,250.00
of the OID, the second Subsequent Tranche shall correspond to Investor Note #2 and $1,250.00 of the OID, the third Subsequent
Tranche shall correspond to Investor Note #3 and $1,250.00 of the OID, the fourth Subsequent Tranche shall correspond to Investor
Note #4 and $1,250.00 of the OID, and the fifth Subsequent Tranche shall correspond to Investor Note #5 and $1,250.00 of the OID.
Lender’s right to convert any portion of any of the Subsequent Tranches is conditioned upon Lender’s payment in full
of the Investor Note corresponding to such Subsequent Tranche (upon the satisfaction of such condition, such Subsequent Tranche
becomes a “Conversion Eligible Tranche”). For the avoidance of doubt, subject to the other terms and conditions
hereof, the Initial Tranche shall be deemed a Conversion Eligible Tranche as of the Purchase Price Date for all purposes hereunder
and may be converted in whole or in part at any time subsequent to the Purchase Price Date, and each Subsequent Tranche that becomes
a Conversion Eligible Tranche may be converted in whole or in part at any time subsequent to the first date on which such Subsequent
Tranche becomes a Conversion Eligible Tranche. For all purposes hereunder, Conversion Eligible Tranches shall be converted (or
redeemed, as applicable) in order of the lowest- numbered Conversion Eligible Tranche. At all times hereunder, the aggregate amount
of any costs, fees or charges incurred by or assessable against Borrower hereunder, including, without limitation, any fees, charges
or premiums incurred in connection with an Event of Default (as defined below), shall be added to the lowest-numbered then-current
Conversion Eligible Tranche.
1.
Payment; Prepayment. All payments owing hereunder shall be in lawful money of the United States of America or Conversion
Shares (as defined below), as provided for herein, and delivered to Lender at the address furnished to Borrower for that purpose.
All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued
and unpaid interest, and thereafter, to (d) principal. Notwithstanding the foregoing, so long as Borrower has not received a Conversion
Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event
of Default has occurred since the Effective Date (whether declared by Lender or undeclared), then Borrower shall have the right,
exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note,
in full, in accordance with this Section 1. Any notice of prepayment hereunder (an “Optional Prepayment Notice”)
shall be delivered to Lender at its registered address and shall state: (y) that Borrower is exercising its right to prepay this
Note, and (z) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment
Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), Borrower shall make payment of the
Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower.
If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash (the “Optional
Prepayment Amount”) equal to 125% (the “Prepayment Premium”) multiplied by the then Outstanding Balance
of this Note. In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or
without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the
Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such
event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on
the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount
without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading
Days from the date that the Optional Prepayment Amount was delivered to Lender. In addition, if Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional
Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.
2. Security.
This Note is secured by that certain Security Agreement of even date herewith, as the same may be amended from time to time (the
“Security Agreement”), executed by Borrower in favor of Lender encumbering the Investor Notes, as more specifically
set forth in the Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this
Note.
3. Conversion.
3.1.
Conversion Price. Subject to the adjustments set forth herein, the conversion price for each Conversion (the “Conversion
Price”) shall be the higher of (a) $0,001 (the “Floor”) or (b) 65% (the “Conversion
Factor”) of the average of the three (3) lowest VWAPs in the twenty (20) Trading Days immediately preceding the
applicable Conversion, provided that if at any time the average of the three (3) lowest VWAPs in the twenty (20) Trading Days
immediately preceding any date of measurement is below $0.02, then in such event the then-current Conversion Factor shall be reduced
by 5% for all future Conversions (subject to other reductions set forth in this section). Additionally, if at any time after the
Effective Date, Borrower is not DWAC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for
all future Conversions. If at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current
Conversion Factor will automatically be reduced by an additional 5% for all future Conversions. Finally, in addition to the Default
Effect, if any Major Default occurs after the Effective Date, the Conversion Factor shall automatically be reduced for all future
Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance
of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions
in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time Borrower is
not DWAC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 65% to 60% for purposes of this
example. Following such event, the first time the Conversion Shares are no longer DTC Eligible, the Conversion Factor for future
Conversions thereafter will be reduced from 60% to 55% for purposes of this example. If, thereafter, there are three (3) separate
occurrences of a Major Default pursuant to Section 4.1(i), then for purposes of this example the Conversion Factor would be reduced
by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default. In no case
shall the Conversion Factor be reduced below 40%.
3.2.
Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid
in full, including without limitation until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice),
at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any
part of the Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common
stock, $0,001 par value per share (“Common Stock”), of Borrower as per the following conversion formula:
the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the
Conversion Price. Notwithstanding the foregoing, in the event the Conversion Price would be less than $0,001 but for the Floor,
instead of delivering Conversion Shares to Lender with respect to such Conversion, Borrower shall be required to deliver to Lender
an amount in cash equal to the number of Conversion Shares deliverable with respect to the applicable Conversion multiplied by
the VWAP of the Common Stock on the date the applicable Conversion Notice is delivered to Borrower. Conversion notices in the
form attached hereto as Exhibit A (each, a “Conversion Notice”) may be effectively delivered to Borrower
by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery),
and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion Shares
from any Conversion to Lender in accordance with Section 8 below within three (3) Trading Days of Lender’s delivery of the
Conversion Notice to Borrower.
4.
Defaults and Remedies.
4.1.
Defaults. The following are events of default under this Note (each, an “Event of Default”): (i) Borrower
shall fail to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; or (ii) Borrower
shall fail to deliver any Conversion Shares in accordance with the terms hereof; or (iii) a receiver, trustee or other similar
official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty
(20) days or shall not be dismissed or discharged within sixty (60) days; (iv) Borrower shall become insolvent or generally fails
to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any;
or (v) Borrower shall make a general assignment for the benefit of creditors; or (vi) Borrower shall file a petition for relief
under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or
filed against Borrower; or (viii) Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition
or agreement of Borrower contained herein or in any other Transaction Document, other than those specifically set forth in this
Section 4.1; or (ix) Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the
SEC or shall fail to timely file all required quarterly and annual reports and any other filings that are necessary to enable
Lender to sell Conversion Shares pursuant to Rule 144; or (x) any representation, warranty or other statement made or furnished
by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this
Note shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or (xi) the occurrence
of a Fundamental Transaction without Lender’s prior written consent; or (xii) Borrower shall fail to maintain the Share
Reserve as required under the Purchase Agreement; or (xiii) Borrower effectuates a reverse split of its Common Stock without twenty
(20) Trading Days prior written notice to Lender; or (xiv) any money judgment, writ or similar process shall be entered or filed
against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; or (xv) Borrower
shall fail to deliver to Lender original signature pages to all Transaction Documents within five (5) Trading Days of the Purchase
Price Date; or (xvi) Borrower is not DWAC Eligible.
4.2.
Remedies. Upon the occurrence of any Event of Default, Borrower shall within one (1) Trading Day deliver written notice
thereof via facsimile, email or reputable overnight courier (with next day delivery specified) (an “Event of Default
Notice”) to Lender. At any time and from time to time after the earlier of Lender’s receipt of an Event
of Default Notice and Lender becoming aware of the occurrence of any Event of Default, Lender may accelerate this Note by written
notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount
(as defined hereafter). Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may,
at its option, elect to increase the Outstanding Balance by applying the Default Effect (as defined below) (subject to the limitation
set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance
shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the
Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender
elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately
due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding
Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). For purposes hereof,
the “Default Effect” is calculated by multiplying the Conversion Eligible Outstanding Balance as of the date
the applicable Event of Default occurred by (i) 15% for each occurrence of any Major Default, or (ii) 5% for each occurrence of
any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default
occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event
of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults
and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to
any Event of Default pursuant to Section 4.1(ii) hereof. Notwithstanding the foregoing, upon the occurrence of any Event of Default
described in clauses (iii), (iv), (v), (vi) or (vii) of Section 4.1, the Outstanding Balance as of the date of acceleration shall
become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required
by Lender. The “Mandatory Default Amount” means the greater of (i) the Outstanding Balance (including all Tranches,
both Conversion Eligible Tranches and Subsequent Tranches that have not yet become Conversion Eligible Tranches) divided by the
Conversion Price (as defined below) on the date the Mandatory Default Amount is demanded, multiplied by the volume weighted average
price (the “VWAP”) on the date the Mandatory Default Amount is demanded (subject to a limit of $0,001), or
(ii) the Default Effect. At any time following the occurrence of any Event of Default, upon written notice given by Lender to
Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an
interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law (“Default
Interest”). Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Conversion
in cash instead of Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount
equal to the number of Conversion Shares set forth in the applicable Conversion Notice multiplied by the highest intra-day trading
price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending
on the date of the applicable Conversion Notice. In connection with acceleration described herein, Lender need not provide, and
Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all
rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such
rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall
limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares
upon Conversion of the Notes as required pursuant to the terms hereof.
4.3.
Cross Default. A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements
(as defined below) shall, at the option of Lender, be considered an Event of Default under this Note, in which event Lender shall
be entitled (but in no event required) to apply all rights and remedies of Lender under the terms of this Note. “Other
Agreements” means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower
(or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects Borrower’s ongoing business operations. For the avoidance of doubt, all existing and future loan
transactions between Borrower and Lender and their respective affiliates will be cross-defaulted with each other loan transaction
and with all other existing and future debt of Borrower to Lender.
5. Unconditional
Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation
of Borrower not subject to offset (except as set forth in Section 18 below), deduction or counterclaim of any kind. Borrower hereby
waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the
payments or conversions called for herein in accordance with the terms of this Note.
6. Waiver.
No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting
the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or
consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent
or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
7.
Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof,
if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any
time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will
be proportionately increased. Any adjustment pursuant to this Section 7 shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment under this Section 7 occurs during the period that
a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect
such event.
8.
Method of Conversion Share Delivery. On or before the close of business on the third (3rd) Trading Day following
the date of delivery of a Conversion Notice, as applicable (the “Delivery Date”), Borrower shall, provided
it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically
via DWAC to the account designated by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible, it shall deliver
to Lender or its broker (as designated in the Conversion Notice, as applicable), via reputable overnight courier, a certificate
representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall be entitled,
registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion
Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the
applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth
above.
9.
Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframes stated in Sections
2 and 8, Lender, at any time prior to selling ail of those Conversion Shares, may rescind in whole or in part that particular
Conversion attributable to the unsold Conversion Shares, with a corresponding increase to the Outstanding Balance (any returned
Conversion Amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In
addition, for each Conversion, in the event that Conversion Shares are not delivered by the fourth Trading Day (inclusive of the
day of the Conversion), a late fee equal to the greater of (a) $500.00 per day and (b) 2% of the applicable Conversion Share Value
rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Conversion shall
not exceed 200% of the applicable Conversion Share Value) will be assessed for each day after the third Trading Day (inclusive
of the day of the Conversion) until Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance
(such fees, the “Conversion Delay Late Fees”). For illustration purposes only, if Lender delivers a Conversion
Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Conversion Shares to Lender and on the Delivery Date
such Conversion Shares have a Conversion Share Value of $20,000.00 (assuming a Closing Sale Price on the Delivery Date of $0.20
per share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00
per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Conversion
Shares are delivered to Lender. For purposes of this example, if the Conversion Shares are delivered to Lender twenty (20) days
after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would
be $10,000.00 (20 days multiplied by $500.00 per day). If the Conversion Shares are delivered to Lender one hundred (100) days
after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would
be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Conversion Share Value).
10.
Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents,
if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance
would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares
of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the
“Maximum Percentage”), then Borrower must not issue to Lender shares of the Common Stock which would exceed
the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section
13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are
referred to herein as the “Ownership Limitation Shares”. Borrower will reserve the Ownership Limitation Shares
for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation
Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower
shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the
number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced
with “9.99%” at such time as the Market Capitalization of the Common Stock is less than $10,000,000.00. Notwithstanding
any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding
sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth
below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such
waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable,
unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.
11. Payment
of Collection Costs. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing
arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise
takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the reasonable
costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements.
Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion
or issuance of shares pursuant to this Note.
12. Opinion
of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to
have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s
counsel.
13. Governing
Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase
Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
14. Resolution
of Disputes.
14.1. Arbitration
of Disputes. By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions set forth as an Exhibit
to the Purchase Agreement.
14.2. Calculation
Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculations (as defined in the Purchase
Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.
15. Cancellation.
After repayment or conversion of the entire Outstanding Balance this Note shall be deemed paid in full, shall automatically be
deemed canceled, and shall not be reissued.
16. Amendments.
The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
17. Assignments.
Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued
upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.
18. Offset
Rights. Notwithstanding anything to the contrary herein or in any of the other Transaction Documents, (a) the parties hereto
acknowledge and agree that Lender maintains a right of offset pursuant to the terms of the Investor Notes that, under certain
circumstances, permits Lender to
IN
WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
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BORROWER: |
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SALEEN
AUTOMOTIVE,
INC. |
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By: |
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Name: |
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Title: |
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ACKNOWLEDGED,
ACCEPTED AND AGREED:
LENDER:
Typenex
Co-Investment, LLC
By: |
Red
Cliffs Investments, Inc., its Manager |
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By: |
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John M. Fife,
President |
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[Signature
Page to Secured Convertible Promissory Note]
ATTACHMENT
1
DEFINITIONS
For
purposes of this Note, the following terms shall have the following meanings:
Al.
“Approved Stock Plan” means any stock option plan which has been approved by the board of directors of Borrower,
pursuant to which Borrower’s securities may be issued to any employee, officer or director for services provided to Borrower.
A2.
“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on its principal market, as reported
by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid
price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in “OTC Pink” by Pink OTC Markets Inc. (formerly Pink Sheets LLC), and any successor
thereto. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall
be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair
market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 14.2. All such
determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction
during such period.
A3.
“Conversion Eligible Outstanding Balance” means the Outstanding Balance of this Note less the sum of the outstanding
balances of each Subsequent Tranche that has not yet become a Conversion Eligible Tranche (i.e., Lender has not yet paid the outstanding
balance of the Investor Note that corresponds to such Subsequent Tranche).
A4.
“Conversion Share Value” means the product of the number of Conversion Shares deliverable pursuant to any Conversion
multiplied by the Closing Sale Price of the Common Stock on the Delivery Date for such Conversion.
A5.
“DTC” means the Depository Trust Company.
A6.
“DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited
in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm
servicing Lender’s brokerage firm for the benefit of Lender.
A7.
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer Program.
A8.
“DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.
A9.
“DWAC Eligible” means that (i) Borrower’s Common Stock is eligible at DTC for full services pursuant
to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system, (ii) Borrower
has been approved (without revocation) by the DTC’s underwriting department, (iii) Borrower’s transfer agent is approved
as an agent in the DTC/FAST Program, (iv) the Conversion Shares are otherwise eligible for delivery via DWAC; (v) Borrower has
previously delivered all Conversion Shares to Lender via DWAC; and (vi) Borrower’s transfer agent does not have a policy
prohibiting or limiting delivery of the Conversion Shares via DWAC.
A10.
“Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or issuable
in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any
issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date.
All.
“Fundamental Transaction” means that (y) (i)
Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with
or into (whether or not Borrower or any
Attachment
1 to Secured Convertible Promissory Note, Page 1
EXHIBIT
A
Typenex
Co-Investment, LLC
303
East Wacker Drive, Suite 1200
Chicago,
Illinois 60601
Saleen
Automotive, Inc.
Attn:
Steve Saleen
2375
Wardlow Road
Corona,
California 92882
CONVERSION
NOTICE
The
above-captioned Lender hereby gives notice to Saleen Automotive, Inc., a Nevada corporation (the “Borrower”),
pursuant to that certain Secured Convertible Promissory Note made by Borrower in favor of Lender on October 28, 2014 (the “Note”),
that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common
Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Conversion Price set forth
below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form of Conversion Notice to conform to the Note. Capitalized
terms used in this notice without definition shall have the meanings given to them in the Note.
A. Date
of Conversion: _________
B. Conversion
#: _______________
C. Conversion
Amount: ________________
D. Conversion
Price: _________________
E. Conversion
Shares: _________________ (C divided by D)
F. Remaining
Outstanding Balance of Note: *
G. Remaining
balance of Investor Notes: *
H. Outstanding
Balance of Note net of balance of Investor Notes:________________ * (F minus G)
*
Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined
in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Conversion
Notice and such Transaction Documents.
The
Conversion Amount converted hereunder shall be deducted from the following Conversion Eligible Tranche(s):
Conversion
Amount |
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Tranche
No. |
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Exhibit
A to Secured Convertible Promissory Note, Page 1
Please
transfer the Conversion Shares electronically (via DWAC) to the following account:
Broker:
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Address:
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DTC#: |
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Account
#: |
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Account
Name: |
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To
the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated
shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise)
to:
Sincerely, |
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Lender: |
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Typenex
Co-Investment, LLC |
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By: |
Red Cliffs Investments,
Inc., its Manager |
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By: |
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John M. Fife,
President |
|
Exhibit
A to Secured Convertible Promissory Note, Page 2
EXHIBIT
B
Saleen
Automotive, Inc.
2375
Wardlow Road
Corona, California 92882
Typenex
Co-Investment, LLC |
Date:
|
Attn:
John Fife
303
East Wacker Dr., Suite 1200
Chicago, Illinois 60601
NOTICE
OF EXERCISE
OF
BORROWER OFFSET RIGHT
The
above-captioned Borrower hereby gives notice to Typenex Co-Investment, LLC, a Utah limited liability company (the “Lender”),
pursuant to that certain Secured Convertible Promissory Note made by Borrower in favor of Lender on October 28, 2014 (the “Note”),
of Borrower’s election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this
Notice of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without
definition shall have the meanings given to them in the Note.
A. Effective
Date of Offset:______________ , 201_
B. Amount
of Offset: __________________
C. Investor
Note(s) Being Offset: _____________
*
Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined
in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Notice of Exercise
of Borrower Offset Right and such Transaction Documents.
Sincerely,
Borrower:
SALEEN
AUTOMOTIVE,
INC. |
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By: |
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Name: |
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Title: |
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Exhibit
B to Secured Convertible Promissory Note, Page 1
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SLNN |
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$400,000
CONVERTIBLE NOTE |
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Interest
free if paid in full within 3 months |
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FOR
VALUE RECEIVED, Saleen Automotive Inc., a Nevada corporation (the “Issuer”
of this Security) with at least 152,154,872 common shares issued and outstanding, issues this Security and promises to pay to
JMJ Financial, a Nevada sole proprietorship, or its Assignees (the “Investor”) the Principal Sum along with the Interest
Rate and any other fees according to the terms herein. This Note will become effective only upon execution by both parties and
delivery of the first payment of Consideration by the Investor (the “Effective Date”).
The
Principal Sum is $400,000 (four hundred thousand) plus accrued and unpaid interest and any other fees. The Consideration is $360,000
(three hundred sixty thousand) payable by wire (there exists a $40,000 original issue discount (the “OID”)). The Investor
shall pay $60,000 of Consideration upon closing of this Note. The Investor may pay additional Consideration to the Issuer in such
amounts and at such dates as the Investor may choose in its sole discretion. THE PRINCIPAL
SUM DUE TO THE INVESTOR SHALL BE PRORATED BASED ON THE CONSIDERATION ACTUALLY PAID BY INVESTOR (PLUS AN APPROXIMATE 10% ORIGINAL
ISSUE DISCOUNT THAT IS PRORATED BASED ON THE CONSIDERATION ACTUALLY PAID BY THE INVESTOR AS WELL AS ANY OTHER INTEREST OR FEES)
SUCH THAT THE ISSUER IS ONLY REQUIRED TO REPAY THE AMOUNT FUNDED AND THE ISSUER IS NOT REQUIRED TO REPAY ANY UNFUNDED PORTION
OF THIS NOTE. The Maturity Date is two years from the Effective Date of each payment (the “Maturity Date”)
and is the date upon which the Principal Sum of this Note, as well as any unpaid interest and other fees, shall be due and payable.
The Conversion Price is 60% of the lowest trade price in the 25 trading days previous to the conversion (In the case that conversion
shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the
DTC system and only eligible for Xclearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative
15% discount shall apply), provided, however, that unless otherwise agreed by mutual written agreement the Conversion Price shall
not be less than $0.00005 (not subject to adjustment for stock splits). Unless otherwise agreed in writing by both parties, at
no time will the Investor convert any amount of the Note into common stock that would result in the Investor owning more than
4.99% of the common stock outstanding.
1. ZERO
Percent Interest for the First Three Months. The Issuer may repay this Note at any time on or before 90
days from the Effective Date, after which the Issuer may not make further payments on this Note prior to the Maturity Date without
written approval from the Investor. If the Issuer repays a payment of Consideration on
or before 90 days from the Effective Date of that payment, the Interest Rate on that payment of Consideration shall be ZERO PERCENT
(0%). If the Issuer does not repay a payment of Consideration on or before 90 days from its Effective Date, a one-time
Interest charge of 12% shall be applied to the Principal Sum. Any interest payable is in addition to the OID, and that OID (or
prorated OID, if applicable) remains payable regardless of time and manner of payment by the Issuer.
2. Conversion.
The Investor has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and
unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock
of the Issuer as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount
divided by the Conversion Price. Conversions may be delivered to the Issuer by method of the Investor’s choice (including
but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and
not require further payment from the Investor. If no objection is delivered from the Issuer to the Investor regarding any variable
or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Issuer shall have been thereafter
deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The
Issuer shall deliver the shares from any conversion to the Investor (in any name directed by the Investor) within 3 (three) business
days of conversion notice delivery.
3. Conversion
Delays. If the Issuer fails to deliver shares in accordance with the timeframe stated in Section 2, the Investor, at any time
prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable
to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares
returned to the Issuer (under the Investor’s and the Issuer’s expectations that any returned conversion amounts will
tack back to the original date of the Note). In addition, for each conversion, in the event that shares are not delivered by the
fourth business day (inclusive of the day of conversion), a penalty of $2,000 per day will be assessed for each day after the
third business day (inclusive of the day of the conversion) until share delivery is made; and such penalty will be added to the
Principal Sum of the Note (under the Investor’s and the Issuer’s expectations that any penalty amounts will tack back
to the original date of the Note).
4. Reservation
of Shares. At all times during which this Note is convertible, the Issuer will reserve from its authorized and unissued Common
Stock to provide for the issuance of Common Stock upon the full conversion of this Note. The Issuer will at all times reserve
at least 40,000,000 shares of Common Stock for conversion.
5. This
Section 5 intentionally left blank
6. This
Section 6 intentionally left blank
7. Default.
The following are events of default under this Note: (i) the Issuer shall fail to pay any principal under the Note when due and
payable (or payable by conversion) thereunder; or (ii) the Issuer shall fail to pay any interest or any other amount under the
Note when due and payable (or payable by conversion) thereunder; or (iii) a receiver, trustee or other similar official shall
be appointed over the Issuer or a material part of its assets and such appointment shall remain uncontested for twenty (20) days
or shall not be dismissed or discharged within sixty (60) days; or (iv) the Issuer shall become insolvent or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or
(v) the Issuer shall make a general assignment for the benefit of creditors; or (vi) the Issuer shall file a petition for relief
under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or
filed against the Issuer; or (viii) the Issuer shall lose its status as “DTC Eligible” or the Issuer’s shareholders
shall lose the ability to deposit (either electronically or by physical certificates, or otherwise) shares into the DTC System;
or (ix) the Issuer shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC; or
(x) the Issuer shall fail to meet all requirements to satisfy the availability of Rule 144 to the Investor or its assigns including
but not limited to timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements
for XBRL filings, and requirements for disclosure of financial statements on its website.
8. Remedies.
In the event of any default, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages,
fees and other amounts owing in respect thereof through the date of acceleration, shall become, at the Investor’s election,
immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the greater of (i) the
outstanding principal amount of this Note, plus all accrued and unpaid interest, liquidated damages, fees and other amounts hereon,
divided by the Conversion Price on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a lower
Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either demanded or paid in full, whichever
has a higher VWAP, or (ii) 150% of the outstanding principal amount of this Note, plus 100% of accrued and unpaid interest, liquidated
damages, fees and other amounts hereon. Commencing five (5) days after the occurrence of any event of default that results in
the eventual acceleration of this Note, the interest rate on this Note shall accrue at an interest rate equal to the lesser of
18% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Investor
need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice of any kind, and the Investor
may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Investor at any time prior
to payment hereunder and the Investor shall have all rights as a holder of the note until such time, if any, as the Investor receives
full payment pursuant to this Section 8. No such rescission or annulment shall affect any subsequent event of default or impair
any right consequent thereon. Nothing herein shall limit the Investor’s right to pursue any other remedies available to
it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to
the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the Note as required
pursuant to the terms hereof.
9. No
Shorting. The Investor agrees that so long as this Note from the Issuer to the Investor remains outstanding, the Investor
will not enter into or effect “short sales” of the Common Stock or hedging transaction which establishes a net short
position with respect to the Common Stock of the Issuer. The Issuer acknowledges and agrees that upon delivery of a conversion
notice by the Investor, the Investor immediately owns the shares of Common Stock described in the conversion notice and any sale
of those shares issuable under such conversion notice would not be considered short sales.
10. Assignability.
The Issuer may not assign this Note. This Note will be binding upon the Issuer and its successors and will inure to the benefit
of the Investor and its successors and assigns and may be assigned by the Investor to anyone without the Issuer’s approval.
11. Governing
Law. This Note will be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without
regard to the conflict of laws principles thereof. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of Florida or in the federal courts located in Miami-Dade
County, in the State of Florida. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of
such courts.
12. Delivery
of Process by the Investor to the Issuer. In the event of any action or proceeding by the Investor against the Issuer, and
only by the Investor against the Issuer, service of copies of summons and/or complaint and/or any other process which may be served
in any such action or proceeding may be made by the Investor via U.S. Mail, overnight delivery service such as FedEx or UPS, email,
fax, or process server, or by mailing or otherwise delivering a copy of such process to the Issuer at its last known attorney
as set forth in its most recent SEC filing.
13. Attorney
Fees. If any attorney is employed by either party with regard to any legal or equitable action, arbitration or other proceeding
brought by such party for enforcement of this Note or because of an alleged dispute, breach, default or misrepresentation in connection
with any of the provisions of this Note, the prevailing party will be entitled to recover from the other party reasonable attorneys’
fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
14. Opinion
of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, the Investor has the right
to have any such opinion provided by its counsel. Investor also has the right to have any such opinion provided by Issuer’s
counsel.
15. Notices.
Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent
by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of
transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier
service for delivery.
Issuer: |
|
Investor: |
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|
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/s/
Steve Saleen |
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|
Steve
Saleen |
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JMJ
Financial |
Saleen
Automotive, Inc. |
|
Its
Principal |
Chief
Executive Officer |
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Date: _______________ |
|
Date: _______________ |
[Signature
Page to $400,000 Convertible Note]