ABAKAN, INC - FORM 8-K - EX-10 - SECURITY AND EXCHANGE AGREEMENT APRIL 28TH 2014

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8-K - ABAKAN 8-K GEORGETOWN APR 29TH 2014 - ABAKAN, INC	abakangeorgetown8k.htm

Exhibit 10

Execution Copy

SECURITIES EXCHANGE AGREEMENT

This SECURITIES EXCHANGE AGREEMENT (the “Agreement”), dated as of April 28, 2014, by

and between ABAKAN INC., a Nevada corporation, with headquarters located at 2665 S. Bayshore

Drive, Suite 450, Miami, Florida 33133 (the “Company”), MESOCOAT, INC., a Nevada corporation,

with headquarters located at 24112 Rockwell Drive, Euclid, Ohio 44117 (“MesoCoat”) and GEORGE

TOWN ASSOCIATES S.A., a Panama corporation with headquarters located at Samuel Lewis Ave. &

53rd Street, Omega Building Mezanine, Panama, Republic of Panama (the “Lender”).

WHEREAS:

As of the date hereof, MesoCoat, a majority owned subsidiary of the Company, has five

outstanding loans from Kyrtos Limited, a British Virgin Islands company (“Kyrtos”) in an aggregate

amount of $1,309,000, all of which plus accrued interested remains outstanding, all as evidenced by five

Secured Promissory Notes issued by MesoCoat to Kyrtos (collectively the “Existing Notes”).

The Existing Notes have been assigned by Kyrtos to the Lender.

The Company, MesoCoat and the Lender have agreed to exchange the Existing Notes for (1) a

new convertible note of the Company, in the form attached hereto as Exhibit A, in the principal amount of

$1,341,963.34 (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 “New Note”), convertible into

units consisting of shares of Company common stock, $0.0001 par value per share (the “Shares”), and

warrants to purchase shares of Company common stock (the “Warrants”), upon the terms and subject to

the limitations and conditions set forth in such New Note, and (2) a Subsidiary Guarantee by MesoCoat in

favor of the Lender, guarantying the satisfaction of all of the Company’s obligations under the New Note,

in the form attached hereto as Exhibit B (the “Subsidiary Guarantee”).

In connection with the foregoing transactions, the Company and MesoCoat have agreed to amend

and restate that certain Security Agreement, dated as of October 30, 2013, by MesoCoat in favor of

Kyrtos, which has been heretofore assigned to the Lender, and such amended and restated Security

Agreement shall be in the from attached hereto as Exhibit C, and provide that the Company’s obligations

under the New Note and MesoCoat’s obligations under the Guarantee will be continue to be secured by

all of the assets of MesoCoat (the “Security Agreement”).

The Company and the Lender are executing and delivering this Agreement in reliance upon

exemptions from securities registration afforded by the rules and regulations as promulgated by the

United States Securities and Exchange Commission (the “Commission”) under the Securities Act of

1933, as amended (the “Securities Act”).

NOW THEREFORE, in consideration of the foregoing and such other consideration as the parties mutually

agree, the parties hereto agree as follows:

Recitals. The recitals set forth above are accurate, represent the intent of the parties hereto and

are incorporated herein by reference.

Exhibit 10

Exchange of Existing Notes and Guarantee for New Note.

Issuance of New Note. On the Closing Date (as defined below), the Company shall issue

and deliver the New Note to the Lender. The New Note shall be issued to the Lender, and the

Subsidiary Guarantee and Security Agreement shall be executed and delivered for the benefit of

the Lender, all in exchange for the Existing Notes, without the payment of any additional

consideration.

Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set

forth in Sections 12 and 13 below, the date and time of the issuance and delivery of the New Note

and surrender of the Existing Notes pursuant to this Agreement (the “Closing Date”) shall be

12:00 noon, Eastern Standard Time on or before April 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.

Expenses. At the Closing, the Company shall pay all expenses and costs of the Lender

(including, without limitation, the attorney fees and expenses of counsel for Lender, all as

reasonable incurred) in connection with the preparation, negotiation, execution and approval of

this Agreement and any and all other documents, instruments and things contemplated hereby,

whether or not such transactions are consummated.

Lender’s Representations and Warranties. The Lender represents and warrants to the Company

and MesoCoat that:

Investment Purpose. As of the date hereof, the Lender is acquiring the New Note and the

Shares and Warrants issuable upon conversion of or otherwise pursuant to the New Note

(including, without limitation, such additional Shares and Warrants, if any, as are issuable as a

result of the events described in the New Note or pursuant to this Agreement) (such Shares and

Warrants being collectively referred to herein as the “Conversion Units” and, collectively with

the New 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 Securities Act; provided, however, that by making the representations

herein, the Lender 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 U.S. federal

and state securities laws applicable to such disposition.

Lender Status.

(i)

The Lender is not a “U.S. person” as that term is defined in Rule 902 of

Regulation S under the Securities Act, and is not acquiring the Securities for the

account or benefit of any U.S. person;

(ii)

The Lender is not, and at Closing will not be, an affiliate of the Company;

(iii)

As of the date this Agreement was executed and delivered, and on the Closing

Date, Lender was outside the United States; no offer to purchase the Securities

was made in the United States and the transactions contemplated hereby have not

been and will not be pre-arranged by the Lender with a purchaser located in the

United States or who is a U.S. person;

Securities Exchange Agreement

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Exhibit 10

(iv)

All offers or sales of the Securities made before the expiration of the six month

“distribution compliance period” (which begins on the date of the final closing of

the offering and ending 180 days thereafter) shall not be made to a U.S. person or

for the account or benefit of a U.S. person (other than a distributor) unless such

Securities are registered under the Securities Act or a valid exemption can be

relied upon under both the appropriate U.S. state or federal securities laws;

(v)

Lender hereby agrees that Lender will resell the Securities only in accordance

with the provisions of Regulation S, pursuant to registration under the Securities

Act, or pursuant to an available exemption from registration, and Lender shall not

engage in hedging transactions with regard to such Securities unless in

compliance with the Securities Act;

(vi)

Lender is not an underwriter or dealer in the Securities and is not a distributor or

participating, pursuant to contractual agreement, in the distribution of such

Securities;

(vii)

Each distributor participating in offering the Securities, if any, has agreed in

writing that all offers and sales of the Securities prior to the expiration of the

“distribution compliance period” shall only be made in compliance with the safe

harbor contained in Rules 903 or 904 of Regulation S, pursuant to registration of

such Securities under the Securities Act, or pursuant to an exemption from

registration; and each distributor has further agreed in writing not to engage in

hedging transactions regarding the Securities unless in compliance with the

Securities Act;

(viii) All offering documents received by Lender include statements to the effect that

the Securities have not been registered under the Securities Act and may not be

offered or sold in the United States or to U.S. persons (other than distributors as

defined in Regulation S) during the “distribution compliance period” unless such

Securities are registered under the Securities Act or an exemption from the

registration requirements is available;

(ix)

Lender acknowledges that receipt of the Securities involves a high degree of risk

and further acknowledges that it can bear the economic risk of the acquiring of

such Securities, including the total loss of its investment;

(x)

Lender understands that the Securities are being offered and issued in reliance on

specific exemptions from the registration requirements of federal and state

securities laws and that the Company is relying on the truth and accuracy of the

representations, warranties, and agreements of Lender set forth herein in order to

determine the applicability of such exemptions and the suitability of Investor to

acquire such securities;

(xi)

Lender is sufficiently experienced in financial and business matters to be capable

of evaluating the merits and risks of receiving the Securities and to make an

informed decision relating thereto;

(xii)

In evaluating its investment, Lender has consulted its own investment and/or

legal and/or tax advisors; and

Securities Exchange Agreement

Page 3

Exhibit 10

(xiii) Lender understands that in the Commission’s view, the statutory basis for the

exemption claimed for this transaction would not be available if the offering,

though in technical compliance with Regulation S, is part of a plan or scheme to

evade the registration provisions of the Securities Act; and Lender confirms that

this transaction is not part of any such plan or scheme. Lender is acquiring the

New Note and the underlying Conversion Units for investment purposes and has

no present intention to sell such Securities in the United States or to a U.S.

person or for the account or benefit of a U.S. person either now or promptly after

the expiration of the “distribution compliance period.”

Reliance on Exemptions. The Lender understands that the Securities are being offered

and sold to it in reliance upon specific exemptions from the registration requirements of U.S

federal and state securities laws and that the Company is relying upon the truth and accuracy of,

and the Lender’s compliance with, the representations and warranties, agreements,

acknowledgments and understandings of the Lender in this Section 3 in order to determine the

availability of such exemptions and the eligibility of the Lender to acquire the Securities.

Information. The Lender and its advisors, if any, have been, and for so long as the New

Note remains 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 Lender or its advisors. The Lender and its advisors,

if any, have been, and for so long as the New Note remains outstanding will continue to be,

afforded the opportunity to ask questions of and receive answers from representatives of the

Company, its officers, directors, employees and agents concerning the Company in order for the

Lender to make an informed decision with respect to its investment in the Securities.

Notwithstanding the foregoing, the Company has not disclosed to the Lender 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 Lender. Neither such inquiries

nor any other due diligence investigation conducted by Lender or any of its advisors or

representatives shall modify, amend or affect Lender’s right to rely on the Company’s and

MesoCoat’s representations and warranties contained in Sections 4 and 5 below. The Lender is

not aware of any facts that may constitute a breach of any of the Company’s representations and

warranties made herein.

Governmental Review. The Lender 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.

Transfer or Re-sale. The Lender acknowledges that the Securities have not been and are

not being registered under the Securities Act and may not be transferred or resold without

registration under the Securities Act or unless pursuant to an exemption therefrom.

Legends. The Lender understands that unless the Securities underlying the Conversion

Units have been registered under the Securities Act or the Securities may be sold pursuant to Rule

144 promulgated under the Securities Act (or a successor rule) (“Rule 144”) without any

restriction as to the number of Securities as of a particular date that can then be immediately sold,

the Securities shall bear a restrictive legend in substantially the following form:

Securities Exchange Agreement

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Exhibit 10

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

(“COMMISSION”) OR THE SECURITIES COMMISSION OF ANY STATE

BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM

REGISTRATION UNDER REGULATION “S” PROMULGATED UNDER

THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”).

THESE SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED

STATES OR TO U.S. PERSONS (I) IN THE ABSENCE OF (A) AN

EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES

UNDER THE SECURITIES ACT, OR (B) AN OPINION OF COUNSEL, 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.”

Notwithstanding the foregoing, the legend set forth above shall be removed and the Company

shall issue a certificate without such legend to the holder of any Securities upon which it is

stamped, if, unless otherwise required by applicable state securities laws, (a) such Securities are

registered for sale under an effective registration statement filed under the Securities 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, 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 Securities may be

made without registration under the Securities Act, which opinion shall be accepted by the

Company so that the sale or transfer is effected. The Lender 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 Lender with respect to the

transfer of Securities pursuant to an exemption from registration, such as Rule 144, it will be

considered an Event of Default pursuant to Section 3.2 of the New Note.

Authorization; Enforcement. This Agreement has been duly and validly authorized,

executed and delivered on behalf of the Lender, and constitutes a valid and binding agreement of

the Lender enforceable in accordance with its terms.

Securities Exchange Agreement

Page 5

Exhibit 10

Representations and Warranties of the Company. The Company and MesoCoat, jointly and

severally, represent and warrant to the Lender that:

Organization and Qualification. The Company and each of its Subsidiaries (as defined

below) 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. 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” or

“Subsidiary” means any corporation or other organization, whether incorporated or

unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership

interest, which such entities are disclosed in the Commission Documents (defined below in

Section 4(g)).

Authorization; Enforcement. (i) The Company has the requisite corporate power and

authority to enter into and perform this Agreement and the Security Agreement, issue the New

Note and to consummate the transactions contemplated hereby and on conversion to issue the

Securities, in accordance with the terms hereof, (ii) the execution and delivery of this Agreement,

the Security Agreement, the New Note and the consummation by it of the transactions

contemplated hereby (including, without limitation, the issuance of the New Note and the

issuance and reservation for the issuance of the Securities underlying the Conversion Units

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 and the Security Agreement have 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 to bind the Company accordingly, and (iv)

this Agreement and the Security Agreement constitute, and upon execution and delivery by the

Company of the New 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.

Securities Exchange Agreement

Page 6

Exhibit 10

Capitalization. As of the date hereof, the authorized capital stock of the Company

consists of 2,500,000,000 shares of common stock, $0.0001 par value per share, of which

66,254,815 shares are issued and outstanding, there are no authorized shares of preferred stock,

4,166,667 shares of common stock are reserved for issuance pursuant to the Company’s stock

option plan, 2,136,397 shares are reserved for issuance pursuant to outstanding warrants

exercisable or convertible into or exchangeable for shares, 3,300,000 shares are reserved for

issuance pursuant to outstanding convertible notes and 2,516,181 shares are reserved for issuance

upon conversion of the New Note into Shares and the exercise of the Warrants. All of such

outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued,

fully paid and non-assessable. 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 date of

this Agreement, (i) except as disclosed above, 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 Securities 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 New Note or the securities underlying the Conversion Units. The Company has

furnished to the Lender true and correct copies of the Company’s Articles of Incorporation as in

effect on the date hereof (“Articles 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

Shares of the Company and the material rights of the holders thereof in respect thereto.

Issuance of Conversion Units. The Securities underlying the Conversion Units are duly

authorized and reserved for issuance and, upon conversion of the New 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.

Acknowledgment of Dilution. The Company understands and acknowledges the

potentially dilutive effect of the Securities underlying the Conversion Units upon conversion of

the New Note. The Company further acknowledges that its obligation to issue the Securities

underlying the Conversion Units upon conversion of the New Note in accordance with this

Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may

have on the ownership interests of other shareholders of the Company.

Securities Exchange Agreement

Page 7

Exhibit 10

No Conflicts. The execution, delivery and performance of this Agreement, the Security

Agreement, the New 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 Securities underlying the Conversion Units) will not (i) conflict

with or result in a violation of any provision of the Articles 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 Articles 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 Lender 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 Securities Act and any applicable state securities laws, the Company is

not required to obtain any consent, authorization or order of, or make any filing or registration

with, any court, 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 Security Agreement, the New Note in accordance with the terms hereof or

thereof or to issue the New Note in accordance with the terms hereof and to issue the Securities

upon conversion of the New 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. The Company is not in violation of the quotation

requirements of the OTC Market Group (the “OTCQB”) and does not reasonably anticipate that

the Shares will be no longer eligible for quotation on the OTCQB 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.

Securities Exchange Agreement

Page 8

Exhibit 10

Commission Documents; Financial Statements. The Company has filed all reports,

schedules, forms, statements and other documents required to be filed by it with the Commission

pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the

“Exchange 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

“Commission Documents”). Upon written request, the Company will deliver to the Lender true

and complete copies of the Commission Documents, except for such exhibits and incorporated

documents. As of their respective dates, the Commission Documents complied in all material

respects with the requirements of the Exchange Act and the rules and regulations of the

Commission promulgated thereunder applicable to the Commission Documents, and none of the

Commission Documents, at the time they were filed with the Commission, 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 Commission 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 Commission

Documents complied as to form in all material respects with applicable accounting requirements

and the published rules and regulations of the Commission 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 Commission

Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities

incurred in the ordinary course of business subsequent to February 28, 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 Exchange

Act.

Absence of Certain Changes. Since February 28, 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 Exchange Act reporting status

of the Company or any of its Subsidiaries.

Absence of Litigation. 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. The Company and

its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the

foregoing.

Securities Exchange Agreement

Page 9

Exhibit 10

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. 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.

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.

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 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.

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 in the Commission Documents, 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.

Securities Exchange Agreement

Page 10

Exhibit 10

Disclosure. All information relating to or concerning the Company or any of its

Subsidiaries set forth in this Agreement and provided to the Lender 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 Exchange Act are being incorporated into an effective

registration statement filed by the Company under the Securities Act).

Acknowledgment Regarding Lender’s Acquiring of Securities.

The Company

acknowledges and agrees that the Lender is acting solely in the capacity of an arm’s length

purchaser with respect to this Agreement and the transactions contemplated hereby. The

Company further acknowledges that the Lender 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 Lender 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 Lender’s acquiring of

the Securities. The Company further represents to the Lender that the Company’s decision to

enter into this Agreement has been based solely on the independent evaluation of the Company

and its representatives.

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 Securities Act of the issuance of the Securities to the Lender. The issuance of the Securities

to the Lender 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.

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.

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 February 28, 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.

Securities Exchange Agreement

Page 11

Exhibit 10

Environmental Matters.

(i)

There are, 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.

Title to Property. The Company and its Subsidiaries have 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 the Commission Documents 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.

Securities Exchange Agreement

Page 12

Exhibit 10

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 are

reasonably sufficient and customary in the businesses in which the Company and its Subsidiaries

are engaged. As of the date hereof and as of the Closing Date, no notice of cancellation has been

received for any of such policies and the Company is in compliance in all material respects with

all of the terms and conditions thereof. 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 without a significant increase in cost. Upon written request, the Company

will provide to the Lender true and correct copies of all policies relating to directors’ and officers’

liability coverage, errors and omissions coverage, and commercial general liability coverage.

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.

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.

Solvency. The Company (after giving effect to the transactions contemplated by this

Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to

pay its probable liabilities on its existing debts as they become absolute and matured) and

currently the Company has no information that would lead it to reasonably conclude that the

Company would not, after giving effect to the transaction contemplated by this Agreement, have

the ability to, nor does it intend to take any action that would impair its ability to, pay its debts

from time to time incurred in connection therewith as such debts mature. The Company did not

receive a qualified opinion from its auditors with respect to its most recent fiscal year end and,

after giving effect to the transactions contemplated by this Agreement, does not anticipate or

know of any basis upon which its auditors might issue a qualified opinion in respect of its current

fiscal year.

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.

Securities Exchange Agreement

Page 13

Exhibit 10

Breach of Representations and Warranties by the Company. If the Company breaches

any of the representations or warranties set forth in this Section 4, in addition to any other

remedies available to the Lender pursuant to this Agreement, it will be considered an Event of

default under Section 3.4 of the New Note.

Representations and Warranties of MesoCoat. The Company and MesoCoat, jointly and

severally, represent and warrant to the Lender that:

MesoCoat has the requisite corporate power and authority to enter into this Agreement,

the Security Agreement, the Subsidiary Guarantee and all other agreements, documents and

instruments contemplated herein to which it is a party.

All corporate action on the part of MesoCoat by its officers, directors and shareholders

necessary for the authorization, execution and delivery of, and the performance by MesoCoat of

its obligations in connection with this Agreement, including, without limitation, the issuance and

delivery of the Security Agreement and the Subsidiary Guarantee, has been duly and validly

taken.

This Agreement and all other agreements, documents and instruments contemplated

herein to which MesoCoat is a party constitute, including, without limitation, the issuance and

delivery of the Security Agreement and the Subsidiary Guarantee, will constitute, valid and

legally binding obligations of MesoCoat, enforceable against MesoCoat in accordance with their

respective terms, subject to (a) applicable bankruptcy, insolvency, fraudulent transfer,

moratorium, reorganization or other similar laws of general application relating to or affecting the

enforcement of creditors’ rights generally and (b) general principles of equity.

The execution and performance of this Agreement, Security Agreement, the Subsidiary

Guarantee and all other agreements, documents and instruments contemplated herein to which

MesoCoat is a party do not conflict in any material respect with any other agreement to which

MesoCoat is a party or is bound, any court order or judgment applicable to MesoCoat or the

constituent documents of MesoCoat.

MesoCoat has received fair value from the Company in consideration for the executing

the Security Agreement and Subsidiary Guarantee made part of this Agreement.

The total indebtedness owed by MesoCoat to Huntington National Bank as of the date

hereof is $134,427.22. Without the prior written consent of the Lender, MesoCoat shall not incur

additional indebtedness from Huntington National Bank or any other lender, other than the

Company, after the date hereof, while the New Note remains outstanding. MesoCoat

acknowledges and agrees that the subordination of Lender’s security interest as set forth in the

Security Agreement is conditioned on the accuracy and compliance with this Section 5(f).

Covenants.

Best Efforts. The parties shall use their best efforts to satisfy timely each of the

conditions described in Sections 12 and 13 of this Agreement.

Securities Exchange Agreement

Page 14

Exhibit 10

Financial Information. Upon written request, the Company agrees to send or make

available the following reports to the Lender until the Lender transfers, assigns, or sells all of the

Securities: (i) within ten (10) days after the filing with the Commission, 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.

Listing. The Company shall maintain quotation of its common stock upon each

automated quotation system upon which its common stock is now quoted and, for so long as the

Lender owns any of the Securities, shall maintain such quotation for all Shares from time to time

issuable upon conversion of the New Note. The Company will obtain and, so long as the Lender

owns any of the Securities, maintain the trading of its common stock on the OTCQB or any

equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq

SmallCap Market (“Nasdaq SmallCap”), 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 Lender copies of any notices it receives from the OTCQB and any other

exchanges or quotation systems on which its common stock are then listed regarding the

continued eligibility of its common stock for listing on such exchanges and quotation systems.

Corporate Existence. So long as the Lender or any of its affiliates beneficially own the

New 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

shares are listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

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 Securities 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.

Breach of Covenants. If the Company breaches any of the covenants set forth in this

Section 6, in addition to any other remedies available to the Lender pursuant to this Agreement, it

will be considered an event of default under Section 3.4 of the New Note.

Failure to Comply with the Exchange Act. So long as the New Note is outstanding, the

Company shall comply with the reporting requirements of the Exchange Act and the Company

shall continue to be subject to the reporting requirements of the Exchange Act.

Trading Activities. Neither the Lender nor its affiliates has an open short position in the

common stock of the Company and the Lender agrees that it shall not, and that it will cause its

affiliates not to, engage in any short sales of or hedging transactions with respect to the common

stock of the Company.

Securities Exchange Agreement

Page 15

Exhibit 10

Borrowings. So long as the Company shall have any obligation under the New Note, the

Company and MesoCoat shall not, without giving advance notice to the Lender and obtaining the

Lender’s prior written consent, which consent may not be unreasonably withheld, incur any

indebtedness, or otherwise assume, guarantee, endorse, contingently agree to purchase or

otherwise become liable for the indebtedness of any other person, firm, partnership, joint venture

or corporation, or grant or suffer to exist any lien on its assets, except (a) the Ohio State Calf loan

that is currently committed as publically disclosed on February 18, 2014, (b) the Director of

Development of the State of Ohio lien, (c) the Huntington National Bank lien, (c) the County of

Cuyahoga, Ohio lien, or (d) indebtedness to trade creditors or financial institutions incurred in the

ordinary course of business and consistent with past practice.

Issuances of Equity. So long as the Company shall have any obligation under the New

Note, the Company and MesoCoat shall not, without giving advance notice to the Lender and

obtaining the Lender’s prior written consent, which consent may not be unreasonably withheld,

issue any equity securities of the Company or MesoCoat, or any securities that are convertible,

exercisable or exchangeable into equity securities of the Company or MesoCoat, except shares of

common stock that are issuable (a) under any employee equity incentive plans in effect prior to

the date of the New Note, or (b) upon the exercise or conversion of securities that were

outstanding prior to the date of the New Note; provided that in each such case, issuances are

made in accordance with the terms of the underlying plan or securities documents as in effect

prior to the date of the New Note and not pursuant to terms that have been amended after the date

of the New Note.

Advances and Loans. So long as the Company shall have any obligation under the New

Note, the Company and MesoCoat shall not, without giving advance notice to the Lender and

obtaining the Lender’s prior written consent, which consent may not be unreasonably withheld,

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

Company and MesoCoat.

Preemptive Right.

Right of Lender to Purchase Company Securities. The Company shall give the Lender

written notice (an “Issuance Notice”) of any proposed issuance by the Company of any shares of

capital stock of the Company, warrants, convertible notes or any other instruments exercisable,

convertible into or exchangeable for shares of capital stock of the Company (“Company

Securities”) at least 15 days prior to the proposed issuance date. The Issuance Notice shall

specify the number and class of such Company Securities, the price at which such Company

Securities are to be issued and the other material terms and conditions of the issuance. As used

herein, a “proposed issuance” means a proposal for which the Company has one or more third

party purchasers that are willing to purchase the Company Securities on the terms stated in the

Issuance Notice, all on an arm’s length basis. The Lender shall be entitled to purchase all or any

of the Company Securities proposed to be issued, at the price and on the other terms and

conditions specified in the Issuance Notice.

Securities Exchange Agreement

Page 16

Exhibit 10

Exercise of Preemptive Right. The Lender may exercise its rights under this Section 7 by

delivering notice of its election to purchase such Company Securities to the Company, within 15

days of receipt of the Issuance Notice. A delivery of such notice (which notice shall specify the

number (or amount) of Company Securities to be purchased) by the Lender shall constitute a

binding agreement of the Company to sell, at the price and on the terms and conditions specified

in the Issuance Notice, the number of shares (or amount) of Company Securities specified in the

Lender’s notice.

Issuance of Company Securities Not Purchased by Lender. Subject to Section 6(i) of this

Agreement, the Company shall have 90 days from the date of the Issuance Notice to consummate

the proposed issuance of any or all of such Company Securities that the Lender has elected not to

purchase at the price and upon terms and conditions that are not materially less favorable to the

Company than those specified in the Issuance Notice, provided that, if such issuance is subject to

regulatory approval, such 90 day period shall be extended until the expiration of five business

days after all such approvals have been received, but in no event later than 120 days from the date

of the Issuance Notice. If the Company proposes to issue any class of Company Securities after

such 90 day period or on other terms materially less favorable to the Company, it shall again

comply with the procedures set forth in this Section 7.

No Waiver. The election by the Lender not to exercise its preemptive rights in any one

instance shall not affect its rights under this Section 7 as to any future issuances of Company

securities. Any sale of Company Securities by the Company without first giving the Lender the

rights described in this Section 7 shall be void and of no force and effect.

Transfer Agent Instructions. The Company shall issue instructions to its transfer agent to issue

certificates, registered in the name of the Lender or its nominee, for the Shares in such amounts as

specified from time to time by the Lender to the Company upon conversion of the New Note in

accordance with the terms thereof. Prior to any registration of the securities underlying the Conversion

Units under the Securities Act or the date on which the 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 3(g) of this Agreement. Nothing in

this Section shall affect in any way the Lender’s obligations and agreement set forth in Section 3(g)

hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the

Securities. If the Lender provides the Company 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 Securities Act and such sale or transfer is

effected or (ii) the Lender 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 securities underlying the Conversion

Units, 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 Lender. The Company acknowledges that a

breach by it of its obligations hereunder will cause irreparable harm to the Lender, 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 8 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 Lender

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.

Securities Exchange Agreement

Page 17

Exhibit 10

Release. The Company and MesoCoat do hereby release, remise, acquit and forever discharge

the Lender, Kyrtos and the Lender’s and Kyrtos’ employees, agents, representatives, consultants,

attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns,

subsidiary corporations, parent corporation, and related corporate divisions (all of the foregoing

hereinafter called the “Released Parties”), from any and all action and causes of action, judgments,

executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every

character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature,

whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to

be done by any of the Released Parties prior to and including the Closing Date, and in any way directly or

indirectly arising out of or in any way connected to this Agreement, the Existing Notes, and the New Note

(all of the foregoing hereinafter called the “Released Matters”). The Company and MesoCoat

acknowledge that the agreements in this Section 9 are intended to be in full satisfaction of all or any

alleged injuries or damages arising in connection with the Released Matters. The Company and

MesoCoat represent and warrant to the Lender that it has not purported to transfer, assign or otherwise

convey any right, title or interest of the Company or MesoCoat in any Released Matter to any other

person and that the foregoing constitutes a full and complete release of all Released Matters.

10.

Renewal. To the extent that any payment or payments made to the Lender or Kyrtos under this

Agreement, the Existing Notes, or the New Note, as each may be amended, are subsequently invalidated,

declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, to the

Company or MesoCoat, whether directly or indirectly as a debtor-in-possession, or to a receiver or any

other party under any bankruptcy law, or other state or federal law, then the portion of the indebtedness of

the Company or MesoCoat intended to have been satisfied by such payment or payments will be revived

and will continue in full force and effect as if such payment or payments had never been received by the

Lender or Kyrtos.

11.

No Cancellation. This Agreement evidences the same indebtedness as evidenced by the Existing

Notes and the same lien as evidenced by the UCC Financing Statement filed by Kyrtos in the State of

Nevada against MesoCoat on October 31, 2013 (the “UCC-1”). This Agreement is an extension,

modification and amendment of the prior documents and the execution hereof does not evidence a

cancellation of the indebtedness evidenced by the Existing Notes or the lien evidenced by the UCC-1.

The Company and MesoCoat agree that Kyrtos may assign the UCC-1 to the Lender and that the lien

evidenced by the UCC-1 is hereby continued.

12.

Conditions to the Company’s and MesoCoat’s Obligations Hereunder. The obligations of the

Company and MesoCoat to the Lender at the Closing are subject to the satisfaction, at or before the

Closing Date, of each of the following conditions, provided that these conditions are for the Company’s

and MesoCoat’s sole benefit and may be waived by the Company and MesoCoat at any time in their sole

discretion:

The Lender shall have executed this Agreement and delivered the same to the Company

and MesoCoat.

The Lender shall have executed the Security Agreement and delivered the same to the

Company and MesoCoat.

The Lender shall have delivered the Existing Notes to the Company.

Securities Exchange Agreement

Page 18

Exhibit 10

The representations and warranties of the Lender in this Agreement 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 Lender 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 Lender at or prior to the Closing Date.

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.

13.

Conditions to the Lender’s Obligations Hereunder. The obligations of the Lender hereunder are

subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that

these conditions are for the Lender’s sole benefit and may be waived by the Lender at any time in its sole

discretion:

The Company and MesoCoat shall have executed this Agreement and delivered the same

to the Lender.

The Company and MesoCoat shall have executed the Security Agreement and delivered

the same to the Lender.

MesoCoat shall have executed the Subsidiary Guarantee and delivered the same to the

Lender.

The Company shall have delivered to the Lender the duly executed New Note.

The representations and warranties of the Company and MesoCoat 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 and MesoCoat 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 and MesoCoat at or prior to the Closing Date.

The Lender shall have received documentation as may be reasonably requested by the

Lender including, but not limited to, certificates signed by the Secretary of the Company and

MesoCoat dated as of the Closing Date with respect to the Company’s and MesoCoat’s Articles

of Incorporation, By-laws, board of directors’ resolutions relating to the transactions

contemplated hereby and the authority and incumbency of the officers executing this Agreement,

the New Note or any other documents required to be executed or delivered in connection

therewith.

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.

Securities Exchange Agreement

Page 19

Exhibit 10

No event shall have occurred which could reasonably be expected to have a Material

Adverse Effect on the Company or MesoCoat.

The Company’s common stock being eligible for quotation on the OTCBQ and trading in

the common stock of the Company on the OTCBQ shall not have been suspended by the

Commission or the OTCQB.

The Company and MesoCoat shall have paid the expenses described in Section 2(c) of

this Agreement.

14.

Governing Law; Miscellaneous.

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 any party against another party concerning the transactions contemplated by this

Agreement shall be brought only in the Supreme Court of the State of New York or the United

States District Court for the Southern District of New York located in New York County, 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, MesoCoat and Lender

waive trial by jury. The prevailing party shall be entitled to recover from the other party its

reasonable attorney’s fees and costs. 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, the Security Agreement, the Subsidiary Guarantee or the New Note 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.

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.

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.

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.

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, none of the parties hereto 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 all of

the parties hereto.

Securities Exchange Agreement

Page 20

Exhibit 10

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:

ABAKAN INC.

2665 South Bayshore Drive, Suite 450

Miami, Florida 33133

Attn: Robert H. Miller, Chief Executive Officer

Facsimile: (786) 347-7706

E-mail: robert.miller@abakaninc.com

If to MesoCoat, to

MESOCOAT, INC.

24112 Rockwell Drive

Euclid, Ohio 44117

Attn: Andrew Sherman, President

Facsimile:

E-mail: ajsherman@mesocoatinc.com

If to the Lender:

GEORGE TOWN ASSOCIATES S.A.

c/o JTE FINANCE AG

Biermensdorferstrasse 55

CH 8004 Zurich, Switzerland

Facsimile:

E-mail:

With a Copy to:

Mazzeo Song & Bradham LLP

708 Third Avenue

New York, NY 10017

Facsimile: 212-599-8400

E-mail: dsong@mazzeosong.com

Securities Exchange Agreement

Page 21

Exhibit 10

Each party shall provide notice to the other party of any change in address.

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit

of the parties and their successors and assigns. None of the parties hereto shall assign this

Agreement or any rights or obligations hereunder without the prior written consent of the other

parties. Notwithstanding the foregoing, subject to Section 3(f), the Lender may assign its rights

hereunder to any person that purchases Securities in a private transaction from the Lender or to

any of its “affiliates,” as that term is defined under the Exchange Act, without the consent of the

Company.

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.

Survival. The representations and warranties of the Company and MesoCoat 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 Lender. The

Company and MesoCoat agree to indemnify and hold harmless the Lender and its 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 or MesoCoat of any of their representations, warranties and

covenants set forth in this Agreement.

Publicity. The Company shall be entitled, without the prior approval of the Lender, to

make any press release or filing with the Commission, OTCQB (or other applicable trading

market) or FINRA with respect to such transactions as is required by applicable law and

regulations.

Further Assurances. Each of the parties 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.

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.

Remedies. The Company and MesoCoat acknowledge that a breach by either party of

their obligations hereunder will cause irreparable harm to the Lender by vitiating the intent and

purpose of the transaction contemplated hereby. Accordingly, the Company and MesoCoat

acknowledge that the remedy at law for a breach of their obligations under this Agreement will be

inadequate and agree, in the event of a breach or threatened breach by the Company or MesoCoat

of the provisions of this Agreement, that the Lender 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

Securities Exchange Agreement

Page 22

Exhibit 10

Conflict. In the event of a conflict between or among the terms, covenants, conditions or

provisions of this Agreement, the Existing Notes or the New Note, as each may be amended, the

Lender may elect to enforce from time to time those provisions that would afford the Lender the

maximum financial benefits and security for the obligations under the New Note and/or provide

the Lender the maximum assurance of payment of the obligations under the New Note in full.

[Signature Page Follows]

Securities Exchange Agreement

Page 23

Exhibit 10

IN WITNESS WHEREOF, the undersigned the Company, MesoCoat and Lender have caused this

Agreement to be duly executed as of the date first above written.

ABAKAN INC.

By: /s/ Robert H. Miller

Name: Robert H. Miller

Title: Chief Executive Officer

MESOCOAT, INC.

By: /s/ Andrew Sherman

Name: Andrew Sherman

Title: President

GEORGE TOWN ASSOCIATES S.A.

By: /s/ Engelbert Schreiber

Name: Engelbert Schreiber

Title: Director

Securities Exchange Agreement

Page 24

Exhibit 10

Execution Copy

SECURED CONVERTIBLE PROMISSORY NOTE

Principal Amount: $1,341,963.34

Issue Date: April 28, 2014

FOR VALUE RECEIVED, ABAKAN INC., a Nevada corporation (hereinafter called the “Maker”),

hereby promises to pay to the order of GEORGE TOWN ASSOCIATES S.A., a Panama corporation, or

its registered assigns (as the case may be, the “Holder”), the sum of $1,341,963.34 on April 27, 2015 (the

“Maturity Date”). Any amount of principal on this Secured Convertible Promissory Note (this “Note”)

which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the

due date thereof until the same is paid (“Default Interest”). Any payment due hereunder (to the extent

not converted into common stock, $0.0001 par value per share (the “Shares”), and stock purchase

warrants (the “Warrants”) 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 Maker 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. 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 Miami, Florida 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 Exchange Agreement dated the date hereof pursuant to which this Note was

originally issued (the “Exchange 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 Maker and will not

impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

CONVERSION RIGHTS

Holder Conversion Right. The Holder shall have the right from time to time 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 1.8(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 Conversion Units (as

defined in Section 1.3(b)) at the Conversion Price (as defined in Section 1.3(a)). Each such

conversion is referred to herein as a “Conversion”. The number of Conversion Units to be issued

upon each Conversion shall be determined by dividing the Conversion Amount (as defined

below) by the Conversion Price then in effect on the date specified in the notice of Conversion,

in the form attached hereto as Exhibit I (the “Notice of Conversion”), delivered to the Maker by

the Holder in accordance with Section 1.6 below; provided that the Notice of Conversion is

submitted by facsimile or e-mail (or by other means resulting in notice) to the Maker before

6:00 p.m., Miami, Florida time on such conversion date (the “Conversion Date”). The term

“Conversion Amount” means, with respect to a Conversion, the sum of (1) the principal amount

of this Note to be converted in such Conversion, plus (2) at the Holder’s option, Default Interest

(if any) on the amounts referred to in the immediately preceding clause (1), plus (3) at the

Holder’s option, any other fees, penalties or liquidated damage amounts owed to the Holder

pursuant to the terms of this Note (if any).

Secured Convertible Promissory Note

Page 1

Exhibit 10

Execution Copy

Maker Conversion Right.

Unit Conversion. The Maker shall have the right from time to time, and at any time following the

date of this Note and ending on the Maturity Date, in respect of the remaining outstanding principal

amount of this Note, in its sole discretion, to cause the conversion of all or any part of the outstanding and

unpaid principal amount of this Note into fully paid and non-assessable Conversion Units, or any shares

of capital stock or other securities of the Maker into which such Units shall hereafter be changed or

reclassified at the Conversion Price if (i) at any time the closing price for the Shares for each of ten (10)

consecutive trading days is greater than three times the Conversion Price then in effect, (ii) the Maker

shall have complied in all material respects with its obligations under this Note, and (iii) the Shares shall

at all times have been and continue to be listed or quoted on a trading market, then, subject to the

conditions set forth in this Section (the “Call Condition Period”) on the date that is five days after

written notice thereof (a “Call Notice”) is received by the Holder (such date shall be known as the “Call

Date”) at the address last shown on the records of the Maker for the Holder or given by the Holder to the

Maker for the purpose of notice; provided, that the conditions to giving such notice must be in effect at all

times during the Call Condition Period or any such Call Notice shall be null and void.

Warrant Exercise. The Maker may further, in its sole discretion, require the exercise of all of the

then unexercised Warrants, if (i) at any time the closing price for the Shares for each of ten (10)

consecutive trading days is greater than five times the Conversion Price then in effect, (ii) the Maker shall

have complied in all material respects with its obligations under this Note, and (iii) the Shares shall at all

times have been and continue to be listed or quoted on a trading market, then, subject to the conditions set

forth in this Section on the date that is five (5) days after a Call Notice is received by the Holder on the

Call Date at the address last shown on the records of the Maker for the Holder or given by the Holder to

the Maker for the purpose of notice; provided, that the conditions to giving such notice must be in effect

at all times during the Call Condition Period or any such Call Notice shall be null and void. Should

Holder fail to exercise Warrants according to the terms and conditions hereinabove, such Warrants shall

expire within ten (10) days after a Call Notice is received.

Conversion.

Conversion Price. As used in this Note, the term “Conversion Price” shall equal $0.80, and shall

be subject to (i) equitable adjustments for stock splits, stock dividends or rights offerings by the Maker

relating to the Maker’s securities, combinations, recapitalization, reclassifications, extraordinary

distributions and similar events, and (ii) all other adjustments required under Section 1.8.

Conversion Units

As used in this Note, the term “Conversion Unit” shall consist of one (1)

share of fully paid and non-assessable Share and one half (½) Warrant entitling the Holder to purchase an

additional Share at $1.20 (“Warrant Exercise Price”) for each whole Warrant. The Warrant Exercise

Price shall be subject to (i) equitable adjustments for stock splits, stock dividends or rights offerings by

the Maker relating to the Maker’s securities, combinations, recapitalization, reclassifications,

extraordinary distributions and similar events, and (ii) all other adjustments required under Section 1.8

and under the terms of the Warrant. The exercise period of each Warrant shall be a period of two (2)

years following the applicable Conversion Date.

Secured Convertible Promissory Note

Page 2

Exhibit 10

Execution Copy

Authorized Shares. The Maker covenants that during the period the conversion right

exists, and if converted, until the expiration or exercise of all Warrants, the Maker will reserve

from its authorized and unissued capital a sufficient number of Shares, free from preemptive

rights, to provide for the issuance of Shares and the exercise of the Warrants upon the full

conversion of this Note issued pursuant to the Exchange Agreement (the “Reserved Amount”).

The Maker represents that upon issuance, the Shares will be duly and validly issued, fully paid

and non-assessable. In addition, if the Maker shall issue any securities or make any change to

its capital structure which would change the number of Shares and Warrants into which the

Note shall be convertible, the Maker shall at the same time make proper provision so that

thereafter there shall be a sufficient number of shares authorized and reserved, free from

preemptive rights, for conversion of the outstanding Note.

Failure to Maintain Reserved Amount. If at any time the Maker does not maintain the

Reserved Amount, it will be considered an Event of Default under Article III.

Method of Conversion.

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 Maker 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., Miami, Florida time) and (B) subject to Section 1.6(b),

surrendering this Note at the principal office of the Maker.

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 Maker unless the entire unpaid principal amount of this Note is so

converted. The Holder and the Maker 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 Maker, 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 Maker 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 Maker, whereupon the Maker 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.

Payment of Taxes. The Maker 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 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 Maker 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 Maker the amount of any

such tax or shall have established to the satisfaction of the Maker that such tax has been paid.

Secured Convertible Promissory Note

Page 3

Exhibit 10

Execution Copy

Delivery of Shares and Warrants Upon Conversion. Upon receipt by the Maker 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 1.6, the Maker shall issue

and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the

Shares and Warrants issuable upon such conversion within three (3) business days after such receipt (but

in any event the fifth (5th) business day being hereinafter referred to as 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 Exchange Agreement.

Obligation of Maker to Deliver Conversion Units. Upon receipt by the Maker of a Notice of

Conversion, the Holder shall be deemed to be the holder of record of the Shares issuable upon such

conversion and the Warrants attached thereto, the outstanding principal amount on this Note shall be

reduced to reflect such conversion, and, unless the Maker 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 Shares and Warrants 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 Maker’s

obligation to issue and deliver the certificates for Shares and Warrants 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 Maker 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 Maker, and irrespective of any other circumstance

which might otherwise limit such obligation of the Maker 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 Maker before 6:00 p.m., Miami, Florida time, on such

date.

Failure to Deliver Conversion Units 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 Shares and Warrants issuable upon conversion of this Note are not delivered by the

Deadline (other than a failure due to the circumstances described in Section 1.4 above, which failure shall

be governed by Sections 1.4 and 1.5), the Maker shall pay to the Holder the greater of (x) $500 per day in

cash, for each day beyond the Deadline that the Maker fails to deliver such Shares and Warrants, and (y)

an amount in cash equal to (A) (N/360) multiplied by (B) the Conversion Amount multiplied by (C) the

Default Interest rate, where “N” equals the number of days beyond the Deadline that the Maker fails to

deliver such Shares and Warrants. Amounts payable pursuant to the preceding sentence shall be paid to the

Holder in immediately available funds on or before the second (2nd) business day following written notice

from the Holder to the Maker specifying the amount owed to it by the Maker. In the event that shares of

Maker’s common stock are purchased by or on behalf of the Holder in order to make delivery on a sale

effected in anticipation of receiving Shares upon conversion, and there is a conversion default with

respect thereto, the Holder shall have the right to receive from the Maker, in addition to the foregoing

amounts, (1) the aggregate amount paid by or on behalf of the Holder for such shares of common stock

minus (2) the aggregate amount of net proceeds, if any, received by the Holder from the sale of the Shares

as and when such Shares are delivered by the Maker to the Holder. At the Holder’s option, amounts

payable hereunder may be added to the principal amount of this Note, and such additional principal

amount shall be convertible into Conversion Units in accordance with the terms of this Note. The Maker

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.

Secured Convertible Promissory Note

Page 4

Exhibit 10

Execution Copy

Accordingly the parties acknowledge that the liquidated damages provision in this Section 1.6(f) are

justified.

Concerning the Conversion Units. The Shares and Warrants 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 Securities Act or (ii) the Maker 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

Securities Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an

“affiliate” (as defined in Rule 144) of the Holder who agrees to sell or otherwise transfer the

shares only in accordance with this Section 1.7 and who is not a U.S. Person (as defined in the

Exchange Agreement). Except as otherwise provided in the Exchange Agreement (and subject

to the removal provisions set forth below), until such time as the Shares issuable upon

conversion of this Note have been registered under the Securities 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 and the Warrants 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:

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED

STATES SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”) OR

THE SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE

BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER REGULATION

“S” PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

(“SECURITIES ACT”). THESE SECURITIES MAY NOT BE OFFERED OR

SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS THE

SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT, OR AN

EXEMPTION FROM SUCH REGISTRATION REQUIREMENT IS

AVAILABLE. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES

MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE

SECURITIES ACT. THESE SECURITIES SHALL NOT CONSTITUTE AN

OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE

SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR

SOLICITATION WOULD BE UNLAWFUL.”

The legend set forth above shall be removed and the Maker shall issue to the Holder a new certificate or

stock purchase warrant therefore free of any transfer legend if (i) the Maker or its transfer agent shall have

received an opinion of counsel, to the effect that a public sale or transfer of such security may be made

without registration under the Securities Act, or (ii) in the case of securities issuable upon conversion of

this Note or exercise of Warrants, such securities are registered for sale by the Holder under an effective

registration statement filed under the Securities 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.

Secured Convertible Promissory Note

Page 5

Exhibit 10

Execution Copy

Effect of Certain Events.

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 Maker, the effectuation by the Maker of a

transaction or series of related transactions in which more than 50% of the voting power of the Maker is

disposed of, or the consolidation, merger or other business combination of the Maker with or into any

other Person (as defined below) or Persons when the Maker is not the survivor shall either: (i) be deemed

to be an Event of Default (as defined in Article III) pursuant to which the Maker 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 1.8(b) hereof. “Person”

shall mean any individual, corporation, limited liability company, partnership, association, trust or other

entity or organization.

Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and

outstanding, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,

or other similar event, as a result of which securities of the Maker shall be changed into the same or a

different number of shares and warrants of another class or classes of stock or securities of the Maker or

another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Maker

other than in connection with a plan of complete liquidation of the Maker, 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 Shares and Warrants 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 shall

thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter

deliverable upon the conversion hereof. The Maker shall not affect any transaction described in this

Section 1.8(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 Maker) assumes by written instrument the obligations of this Section 1.8(b).

The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share

exchanges.

Adjustment Due to Distribution. If the Maker shall declare or make any distribution of its assets

(or rights to acquire its assets) to holders of its shares as a dividend, stock repurchase, by way of return of

capital or otherwise (including any dividend or distribution to the Maker’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 receive the amount of such assets on an “as-converted” basis; that is, the amount

which would have been payable to the Holder with respect to the Shares issuable if the Holder converted

this Note in full (without regard to any limitations on conversion contained herein) immediately prior to

the date of record for determining shareholders entitled to such Distribution.

Secured Convertible Promissory Note

Page 6

Exhibit 10

Execution Copy

Purchase Rights. If, at any time when this Note is issued and outstanding, the Maker 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 Shares, then the Holder of this Note will acquire,

upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights on an “as-converted”

basis; that is, the aggregate Purchase Rights such Holder would have acquired if such Holder converted

this Note in full (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 Shares are to be determined for the grant, issue

or sale of such Purchase Rights.

Dilutive Issuances. If the Maker issues or sells, or is deemed to have issued or sold, any Shares

for no consideration or for consideration on a per share basis less than the Conversion Price in effect on

the date of such issuance or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then the

Conversion Price and the Warrant Exercise Price shall be adjusted so as to equal the consideration per

share received or receivable by the Maker (on a per share basis) for the additional Shares so issued, sold,

or deemed issued or sold in such Dilutive Issuance. If the Maker issues or sells, or is deemed to have

issued or sold, any Shares for consideration per share less than the Warrant Exercise Price and equal to or

greater than the Conversion Price in effect on the date of such issuance or sale (or deemed issuance or

sale), then the Warrant Exercise Price shall be adjusted so as to equal the consideration per share received

or receivable by the Maker (on a per share basis) for the additional Shares so issued, sold, or deemed

issued or sold in such issuance. For purposes of this Section 1.8(e), if the Maker issues, sells or amends

any options, warrants, convertible securities or other similar instruments whether or not immediately

convertible, exercisable or exchangeable, then the Shares issuable upon the exercise of such securities

shall, as of the date of the issuance, sale or amendment of such securities, be deemed to be outstanding

and to have been issued and sold by the Maker at the per share price for which Shares are issuable upon

the conversion, exercise or exchange of such securities.

Notice of Adjustments. Upon the occurrence of each adjustment or readjustment as a result of the

events described in this Section 1.8, the Maker, at its expense, shall promptly compute such adjustment or

readjustment and prepare and furnish to the Holder of a certificate setting forth such adjustment or

readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The

Maker 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, and (ii) the number of Shares, Warrants and the amount,

if any, of other securities or property which at the time would be received upon conversion of this Note.

Reserved

Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the

Conversion Units covered thereby shall be deemed converted into Shares and Warrants 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 and Warrants and to any

remedies provided herein or otherwise available at law or in equity to such Holder because of a

failure by the Maker to comply with the terms of this Note. Notwithstanding the foregoing, if a

Holder has not received certificates for all Shares and all Warrants prior to the tenth (10th)

business day after the expiration of the Deadline with respect to a conversion of any portion of

Secured Convertible Promissory Note

Page 7

Exhibit 10

Execution Copy

this Note for any reason, then (unless the Holder otherwise elects to retain its status as a

holder of Shares and Warrants by so notifying the Maker) the Holder shall regain, retroactive

to the date the Notice of Conversion was submitted, the rights of a Holder of this Note with

respect to such unconverted portions of this Note and the Maker 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 for the Maker’s failure to convert this Note.

Prepayment. Notwithstanding anything to the contrary contained in this Note, so long

as the Maker has not received a Notice of Conversion from the Holder, then at any time during

the period beginning on October 30, 2014 and ending on the Maturity Date, the Maker shall

have the right, exercisable on not less than five (5) business days prior written notice to the

Holder, to prepay the outstanding Note in full, in accordance with this Section 1.11. 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 Maker is exercising its right

to prepay the Note, and (2) the date of prepayment which shall be not less than five (5)

business days from the date on which the Optional Prepayment Notice is delivered. On (and

not before) the date fixed for prepayment (the “Optional Prepayment Date”), the Maker 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 Maker at least one (1) business day prior

to the Optional Prepayment Date. Notwithstanding the foregoing, the Holder shall have the

right to convert all or any portion of this Note even after an Optional Prepayment Notice has

been delivered, so long as the Holder submits a Notice of Conversion prior to actual

prepayment of this Note.

If the Maker exercises its right to prepay the Note, the Maker shall make payment to the Holder

of an amount (the “Optional Prepayment Amount”) in cash equal to 125% of the sum of: (x) the

then outstanding principal amount of this Note plus (y) Default Interest (if any) on the amount

referred to in clause (x), plus (z) all other fees, penalties or liquidated damage amounts owed

to the Holder pursuant to the terms of this Note (if any). The Maker shall also issue, for no

additional consideration, the number of Warrants equal to what the Holder would have

received if such Holder converted this Note in full (without regard to any limitations on

conversion contained herein) immediately before the date on which the Optional Prepayment

Notice is delivered. If the Maker delivers an Optional Prepayment Notice and fails to pay the

Optional Prepayment Amount due to the Holder on the Optional Prepayment Date, the Maker

shall forever forfeit its right to prepay the Note pursuant to this Section 1.11.

CERTAIN COVENANTS

Distributions on Capital Stock. So long as the Maker shall have any obligation under

this Note, the Maker 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 solely in the form of

additional Shares 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 Maker’s disinterested

directors.

Restriction on Stock Repurchases. So long as the Maker shall have any obligation under

this Note, the Maker 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

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otherwise) in any one transaction or series of related transactions any shares of capital stock

of the Maker or any warrants, rights or options to purchase or acquire any such shares.

Borrowings. So long as the Maker shall have any obligation under this Note, the Maker

shall not, without giving advance notice to the Holder and obtaining the Holder’s prior written

consent, which consent shall not be unreasonably withheld, incur any indebtedness, or

otherwise assume, guarantee, endorse, contingently agree to purchase or otherwise become

liable for the indebtedness of any other person, firm, partnership, joint venture or corporation,

or grant or suffer to exist any lien on its assets, except (a) the Ohio State Calf loan that is

currently committed as publically disclosed on February 18, 2014, (b) the Director of

Development of the State of Ohio lien, (c) the Huntington National Bank lien, (d) the County of

Cuyahoga, Ohio lien or (e) indebtedness to trade creditors or financial institutions incurred in

the ordinary course of business and consistent with past practice.

Issuances of Equity. So long as the Maker shall have any obligation under this Note, the

Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s prior

written consent, which consent may not be unreasonably withheld, issue any equity securities

of the Maker, or any securities that are convertible, exercisable or exchangeable into equity

securities of the Maker, except shares of common stock that are issuable (a) under any

employee equity incentive plans in effect prior to the date of this Note, or (b) upon the exercise

or conversion of securities that were outstanding prior to the date of this Note; provided that in

each such case, issuances are made in accordance with the terms of the underlying plan or

securities documents as in effect prior to the date of this Note and not pursuant to terms that

have been amended after the date of this Note. Any issuances of equity securities consented to

by the Holder shall nonetheless remain subject to the provisions of Section 1.8 of this Note.

Sale of Assets. So long as the Maker shall have any obligation under this Note, the

Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s prior

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.

Advances and Loans. So long as the Maker shall have any obligation under this Note,

the Maker shall not, without giving advance notice to the Holder and obtaining the Holder’s

prior written consent, which consent may not be unreasonably withheld, 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 Maker.

EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

Failure to Pay Principal. The Maker fails to pay the principal hereof when due on this

Note, whether at maturity, upon acceleration or otherwise and such failure to pay shall

continue for a period of two (2) business days after written notice thereof to the Maker from

the Holder.

Conversion and the Shares. The Maker fails to issue Shares and Warrants 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

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certificated form) any certificate for Shares and Warrants issued to the Holder upon

conversion of or otherwise pursuant to this Note as and when required by this Note, the Maker

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 or

Warrants 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

or Warrants 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

shall continue uncured (or any written announcement, statement or threat not to honor its

obligations shall not be rescinded in writing) for three (3) business days after the Holder shall

have delivered a Notice of Conversion.

Breach of Covenants. The Maker or MesoCoat, Inc. (“MesoCoat”), a majority owned

subsidiary of Maker, breaches any material covenant or other material term or condition

contained in this Note and any collateral documents including but not limited to the Exchange

Agreement, Security Agreement and such breach continues for a period of five (5) business

days after written notice thereof to the Maker from the Holder.

Breach of Representations and Warranties. Any representation or warranty of the

Maker or MesoCoat made herein or in any agreement, statement or certificate given in writing

pursuant hereto or in connection herewith (including, without limitation, the Exchange

Agreement and Security Agreement), shall be false or misleading in any material respect when

made and the breach of which has (or with the passage of time will have) a material adverse

effect on the rights of the Holder with respect to this Note, the Exchange Agreement or the

Security Agreement.

Receiver or Trustee. The Maker or any subsidiary of the Maker shall make an

assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver

or trustee for it or for a substantial part of its property or business, or such a receiver or

trustee shall otherwise be appointed.

Judgments. Any money judgment, writ or similar process shall be entered or filed

against the Maker or any subsidiary of the Maker 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) days unless otherwise consented to by the Holder, which consent will not be unreasonably

withheld.

Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or

other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law

for the relief of debtors shall be instituted by or against the Maker or any subsidiary of the

Maker.

Delisting of Shares. The Maker shall fail to maintain the listing of the Shares on at least

one of the OTCQB or an equivalent replacement exchange, the Nasdaq National Market, the

Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange and

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such failure to maintain continues for a period of five (5) business days after written notice

thereof to the Maker from the Holder.

Failure to Comply with the Exchange Act. The Maker shall fail to comply with the

reporting requirements of the Exchange Act; and/or the Maker shall cease to be subject to the

reporting requirements of the Exchange Act and such failure or ceasing continues for a period

of five (5) business days after written notice thereof to the Maker from the Holder.

Liquidation. Any dissolution, liquidation, or winding up of Maker or any subsidiary of

the Maker or any substantial portion of their respective businesses.

Cessation of Operations. Any cessation of operations by Maker or any subsidiary of

Maker, or Maker or any subsidiary of Maker admits it is otherwise generally unable to pay its

debts as such debts become due, provided however, that any disclosure of the Maker’s ability to

continue as a “going concern” shall not be an admission that the Maker cannot pay its debts as

such become due.

Maintenance of Assets. The failure by Maker or any subsidiary of Maker 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) and such failure to maintain

continues for a period of five (5) business days after written notice thereof to the Maker from

the Holder.

Financial Statement Restatement. The restatement of any financial statements filed by

the Maker with the Securities and Exchange Commission for any date or period from two 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, the

Exchange Agreement or the Security Agreement.

Reverse Splits. The Maker effectuates a reverse split of its Shares without twenty (20)

days prior written notice to the Holder.

Replacement of Transfer Agent. In the event that the Maker proposes to replace its

transfer agent, the Maker fails to provide, prior to the effective date of such replacement, fully

executed Irrevocable Transfer Agent Instructions (including, but not limited to, the provision

to irrevocably reserve Shares in the Reserved Amount) signed by the successor transfer agent

to Holder.

Cross-Default. Notwithstanding anything to the contrary contained in this Note or the

other related or companion documents, a breach or default by the Maker or any subsidiary of

the Maker of any covenant or other term or condition contained in any of the Other

Agreements (as defined below), 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 Maker and any affiliate of the Maker, and, or for the benefit of, (2) the Holder and any

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affiliate of the Holder, however, the term “Other Agreements” shall not include the related or

companion documents to this Note.

Upon the occurrence and during the continuation of an Event of Default specified in this Article III, the

Note shall become immediately due and payable upon delivery of written notice to the Maker by the

Holder (the “Default Notice”), in which case, the Maker shall pay to the Holder an amount equal to the

sum of:

(A) 125% times the greater of:

(1) the sum of (x) the outstanding principal amount of this Note plus (y) Default Interest (if any) on

the amount referred to in clause (x) plus (z) all other fees, penalties or liquidated damage amounts

owed to the Holder pursuant to the terms of this Note (if any) (collectively, the “Default Amount”);

and

(2) the product of (x) the quotient of (i) the Default Amount divided by (ii) the Conversion Price then

in effect multiplied by (y) the greater of (i) the Market Price and (ii) the VWAP; in each case,

calculated as of the date on which the Default Notice is delivered. “Market Price” means, as of a

particular date, the highest daily VWAP during the period of twenty (20) consecutive trading days

occurring immediately prior to (but not including) such date. “VWAP” means, as of a particular date,

the volume weighted average price of the Maker’s common stock for such date (provided if such date is

not a trading day, then as of the trading day immediately preceding such date) on its principal trading

market as reported by Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then

reporting such prices, by a comparable reporting service of national reputation selected by the Holder and

reasonably satisfactory to the Maker.

plus

(B) all costs of collection, including, without limitation, legal fees and expenses reasonably incurred.

The Maker’s payment in full of the above amount shall be in full satisfaction of its obligations hereunder.

The Holder shall be entitled to exercise all other rights and remedies available at law or in equity. If the

Maker fails to pay the Default Amount as and when due, then the Holder shall have the right at any time,

so long as the Maker remains in default, to require the Maker, upon written notice, to immediately issue,

in lieu of the Default Amount, the number of Shares of the Maker equal to the Default Amount divided by

80% of the Conversion Price then in effect.

MISCELLANEOUS

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. All rights and remedies existing

hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

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

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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 Maker, to:

ABAKAN INC.

2665 S. Bayshore Drive, Suite 450

Miami, Florida 33133

Attn: Robert H. Miller, Chief Executive Officer

Facsimile: (786) 347-7706

E-mail: robert.miller@abakaninc.com

If to the Holder:

GEORGE TOWN ASSOCIATES S.A.

Samuel Lewis Ave. & 53^rd Street

Omega Building Mezanine,

Panama, Republic of Panama

Attn: _____________________

Facsimile: _________________

E-mail: ___________________

and

JTE FINANCE AG

Biermensdorferstrasse 55

CH 8004 Zurich, Switzerland

With a copy to:

Mazzeo Song & Bradham LLP

708 Third Avenue

New York, NY 10017

Attn: David S. Song

Facsimile: 212-599-8400

E-mail: dsong@mazzeosong.com

Amendments. This Note and any provision hereof may only be amended by an

instrument in writing signed by the Maker and the Holder. The term “Note” and all reference

thereto, as used throughout this instrument, shall mean this instrument as originally executed,

or if later amended or supplemented, then as so amended or supplemented.

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Assignability. This Note shall be binding upon the Maker and its successors and

assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Except

as otherwise permitted, each transferee of this Note must not be a “U.S. Person” (as that term is

defined in Rule 902 of Regulation S), and is not acquiring the securities for the account or

benefit of any U.S. Person (as defined in Rule 501(a) of the Securities 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.

Cost of Collection. If default is made in the payment of this Note, the Maker shall pay the

Holder hereof costs of collection, including reasonable attorneys’ fees.

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

New York County. 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 Maker 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 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.

Certain Amounts. Whenever pursuant to this Note the Maker 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 Default Interest, the Maker 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 Maker 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 acquired upon conversion of this Note at

a price in excess of the price paid for such shares pursuant to this Note. The Maker 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.

Exchange Agreement. By its acceptance of this Note, each party agrees to be bound by

the applicable terms of the Exchange Agreement.

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4.9

Security Agreement.

The Note shall be secured by a security interest in the assets of

MesoCoat, as evidenced by the Exchange Agreement and the Security Agreement that includes a UCC

Financing Statement Amendment perfecting and continuing Holder’s lien on MesoCoat’s assets.

Notice of Corporate Events. Except as otherwise provided herein, the Holder of this Note shall

have no rights as an owner of Shares unless and only to the extent that it converts this Note

into Shares. The Maker shall provide the Holder with prior notification of any meeting of the

Maker’s shareholders (and copies of proxy materials and other information sent to

shareholders). In the event of any taking by the Maker 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 Maker or any proposed liquidation,

dissolution or winding up of the Maker, the Maker 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 Maker 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 4.10.

Remedies. The Maker 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 Maker 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 Maker 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.

[Signature Page Follows]

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IN WITNESS WHEREOF, Maker has caused this Note to be signed in its name by its duly authorized

officer as of the date first written above.

ABAKAN INC.

By: /s/ Robert H. Miller

Robert H. Miller, Chief Executive Officer

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EXHIBIT I: NOTICE OF CONVERSION

Capitalized terms that are used and not defined in this Notice of Conversion that are defined in the

secured convertible promissory note of ABAKAN INC., a Nevada corporation, dated April 28, 2014 (the

“Note”) to which this Notice of Conversion is attached, shall have the respective definitions set forth in

the Note.

The undersigned hereby elects to convert a principal amount of $__________from the Note into that

number of Shares and Warrants to be issued pursuant to the conversion of the Note, as set forth below,

according to the conditions of 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.

Check box as to applicable instructions:

[ ]

The Maker shall electronically transmit the Shares 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”) and deliver the

Warrants in the name(s) specified below or, if additional space is necessary, on an

attachment hereto.

Name of DTC Prime Broker:

Account Number:

[ ]

The undersigned hereby requests that the Maker issue a certificate or certificates for the

Shares 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:

_______________________

Attention: Certificate Delivery

_______________________

Date of Conversion:

Applicable Conversion Price:

Number of Shares to be issued

pursuant to Conversion of the Note:

Number of Warrants to be issued

pursuant to Conversion of the Note:

Amount of principal balance due remaining

under the Note after this conversion:

By:

Name:

Title:

Date:

Secured Convertible Promissory Note

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SUBSIDIARY GUARANTEE

This SUBSIDIARY GUARANTEE (the “Guarantee”), dated as of April 28, 2014, is made by

MESOCOAT, INC., a Nevada corporation (the “Guarantor”), for and on behalf of GEORGE TOWN

ASSOCIATES S.A., a Panama corporation (the “Lender”). This Guarantee is being executed and

delivered by the Guarantor in connection with that certain Securities Exchange Agreement, dated as of

April 28, 2014 (the “Exchange Agreement”), between Abakan, Inc., a Nevada corporation (the

“Company”), the Guarantor and the Lender. Capitalized terms used herein and not otherwise defined

herein have the respective meanings set forth in the Exchange Agreement.

WHEREAS:

The Guarantor shall derive substantial direct and indirect benefits from the transactions

contemplated by the Exchange Agreement; and

It is a condition to the transactions contemplated by the Exchange Agreement that the Guarantor

execute and deliver this Guarantee to the Lender.

NOW, THEREFORE, in consideration of the foregoing, the covenants set forth herein, and other good

and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor

hereby agrees as follows:

Guarantee.

Guarantee of Guaranteed Obligations. The Guarantor hereby unconditionally guarantees

to the Lender, its successors, endorsees, transferees and assigns, the prompt payment (whether at

stated maturity, by acceleration or otherwise) and performance of any and all indebtedness

(whether principal or interest), liabilities and other obligations of the Company under the New

Note now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed,

contingent, liquidated, unliquidated, joint, several or joint and several, and to pay all fees,

indemnities, costs and expenses (including reasonable attorneys’ fees) provided for in this

Guarantee (collectively, the “Guaranteed Obligations”). The Guarantor agrees that this

Guarantee is a guaranty of payment and performance and not of collection, and that its

obligations under this Guarantee shall be primary, absolute and unconditional, irrespective of, and

unaffected by:

the genuineness, validity, regularity, enforceability or any future amendment of,

or change in this Guarantee or any other document now existing or hereafter arising;

ii.

the absence of any action to enforce this Guarantee or any other document, or the

waiver or consent by the Lender with respect to any of the provisions thereof;

iii.

the existence, value or condition of, or failure to perfect a lien against, any

collateral (“Collateral”) for the Guaranteed Obligations or any action, or the absence of

any action, by the Lender in respect thereof (including, without limitation, the release of

any such security);

iv.

the insolvency of the Company, the Guarantor or any other party; or

Exhibit 10

any other action or circumstances which might otherwise constitute a legal or

equitable discharge or defense of a surety or guarantor;

it being agreed by the Guarantor that its obligations under this Guarantee shall not be discharged

until the satisfaction of the Guaranteed Obligations in full. The Guarantor shall be regarded, and

shall be in the same position, as principal debtor with respect to the Guaranteed Obligations.

Enforcement of Guarantee. In no event shall the Lender have any obligation (although it

is entitled, at its option) to proceed against the Company or any Collateral before seeking

satisfaction from Guarantor, and the Lender may proceed, prior or subsequent to, or

simultaneously with, the enforcement of its rights hereunder, to exercise any right or remedy

which it may have against any Collateral, as a result of any liens it may have as security for all or

any portion of the Guaranteed Obligations.

Waiver. The Guarantor (i) waives, and agrees that it shall not at any time insist upon,

plead or in any manner whatsoever claim or take the benefit or advantage of, any appraisal,

valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now

or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by

the Guarantor of its Guaranteed Obligations under, or the enforcement by the Lender of, this

Guarantee, (ii) waives diligence, presentment and demand (whether for non-payment or protest or

of acceptance, maturity, extension of time, change in nature or form of the Guaranteed

Obligations, acceptance of further security, release of further security, composition or agreement

arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse

change in the Company’s financial condition or any other fact which might increase the risk to

the Guarantor) with respect to any of the Guaranteed Obligations or all other demands

whatsoever, (iii) represents, warrants and agrees that to its knowledge, as of the date of this

Guarantee, its obligations under this Guarantee are not subject to any offsets or defenses against

the Company or the Lender and (iv) agrees that its obligations under this Guarantee shall not be

subject to any counterclaims, offsets or defenses against the Company or the Lender which may

arise in the future, except those counterclaims, offsets or defenses related to the satisfaction in

whole or part of the Guaranteed Obligations.

Benefit of Guarantee. The provisions of this Guarantee are for the benefit of the Lender

and its successors, transferees, endorsees and assigns, and nothing herein contained shall impair,

as between the Guarantor and the Lender, the obligations of the Guarantor under this Guarantee.

In the event all or any part of the Guaranteed Obligations are transferred, indorsed or assigned by

the Lender to any person or entity, any reference to the Lender herein shall be deemed to refer

equally to such person or entity.

Modification of Guaranteed Obligations, Etc. The Guarantor hereby acknowledges and

agrees that the Lender may at any time or from time to time, with or without the consent of, or

notice to, the Guarantor:

change or extend the manner, place or terms of payment of, or renew or alter all

or any portion of, the Guaranteed Obligations in accordance with the terms therein;

ii.

take any action under or in respect of the Exchange Agreement or any document

executed thereunder in the exercise of any remedy, power or privilege contained therein

or available to it at law, equity or otherwise, or waive or refrain from exercising any such

remedies, powers or privileges;

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Exhibit 10

iii.

amend or modify, in any manner whatsoever, the Exchange Agreement, the New

Note or any document executed thereunder in accordance with the terms therein;

iv.

extend or waive the time for the Company’s performance of, or compliance with,

any term, covenant or agreement on its part to be performed or observed under the

Exchange Agreement, the New Note or any document executed thereunder, or waive

such performance or compliance or consent to a failure of, or departure from, such

performance or compliance in accordance with the terms therein;

take and hold Collateral for the payment of the Guaranteed Obligations

guaranteed hereby or sell, exchange, release, dispose of, or otherwise deal with, any

property pledged, mortgaged or conveyed, or in which the Lender has been granted a

lien, to secure any Guaranteed Obligations or any other obligations in accordance with

the terms therein;

vi.

release anyone who may be liable in any manner for the payment of any amounts

owed by Guarantor or the Company to the Lender; and/or

vii.

apply any sums by whomever paid or however realized to any amounts owing by

Guarantor or the Company to the Lender in such manner as the Lender shall determine in

its discretion;

and the Lender shall not incur any liability to the Guarantor as a result thereof, and no such

action, except satisfaction of the Guaranteed Obligations, shall impair or release the Guarantor or

any of the Guaranteed Obligations under this Guarantee.

Deferral of Subrogation, Etc. Notwithstanding anything to the contrary in this Guarantee

or any other document, the Guarantor hereby:

expressly and irrevocably waives, on behalf of itself and its successors and

assigns (including any surety) until the satisfaction of the Guaranteed Obligations in full,

any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to

contribution, to indemnification, to set off or to any other rights that could accrue to a

surety against a principal, to a guarantor against a principal, to a guarantor against a

maker or obligor, to an accommodation party against the party accommodated, to a

holder or transferee against a maker, or to the holder of any claim against any person or

entity, and which Guarantor may have or hereafter acquire against the Company in

connection with or as a result of Guarantor’s execution, delivery and/or performance of

this Guarantee, or any other documents to which such Guarantor is a party or otherwise;

and

ii.

acknowledges and agrees (x) that this waiver is intended to benefit the Lender

and shall not limit or otherwise affect the Guarantor’s liability hereunder or the

enforceability of this Guarantee, and (y) that the Lender and its successors and assigns

are intended third party beneficiaries of the waivers and agreements set forth in this

Section 1(f).

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Exhibit 10

Election of Remedies. If the Lender may, under applicable law, proceed to realize

benefits under the Exchange Agreement, New Note or any document executed thereunder, giving

such Lender a lien upon any Collateral, either by judicial foreclosure or by non-judicial sale or

enforcement, the Lender may, at its sole option, determine which of such remedies or rights it

may pursue without affecting any of such rights and remedies under this Guarantee. If, in the

exercise of any of its rights and remedies, the Lender shall forfeit any of its rights or remedies,

including its right to enter a deficiency judgment against the Guarantor or the Company, whether

because of any applicable laws pertaining to “election of remedies” or the like, the Guarantor

hereby consents to such action by the Lender and waives any claim based upon such action, even

if such action by the Lender shall result in a full or partial loss of any rights of subrogation which

the Guarantor might otherwise have had but for such action by the Lender. Any election of

remedies which results in the denial or impairment of the right of the Lender to seek a deficiency

judgment against the Guarantor or the Company shall not impair, reduce or limit the Guarantor’s

obligation to pay the full amount of the Guaranteed Obligations. In the event the Lender shall bid

at any foreclosure or trustee’s sale or at any private sale permitted by law or the Exchange

Agreement, New Note or any document executed thereunder, such Lender may bid all or less

than the amount of the Guaranteed Obligations and the amount of such bid need not be paid by

the Lender but shall be credited against the Guaranteed Obligations. The amount of the

successful bid at any such sale shall be conclusively deemed to be the fair market value of the

Collateral and the difference between such bid amount and the remaining balance of the

Guaranteed Obligations shall be conclusively deemed to be the amount of the Guaranteed

Obligations guaranteed under this Guarantee, notwithstanding that any present or future law or

court decision or ruling may have the effect of reducing the amount of any deficiency claim to

which the Lender might otherwise be entitled but for such bidding at any such sale.

Representations and Warranties. The Guarantor hereby represents and warrants to the Lender as

follows:

Organization, Good Standing. The Guarantor is duly and validly organized, validly existing

and in good standing under the laws of its formation and has all requisite power and authority to

carry on its business as now conducted.

Authorization; Consents. The Guarantor has the requisite power and authority to enter into

and perform its obligations under this Guarantee. All action on the part of the Guarantor necessary

for the authorization, execution and delivery of, and the performance of its obligations under, this

Guarantee has been taken, and no further consent or authorization of the Guarantor, its board of

directors, equity holders or, to its knowledge, any Governmental Authority or any other Person is

required in connection therewith.

Due Execution; Enforceability. This Guarantee has been duly executed and delivered by the

Guarantor. This Guarantee constitutes the valid and legally binding obligation of the Guarantor,

enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency,

fraudulent transfer, moratorium, reorganization or other similar laws of general application relating

to or affecting the enforcement of creditors’ rights generally and (ii) general principles of equity.

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Exhibit 10

No Conflict with Other Instruments. The execution, delivery and performance of this

Guarantee will not result in any material violation of any provisions of the Guarantor’s articles of

incorporation or any other governing document or in a default under any provision of any instrument

or contract to which it is a party or by which it or any of its assets or properties are bound, or in any

violation of any provision of any laws, regulations or permits applicable to the Guarantor or be in

conflict with or constitute, with or without the passage of time and giving of notice, either a default

under any material provision, instrument or contract or an event which results in the creation of any

lien upon any assets of the Guarantor.

Further Assurances. The Guarantor agrees, upon the written request of the Lender, to execute and

deliver to the Lender, from time to time, any additional instruments or documents reasonably considered

necessary by the Lender to cause this Guarantee to be, become or remain valid and effective in

accordance with its terms.

Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective

should any petition be filed by or against the Guarantor or the Company for liquidation or reorganization,

should the Guarantor or the Company become insolvent or make an assignment for the benefit of any

creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the

Guarantor’s or the Company’ assets, and shall continue to be effective or be reinstated, as the case may

be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is,

pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by

any obligee of the Guaranteed Obligations, whether as a “voidable preference,” “fraudulent conveyance,”

or otherwise, all as though such payment or performance had not been made. In the event that any

payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall

be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or

returned.

Miscellaneous.

Survival; Severability. In the event that any provision of this Guarantee becomes or is

declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Guarantee shall

continue in full force and effect without said provision; provided that in such case the parties shall

negotiate in good faith to replace such provision with a new provision which is not illegal,

unenforceable or void, as long as such new provision does not materially change the economic

benefits of this Guarantee to the parties.

Successors and Assigns. The terms and conditions of this Guarantee shall inure to the

benefit of and be binding upon the respective successors and permitted assigns of the parties.

Nothing in this Guarantee, express or implied, is intended to confer upon any party other than the

parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or

liabilities under or by reason of this Guarantee, except as expressly provided in this Guarantee. The

Lender may assign its rights and obligations hereunder in connection with any private sale or transfer

of the New Note, in which case the term “Lender” shall also be deemed to refer to such transferee.

The Guarantor may not assign its obligations under this Guarantee.

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Exhibit 10

Governing Law; Jurisdiction. This Guarantee shall be governed by and construed under the

laws of the State of New York applicable to contracts made and to be performed entirely within the

State of New York. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of

the state and federal courts sitting in the City and County of New York for the adjudication of any

dispute hereunder or in connection herewith or with any transaction contemplated hereby 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. The

Guarantor hereby irrevocably waives personal service of process and consents to process being

served in any such suit, action or proceeding by mailing a copy thereof to the Guarantor at the

address in effect for notices to it under this Guarantee 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.

Waiver of Jury Trial. The parties hereto waive all right to trial by jury in any action, suit

or proceeding brought to resolve any dispute, whether sounding in contract, tort, or otherwise,

between the Guarantor and the Lender arising out of, connected with, related to, or incidental to

the relationship established in connection with, this Guarantee or the transactions related hereto.

Headings. The headings used in this Guarantee are used for convenience only and are not to

be considered in construing or interpreting this Guarantee.