NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
POWER TECHNOLOGIES, INC. 8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 8, 2018
VALUE RECEIVED, Cyclone Power Technologies, Inc. (the “Company”) promis es to pay to the order of UNION CAPITAL, LLC
and its authorized successors and Permitted Assigns, defined below, (“Holder”), the aggregate principal face
amount Thirty Thousand Dollars exactly (U.S. $30,000.00) on May 8, 2018 (“Maturity Date”) and to pay interest
on the prin cipal amount outstanding hereunder at the rate of 8% per annum commencing on May 8, 2017. The interest will be paid
to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this
Note. The principal of, and interest on, this Note are payable at 91 Shelton Ave, Suite 107, New Haven, CT 06511, initially, and
if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The
Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any
amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder
at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a
payment of outstanding principal hereunder and shall satisfy and dis charge the liability for principal on this Note to the extent
of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to
par agraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied
by an Opinion of Counsel as provided for in Section 2(t) of the Securities Purchase Agreement.
Note is subject to the following additional provisions:
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that
Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently
transfers, assigns, sells or exchanges any of the multiple lesser denomi nation notes, Holder acknowledges that it will provide
the Company with Opinions of Counsel as provided for in Section 2(0 of the Securities Purchase Agreement.
The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
This Note may be transfened or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior
to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be
overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note
electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section
4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that
this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The
date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion
will be accompanied by an Opinion of Counsel.
(a) The Holder of this Note is entitled, at its option, at any time, after full cash payment for this Note, to convert all
or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the
“Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to
55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Markets
ex change which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future
(“Exchange’’), for the twenty prior trading days including the day up on which a
Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel,
by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the
Holder wishes to include the same day closing price). If the shares have not been delivered with in 3 business days, the Notice
of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the
Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject
to conversion. No fractional shares or scrip representing fractions of shares will be is sued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common
Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders
to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending
this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be
decreased to 45% instead of 55% while that “Chill” is in effect. In no event shall the Holder be allowed to effect
a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its
affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9%
upon 60 days’ prior written notice by the Investor).
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the
Company in Common Stock (“Interest Shares’1). Holder may, at any time, send in a Notice of Conversion to the Company
for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall
be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
This Note may not be prepaid, except that if the $30,000 Rule 144 convertible redeemable note issued by the Company of even
date herewith is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under
this Note and all obligations of the Holder under the Holder issued Back End Note will be auto matically be deemed satisfied and
this Note and the Holder issued Back End Note will be auto matically be deemed cancelled and of no further force or effect.
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change
or exchange of out standing shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii)
any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity
(other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and
(iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem
this Note in cash for 150¾ of the principal amount, plus accrued but unpaid interest through the date of redemption, or
at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued
but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with
which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this
Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares
of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other
change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise
of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the considerawtion received by the holders of Common Stock is other than cash,
the value shall be as deter mined by the Board of Directors of the Company or successor person or entity acting in good faith.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the fom1, herein prescribed.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred
by the Holder in collecting any amount due under this Note.
If one or more of the following described “Events of Default” shall occur:
The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation
of the Company under this Note or any other note issued to the Holder; or
The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing
its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver
for its or for a sub stantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the
filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state
laws as applicable; or
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged with in sixty (60) days after such appointment; or
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company; or
One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unhanded or unstayed for a period of fifteen (I 5) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
Defaulted on or breached any term of any other note of similar debt in- strument into which the Company has entered and failed
to cure such default within the appropriate grace period; or
The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock
trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file
its 1934 act reports with the SEC;
If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports
the removal of a restrictive legend; or
The Company shall not replenish the reserve set forth in Section 12, with- in 5 business days of the request of the Holder; or
The Company’s Common Stock has a closing bid price of less than $0.0005 per share for at least 5 consecutive trading
Intentionally deleted; or
The Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or
The Company shall lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange)
or at any time thereafter, unless cured (except for 8(m) and 8(n)) which are incurable de faults, the sole remedy of
which is to allow the Holder to cancel both this Note and the Holder Issued Note, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note
immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the
contrary not with standing, and the Holder may immediately, and without expiration of any period of grace, en force any and
all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event
of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted
by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty
shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the
Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(p)
shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. Further, if a breach of Section 8(0) occurs or is continuing after the 6
month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency
period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is
$0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share. If
this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.
the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging
an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the
conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder
incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company-written notice indicating the amounts payable
to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
to Deliver Loss= [(High trade price within 20 trading days or after the day of exercise) x (Nwnber of conversion shares)]
Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day
from the time of the Holder’s written notice to the Company.
In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be ad justed rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed
by the Company and the Holder.
The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if
it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10
type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i)
write a “144” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s
Prior to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of
shares of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth
in Section 4(a) herewith. Upon full conversion of this Note, the reserve representing this Note shall be can celled. The Company
will pay all transfer agent costs associated with issuing and delivering the shares. If such amounts are to be paid by the Holder,
it may deduct such amounts from the Con version Price. Conversion Notices may be sent to the Company or its transfer agent via
electric mail. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection
with its conversions.
The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to
be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State
of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts,
and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
be Executed by the Registered Holder in order to Convert the Note)
undersigned hereby irrevocably elects to convert $”______________ of the above Note into______________ Shares of Common
Stock of Cyclone Power Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the
date‘ Witten below.
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other
taxes and charges payable with respect thereto.
Name of Holder and Title of Signer]|
are to be registered in the following name:
are to be sent or delivered to the following account: