Exhibit 10.1

 

PURCHASE AGREEMENT

 

 

THIS PURCHASE AGREEMENT, dated as of June 3, 2014, is entered into by and among
Solar Wind Energy Tower, Inc., a Nevada corporation (the "Company"), and JDF
Capital Inc. (the "Purchaser").

 

WITNESSETH:

 

WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and

 

WHEREAS, the Purchaser wishes to purchase a 10% Convertible Promissory Note of
the Company (the "Note"), subject to and upon the terms and conditions of this
Agreement and acceptance of this Agreement by the Company, on the terms and
conditions referred to herein.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

 

a. Purchase.

 

(i) Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the Purchaser hereby agrees to purchase a Note in the
aggregate amount of $885,000 (the "Purchase Amount"), which Note shall be funded
on the Closing Date as described therein.

 

(ii) The Note referred to herein shall be in the form of Annex I annexed hereto.

 

(iii) In consideration for the Purchaser agreeing to Purchase the Note, the
Company agrees to issue to the Purchaser the Warrants (as defined herein) in the
form of Annex II hereto. Additional provisions relating to the Warrants are
provided below.

 

(iv) The purchase of the Note and the issuance of the Warrants by the Purchaser
and the other transactions contemplated hereby are sometimes referred to herein
and in the other Transaction Documents as the purchase and sale of the
Securities (as defined below), and are referred to collectively as the
"Transactions".

 

(v) Upon the effectiveness of the Registration Statement (as defined herein) as
required pursuant to Section 9, the Purchaser hereby agrees to fund the second
tranche of the Note in the Purchase Amount of $330,000, to consist of a cash
payment of $300,000, and 10% pre-paid interest. The additional Note funding will
occur within 15 business days of effectiveness of the Registration Statement.

 

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b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

 

"Affiliate" means, with respect to a specific Person referred to in the relevant
provision, another Person who or which controls or is controlled by or is under
common control with such specified Person.

 

"Certificate" means the original signed Note duly executed by the Company.

 

"Closing Date" means the date of the closing of the issuance of Note.

 

"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

 

"Company Control Person" means each director, executive officer, promoter, and
such other Persons as may be deemed in control of the Company pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).

 

"Conversion Shares" means shares of Common Stock underlying and issuable upon
conversions of the Note funded herein and to be funded pursuant to the second
tranche in Section 1a.(v).

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

"Holder" means the Person holding the relevant Securities at the relevant time.

 

"Last Audited Date" means December 31, 2013.

 

"Purchaser Control Person" means each director, executive officer, promoter, and
such other Persons as may be deemed in control of the Purchaser pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act.

 

"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (w) adversely
affect the legality, validity or enforceability of the Securities or any of the
Transaction Documents, (x) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents or the transactions contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Purchaser
in the Transaction Documents.

 

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"Person" means any living person or any entity, such as, but not necessarily
limited to, a corporation, partnership or trust.

 

"Principal Trading Market" means the Over the Counter Bulletin Board or such
other market on which the Common Stock is principally traded at the relevant
time.

 

"Securities" means the Note, the Conversion Shares, the Warrants and the Warrant
Shares, and any shares of common stock of the Company that may be issued to the
Purchaser in connection with any other agreements between the parties.

 

"Shares" means the shares of representing any or all of the Conversion Shares.

 

"State of Incorporation" means Nevada.

 

"Subsidiary" means any subsidiary of the Company.

 

"Trading Day" means any day during which the Principal Trading Market shall be
open for business.

 

"Transfer Agent" means, at any time, the transfer agent for the Company’s Common
Stock.

 

"Transaction Documents" means this Purchase Agreement and the Note, and includes
all ancillary documents referred to in those agreements.

 

"Warrants" means, collectively, share purchase warrants entitling the Purchaser
to acquire 15,750,000 Shares of the Company's common stock, of which 8,750,000
Warrants shall be exercisable at the price of $0.04 per Warrant Share for a
period of 90 days, and 7,000,000 Warrants shall be exercisable at the price of
$0.05 for a period of 150 days, from the effective date of the Registration
Statement (as defined herein).

 

"Warrant Shares" means shares of Common Stock underlying the Warrants.

 

c. Form of Payment; Delivery of Certificates.

 

(i) The Purchaser shall pay the Purchase Amount payable under the Note by
delivering immediately available good funds in United States Dollars to the
Company on the applicable Closing Date.

 

(ii) On the applicable Closing Date, the Company shall deliver the Note and
Warrants, duly executed on behalf of the Company to the Purchaser.

 

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(iii) By signing this Agreement, each of the Purchaser and the Company agrees to
all of the terms and conditions of the Transaction Documents, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

 

d. Method of Payment. Payment of the Purchase Amount shall be made by wire
transfer of funds to:

 

Solar Wind Energy Tower Inc.

RTE: 061000104
ACCT: 1000158813476
Sun Trust Bank

2122 Generals Hwy
Annapolis, MD 21401

 

 

2. PURCHASER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.

 

The Purchaser represents and warrants to, and covenants and agrees with, the
Company as follows:

 

a. Without limiting Purchaser's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Purchaser is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.

 

b. The Purchaser is (i) an "accredited investor" as that term is defined in Rule
501 of the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), (ii) experienced in making investments of the kind described in this
Agreement and the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and to evaluate the merits and risks of an investment in the Securities, and
(iv) able to afford the entire loss of its investment in the Securities.

 

c. All subsequent offers and sales of the Securities by the Purchaser shall be
made pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from registration.

 

d. The Purchaser understands that the Securities are being offered and sold to
it in reliance on specific exemptions from the registration requirements of the
1933 Act and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.

 

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e. The Purchaser and its advisors, if any, have been furnished with or have been
given access to 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 Purchaser, including those set forth on in any
annex attached hereto. The Purchaser and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Purchaser has also had the
opportunity to obtain and to review the Company's filings on EDGAR
(collectively, the "Company's SEC Documents").

 

f. The Purchaser understands that its investment in the Securities involves a
high degree of risk.

 

g. The Purchaser hereby represents that, in connection with its purchase of the
Securities, it has not relied on any statement or representation by the Company
or any of its officers, directors and employees or any of their respective
attorneys or agents, except as specifically set forth herein.

 

h. The Purchaser understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.

 

i. This Agreement and the other Transaction Documents to which the Purchaser is
a party, and the transactions contemplated thereby, have been duly and validly
authorized, executed and delivered on behalf of the Purchaser and are valid and
binding agreements of the Purchaser enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

 

3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to the
Purchaser as of the date hereof and as of the Closing Date.

 

a. Rights of Others Affecting the Transactions. There are no preemptive rights
of any shareholder of the Company, as such, to acquire the Note, or any shares
of the Company’s common stock that may be issued to the Purchaser in connection
with any other agreements between the parties, in the event such shares are
issued. No party other than a Purchaser has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Documents.

 

b. Status. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those jurisdictions in which the failure to so qualify would not have or result
in a Material Adverse Effect. The Company has registered its stock and is
obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The Common Stock
is, or immediately following the Closing Date will be, quoted on the Principal
Trading Market. The Company has received no notice, either oral or written, with
respect to the continued eligibility of the Common Stock for such quotation on
the Principal Trading Market, and the Company has maintained all requirements on
its part for the continuation of such quotation.

 

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c. Authorized Shares.

 

(i) The authorized capital stock of the Company consists of 900,000,000 shares
of Common Stock, $0.0001 par value, of which 503,426,537 shares are outstanding
as of the date hereof.

 

(ii) The Company has sufficient authorized and unissued shares of Common Stock
as may be necessary to effect the issuance of the Shares on the Closing Date.

 

(iii) As of the Closing Date, the Shares shall have been duly authorized by all
necessary corporate action on the part of the Company, and, when issued pursuant
to the relevant provisions of the Transaction Documents, in each case in
accordance with their respective terms, will be duly and validly issued, fully
paid and non-assessable and will not subject the Holder thereof to personal
liability by reason of being such Holder.

 

d. Transaction Documents and Stock. This Agreement and each of the other
Transaction Documents, and the transactions contemplated thereby, have been duly
and validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Note and each of the
other Transaction Documents, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally.

 

e. Non-contravention. The execution and delivery of this Agreement and each of
the other Transaction Documents by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, each of the Notes and the other Transaction Documents do not and
will not conflict with or result in a breach by the Company of any of the terms
or provisions of, or constitute a default under (i) the certificate of
incorporation or by-laws of the Company, each as currently in effect, (ii) any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock except as herein
set forth, or (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have or
result in a Material Adverse Effect.

 

f. Approvals. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the shareholders of the Company is required to be obtained by the
Company for the issuance and sale of the Securities to the Purchaser as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.

 

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g. Filings. None of the Company’s SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein in light of the circumstances under which they were made, not
misleading.

 

h. Absence of Certain Changes. Since the Last Audited Date, there has been no
material adverse change and no Material Adverse Effect, except as disclosed in
the Company’s SEC Documents. Since the Last Audited Date, except as provided in
the Company’s SEC Documents, the Company has not (i) incurred or become subject
to any material liabilities (absolute or contingent) except liabilities incurred
in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material lien or encumbrance or paid any material
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business consistent with past practices; (iii)
declared or made any payment or distribution of cash or other property to
shareholders with respect to its capital stock, or purchased or redeemed, or
made any agreements to purchase or redeem, any shares of its capital stock; (iv)
sold, assigned or transferred any other tangible assets, or canceled any debts
owed to the Company by any third party or claims of the Company against any
third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.

 

i. Full Disclosure. To the best of the Company’s knowledge, there is no fact
known to the Company (other than general economic conditions known to the public
generally or as disclosed in the Company’s SEC Documents) that has not been
disclosed in writing to the Purchaser that would reasonably be expected to have
or result in a Material Adverse Effect.

 

j. Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company before or by any governmental authority or
nongovernmental department, commission, board, bureau, agency or instrumentality
or any other person, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, any of the Transaction Documents. The Company is not aware of
any valid basis for any such claim that (either individually or in the aggregate
with all other such events and circumstances) could reasonably be expected to
have a Material Adverse Effect. There are no outstanding or unsatisfied
judgments, orders, decrees, writs, injunctions or stipulations to which the
Company is a party or by which it or any of its properties is bound, that
involve the transaction contemplated herein or that, alone or in the aggregate,
could reasonably be expect to have a Material Adverse Effect.

 

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k. Absence of Events of Default. Except as set forth in Section 3(e) and 3(g)
hereof, (i) neither the Company nor any of its subsidiaries is in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material agreement to which it is a party or by which its property is bound, and
(ii) no Event of Default (or its equivalent term), as defined in the respective
agreement to which the Company or its subsidiary is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse Effect.

 

l. No Undisclosed Liabilities or Events. To the best of the Company’s knowledge,
the Company has no liabilities or obligations other than those disclosed in the
Transaction Documents or the Company's SEC Documents or those incurred in the
ordinary course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.

 

m. No Integrated Offering. Neither the Company nor any of its Affiliates nor any
Person acting on its or their behalf has, directly or indirectly, at any time
since May 1, 2013, made any offer or sales of any security or solicited any
offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.

 

n. Dilution. Any shares of the Company’s common stock issued to the Purchaser in
connection with any agreements between the parties hereto, in the event such
shares are issued may have a dilutive effect on the ownership interests of the
other shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company.

 

o. Confirmation. The Company confirms that all statements of the Company
contained herein shall survive acceptance of this Agreement by the Purchaser.
The Company agrees that, if any events occur or circumstances exist prior to the
Closing Date or the release of the Purchase Amount to the Company which would
make any of the Company’s representations, warranties, agreements or other
information set forth herein materially untrue or materially inaccurate as of
such date, the Company shall immediately notify the Purchaser (directly or
through its counsel, if any) in writing prior to such date of such fact,
specifying which representation, warranty or covenant is affected and the
reasons therefor.

 

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p. Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith. Each
Transaction Agreement has been (or upon delivery will have been) duly executed
by the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

 

q. SEC Reports; Financial Statements. Other than as previously disclosed to the
Purchaser, the Company has filed all reports required to be filed by it under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials, including the
exhibits thereto, being collectively referred to herein as the "SEC Reports") on
a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

 

r. Sarbanes-Oxley; Internal Accounting Controls. Except as disclosed in the SEC
Reports , the Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.
The Company and the Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP 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. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of the date prior to the filing date of
the most recently filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.

 

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s. Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company has no knowledge of a tax deficiency which has been asserted
or threatened against the Company or any Subsidiary.

 

t. No Disagreements with Accountants and Lawyers. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its
accountants and lawyers. By making this representation the Company does not, in
any manner, waive the attorney/client privilege or the confidentiality of the
communications between the Company and its lawyers.

 

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

 

a. Transfer Restrictions. The Purchaser acknowledges that (1) the Securities
have not been and are not being registered under the provisions of the 1933 Act
and, the Shares have not been and are not being registered under the 1933 Act,
and may not be transferred unless (A) subsequently registered thereunder or (B)
the Purchaser shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Securities
made in reliance on Rule 144 promulgated under the 1933 Act ("Rule 144") may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such Securities under circumstances in which the
seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.

 

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b. Restrictive Legend. The Purchaser acknowledges and agrees that the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):

 

"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."

 

c. Filings. The Company undertakes and agrees to make all necessary filings in
connection with the sale of the Securities to the Purchaser under any United
States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Purchaser promptly after such filing.

 

d. Reporting Status. So long as the Purchaser beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company will take
all reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock on the Principal Trading Market or a
listing on the NASDAQ/Small Cap or National Markets and, to the extent
applicable to it, will comply in all material respects with the Company’s
reporting, filing and other obligations under the by-laws or rules of the
Principal Trading Market and/or the National Association of Securities Dealers,
Inc., as the case may be, applicable to it for so long as the Purchaser
beneficially owns any of the Securities.

 

e. Use of Proceeds. The Company will use the proceeds received hereunder
(excluding amounts paid by the Company for legal fees in connection with the
sale of the Securities) (1) for payment of currently outstanding convertible
debt, and (2) the balance for working capital.

 

f. Warrant. The Company agrees to issue the Warrants to the Purchaser on the
Closing Date. The form of Warrant is provided in Annex II annexed hereto, the
terms of which are incorporated herein by reference.

 

g. Publicity, Filings, Releases, Etc. Each of the parties agrees that it will
not disseminate any information relating to the Transaction Documents or the
transactions contemplated thereby, including issuing any press releases, holding
any press conferences or other forums, or filing any reports (collectively,
"Publicity"), without giving the other party reasonable advance notice and an
opportunity to comment on the contents thereof. Neither party will include in
any such Publicity any statement or statements or other material to which the
other party reasonably objects, unless in the reasonable opinion of counsel to
the party proposing such statement, such statement is legally required to be
included. In furtherance of the foregoing, the Company will provide to the
Purchaser drafts of the applicable text of the first filing of a Current Report
on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K intended to be
made with the SEC which refers to the Transaction Documents or the transactions
contemplated thereby as soon as practicable (but at least two (2) Trading Days
before such filing will be made) will not include in such filing any statement
or statements or other material to which the other party reasonably objects,
unless in the reasonable opinion of counsel to the party proposing such
statement, such statement is legally required to be included. Notwithstanding
the foregoing, each of the parties hereby consents to the inclusion of the text
of the Transaction Documents in filings made with the SEC as well as any
descriptive text accompanying or part of such filing which is accurate and
reasonably determined by the Company’s counsel to be legally required.
Notwithstanding, but subject to, the foregoing provisions of this Section 4(i),
the Company will, after the Closing Date, promptly file a Current Report on Form
8-K or, if appropriate, a quarterly or annual report on the appropriate form,
referring to the transactions contemplated by the Transaction Documents.

 

Page 11

 

 

5. TRANSFER AGENT INSTRUCTIONS.

 

a. The Company warrants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 4(a) hereof, it will give
its transfer agent no instructions inconsistent with instructions to issue the
Shares to the Holder as contemplated in the Transaction Documents. Nothing in
this Section shall affect in any way the Purchaser's obligations and agreement
to comply with all applicable securities laws upon resale of the Securities. If
the Purchaser provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of a resale by the Purchaser of
any of the Securities in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall (except as
provided in clause (2) of Section 4(a) of this Agreement) permit the transfer or
issue of the Shares represented by one or more certificates for Common Stock
without legend (or where applicable, by electronic registration) in such name
and in such denominations as specified by the Purchaser.

 

b. The Company will authorize the Transfer Agent to give information relating to
the Company directly to the Holder or the Holder’s representatives upon the
request of the Holder or any such representative, to the extent such information
relates to (i) the status of shares of Common Stock issued or claimed to be
issued to the Holder in connection with a Notice of Exercise, or (ii) the
aggregate number of outstanding shares of Common Stock of all shareholders (as a
group, and not individually) as of a current or other specified date. At the
request of the Holder, the Company will provide the Holder with a copy of the
authorization so given to the Transfer Agent.

 

6. CLOSING DATE.

 

a. The respective Closing Date shall occur as indicated in Section 1(a)(1) after
each of the conditions contemplated by Sections 7 and 8 hereof shall have either
been satisfied or been waived by the party in whose favor such conditions run.

 

Page 12

 

 

b. The closing of the Transactions shall occur on the respective Closing Date at
the offices of the Purchaser and shall take place no later than 3:00 P.M., PST,
on such day or such other time as is mutually agreed upon by the Company and the
Purchaser.

 

7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

 

The Purchaser understands that the Company's obligation to sell the Note to the
Purchaser pursuant to this Agreement on the Closing Date is conditioned upon:

 

a. The execution and delivery of this Agreement by the Purchaser; and

 

b. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

 

8. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE.

 

The Company understands that the Purchaser’s obligation to purchase any Notes
and its acceptance of any shares of the Company’s common stock that may be
issued in connection with any agreements between the parties hereto on a Closing
Date is conditioned upon:

 

a. The execution and delivery of this Agreement and the other Transaction
Documents by the Company;

 

b. Delivery by the Company to the Purchaser of the Note and Warrants in
accordance with this Agreement or any other agreements between the parties;

 

c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;

 

d. The Company must be current with all required Exchange Act filings.

 

e. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and

 

f. From and after the date hereof to and including the Closing Date, each of the
following conditions will remain in effect: (i) the trading of the Common Stock
shall not have been suspended by the SEC or on the Principal Trading Market;
(ii) trading in securities generally on the Principal Trading Market shall not
have been suspended or limited; (iii) no minimum prices shall been established
for securities traded on the Principal Trading Market; and (iv) there shall not
have been any Material Adverse Effect in regards to the Company.

 

Page 13

 

 

9. REGISTRATION RIGHTS

 

9.1 Registration procedures and Other Matters

 

a.The Company shall:

 

(i) as soon as possible but in any event not later than the 60th day after the
Closing Date (or, if such day is a Saturday, Sunday or holiday, then by the next
succeeding business day), file a registration statement on Form S-3 (or, if Form
S-3 is note then available, on such form of registration statement as is then
available to effect a registration of all Shares and Warrant Shares) to enable
the resale of the Shares and the Warrant Shares by the Purchaser from time to
time (the "Registration Statement");

 

(ii) use commercially reasonable efforts to cause a Registration Statement to be
declared effective by the SEC as soon as possible, but in any event not later
than the earlier of (a) the 120th day following the Closing Date, and (b) the
fifth trading day following the date on which the Company is notified by the SEC
that the Registration Statement will not be reviewed or is no longer subject to
further review and comments;

 

(iii) use commercially reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith (the "Prospectus") as may be necessary to keep the
Registration Statement continuously current, effective and free from any
material misstatement or omission to state a material fact for a period not
exceeding, with respect to the Purchaser’s Shares and Warrant Shares purchased
hereunder from the date it is first declared effective until, the earlier of (A)
six months from the date of the final exercise of all of the Warrants, (B) the
date on which the Purchaser may sell all Shares and Warrant Shares then held by
the Purchaser 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 (C) the
public sale of all of the Shares and the Warrant Shares (such period, the
"Effectiveness Period");

 

Page 14

 

 

(iv) if (A) the Registration Statement is not filed on or prior to the date of
filing required pursuant to Section 9.1(a)(i), (B) the Registration Statement is
not declared effective on or prior to the date required by Section 9.1(a)(ii),
or (C) notwithstanding Section 9.1(a)(ii), after the date first declared
effective by the SEC and prior to the expiration of the Effectiveness Period,
the Registration Statement ceases to be effective and available to each
Purchaser as to its Shares and Warrant Shares (whether pursuant to Section 9, or
otherwise) without being succeeded within 20 trading days by an effective
amendment thereto or by a subsequent registration statement filed with and
declared effective by the SEC, (any such failure being referred to as an "Event"
and the date of such failure being the "Event Date"), then, in addition to any
other rights available to the Purchaser under this Agreement or applicable law:
(w) on the failure by the Company to comply with the Event required pursuant to
Section 9.1(a)(i) the Company shall pay to the Purchaser an amount in cash, as
liquidated damages and not as a penalty, equal to two percent of the
Subscription Price paid by the Purchaser and on each monthly anniversary of such
Event Date (if the Event has not been cured by such date) until the applicable
Event is cured, the Company shall pay to the Purchaser a further amount in cash,
as liquidated damages and not as a penalty, equal to one percent of the
Subscription Price paid by the Purchaser; (x) on the failure by the Company to
comply with the Event required pursuant to Section (ii) or the occurrence of the
Event set forth in Section (iv)(C) and on each monthly anniversary of such Event
Dates (if the Event has not been cured by such date) until the applicable Event
is cured, an amount shall accrue and be payable by the Company to the Purchaser,
as liquidated damages and not as a penalty, equal to one percent of the
Subscription Price paid by the Purchaser; and if an Event is not cured within 90
days of the applicable Event Date, all liquidated damages that have accrued and
are owed and continue to accrue to the Purchaser shall be paid in cash, and any
liquidated damages shall not exceed six percent of the Subscription Price paid
by the Purchaser. The parties agree that the Company shall not be liable for
liquidated damages under this Agreement with respect to any Shares and Warrant
Shares that the Company was not permitted to include on such Registration
Statement due solely to the SEC’s application of Rule 415. The liquidated
damages pursuant to the terms hereof shall apply on a pro rata basis for any
portion of a month prior to the cure of an Event;

 

(v) furnish to the Purchaser with respect to the Shares and the Warrant Shares
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and Preliminary Prospectuses in conformity
with the requirements of the 1933 Act and such other documents as the Purchaser
may reasonably request in writing, in order to facilitate the public sale or
other disposition of all or any of the Shares or Warrant Shares by the
Purchaser; provided, however, that the obligation of the Company to deliver
copies of Prospectuses or Preliminary Prospectuses to the Purchaser shall be
subject to the receipt by the Company of reasonable assurances from the
Purchaser that the Purchaser will comply with the applicable provisions of the
1933 Act and of such other securities or blue sky laws as may be applicable in
connection with any use of such Prospectuses or Preliminary Prospectuses;

 

(vi) file documents required of the Company for blue sky clearance in states
specified in writing by the Purchaser and use its commercially reasonable
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement pursuant
to Section 9.1(a)(iii); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;

 

Page 15

 

 

(vii) bear all expenses in connection with the procedures in paragraph 9.1(a)(i)
through (vi) of this Section 9.1 (other than any underwriting discounts or
commissions, brokers’ fees and similar selling expenses, and any other fees or
expenses incurred by the Purchaser, including attorneys’ fees); and

 

(viii) advise the Purchaser in writing promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its
commercially reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued.

 

b. Notwithstanding anything to the contrary herein, the Registration Statement
shall cover only the Shares and the Warrant Shares and such other securities
issued by the Company subject to registration rights. In no event at any time
before the Registration Statement becomes effective with respect to the Shares
and Warrant Shares shall the Company publicly announce or file any other
registration statement, other than registrations on Form S-8 or registrations
for other securities issued by the Company subject to registration rights,
without the prior written consent of the Purchaser

 

9.2 Transfer of Shares After Registration; Suspension

 

a. The Purchaser agrees that it will promptly notify the Company of any material
changes in the information set forth in the Registration Statement regarding the
Purchaser or its plan of distribution.

 

b. Except in the event that paragraph (c) below applies, the Company shall (i)
if deemed necessary by the Company, prepare and file from time to time with the
SEC a post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares and Warrant Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Purchaser copies of any documents filed
pursuant to Section 9.1 as the Purchaser may reasonably request; and (iii)
inform each Purchaser that the Company has complied with its obligations in
Section 9.1 (or that, if the Company has filed a post-effective amendment to the
Registration Statement which has not yet been declared effective, the Company
will notify the Purchaser to that effect, will use its commercially reasonable
efforts to secure the effectiveness of such post-effective amendment as promptly
as possible and will promptly notify the Purchaser pursuant to Section 9.1
hereof when the amendment has become effective).

 

Page 16

 

 

c. Subject to paragraph (d) below, in the event of: (i) any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information; (ii)
the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iii) the receipt by the Company
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; or (iv) any
event or circumstance which, upon the advice of its counsel, necessitates the
making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue statement
of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company shall
deliver a certificate in writing to the Purchaser (the "Suspension Notice") to
the effect of the foregoing and, upon receipt of such Suspension Notice, the
Purchaser will refrain from selling any Shares and Warrant Shares pursuant to
the Registration Statement (a "Suspension") until the Purchaser's receipt of
copies of a supplemented or amended Prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the current
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
commercially reasonable efforts to cause the use of the Prospectus so suspended
to be resumed as soon as reasonably practicable within 20 trading days after the
delivery of a Suspension Notice to the Purchaser.

 

d. Notwithstanding the foregoing paragraphs of this Section 9.2, the Purchaser
shall not be prohibited from selling Shares under the Registration Statement as
a result of Suspensions on more than two occasions of not more than 20 trading
days each in any twelve month period.

 

e. Provided that a Suspension is not then in effect, the Purchaser may sell the
Shares and the Warrant Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such Shares
or Warrant Shares, as applicable. The Company shall provide such number of
current Prospectuses to the Purchaser as the Purchaser may reasonably request,
and shall supply copies to any other parties reasonably requiring such
Prospectuses.

 

Page 17

 

 

9.3 Indemnification

 

a. The Company agrees to indemnify and hold harmless the Purchaser and the
officers, directors, agents and employees of the Purchaser, to the fullest
extent permitted by applicable law from and against any losses, claims, damages
or liabilities to which any such person(s) may become subject (under the 1933
Act or otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon (i)
any Untrue Statement (defined below), or (ii) any failure by the Company to
fulfill any undertaking included in the Registration Statement, as amended or
supplemented from time to time, which indemnification will include reimbursement
for any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, or
preparing to defend any such action, proceeding or claim, provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an Untrue
Statement made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Purchaser specifically for use
in preparation of the Registration Statement, as amended or supplemented from
time to time or the failure of the Purchaser to comply with its covenants and
agreements contained in this Agreement hereof respecting sale of the Shares or
Warrant Shares or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by the Purchaser. The Company shall reimburse the
Purchaser for the indemnifiable amounts provided for herein on demand as such
expenses are incurred. Notwithstanding the foregoing, the Company's aggregate
obligation to indemnify the Purchaser and such officers, directors and
controlling persons shall be limited to the amount of the Subscription Price
received by the Company from the Purchaser.

 

b. The Purchaser agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act, each officer of the Company who signs the Registration Statement and
each director of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the 1933 Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any Untrue Statement if such
Untrue Statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Purchaser specifically for use in
preparation of the Registration Statement, as amended or supplemented from time
to time or (ii) the failure of the Purchaser to comply with its covenants and
agreements contained in this Agreement hereof respecting sale of the Shares or
Warrant Shares or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by the Purchaser; and the Purchaser will reimburse the
Company or such officer, director or controlling person, as the case may be, for
any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim. The
Purchaser shall reimburse the Company or such officer, director or controlling
person, as the case may be, for the indemnifiable amounts provided for herein on
demand as such expenses are incurred. Notwithstanding the foregoing, the
Purchaser's aggregate obligation to indemnify the Company and such officers,
directors and controlling persons shall be limited to the amount received by the
Purchaser from the sale of Shares or Warrant Shares that are the subject of such
loss.

 

Page 18

 

 

c. Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 9.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
person will not relieve it from any liability which it may have to any
indemnified person under this Section 9.3 (except to the extent that such
omission materially and adversely affects the indemnifying person's ability to
defend such action) or from any liability otherwise than under this Section 9.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld or delayed. No indemnifying
person shall, without the prior written consent of the indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from all
liability on claims that are the subject matter of such proceeding.

 

d. The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 9.3, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 9.3 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the 1933 Act and the Securities Exchange Act of 1934,
as amended (the "1934 Act"). The parties are advised that federal or state
public policy as interpreted by the courts in certain jurisdictions may be
contrary to certain of the provisions of this Section 9.3, and the parties
hereto hereby expressly waive and relinquish any right or ability to assert such
public policy as a defense to a claim under this Section 9.3 and further agree
not to attempt to assert any such defense.

 

Page 19

 

 

e. For the purpose of this Section 9:

 

(i) the term "Registration Statement" shall include the Prospectus in the form
first filed with the SEC pursuant to Rule 424(b) of the 1933 Act or filed as
part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required, and any exhibit, supplement or amendment included in
or relating to the Registration Statement referred to in Section 9.1; and

 

(ii) the term "Untrue Statement" means any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the Registration
Statement, as amended or supplemented from time to time, a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

 

9.4 Information Available

 

So long as the Registration Statement is effective covering the resale of Shares
and Warrant Shares owned by the Purchaser, the Company will, at Purchaser's
written request, furnish to the Purchaser:

 

a. as soon as practicable after it is available, one copy of (i) its Annual
Report to Shareholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a
national firm of certified public accountants), (ii) its Annual Report on Form
10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing, in each case,
excluding exhibits);

 

b. any and all exhibits to the reports set forth in Section 9.4(a) as filed with
the SEC and all other information that is made available to shareholders; and

 

c. an adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses.

 

10. INDEMNIFICATION AND REIMBURSEMENT.

 

a. (i) The Company agrees to indemnify and hold harmless the Purchaser and its
officers, directors, employees, and agents, and each Purchaser Control Person
from and against any losses, claims, damages, liabilities or expenses incurred
(collectively, "Damages"), joint or several, and any action in respect thereof
to which the Purchaser, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Purchaser Control Person
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Purchaser's failure to perform any covenant or agreement contained in this
Agreement or the Purchaser's or its officer’s, director’s, employee’s, agent’s
or Purchaser Control Person’s negligence, recklessness or bad faith in
performing its obligations under this Agreement.

 

Page 20

 

 

(ii) The Company hereby agrees that, if the Purchaser, other than by reason of
its negligence, illegal or willful misconduct (in each case, as determined by a
non-appealable judgment to such effect), (x) becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement or the other Transaction Documents,
or if the Purchaser is impleaded in any such action, proceeding or investigation
by any Person, or (y) becomes involved in any capacity in any action, proceeding
or investigation brought by the SEC, any self-regulatory organization or other
body having jurisdiction, against or involving the Company or in connection with
or as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Documents, or (z) is impleaded in any such
action, proceeding or investigation by any Person, then in any such case, the
Company shall indemnify, defend and hold harmless the Purchaser from and against
and in respect of all losses, claims, liabilities, damages or expenses resulting
from, imposed upon or incurred by the Purchaser, directly or indirectly, and
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith,
as such expenses are incurred. The indemnification and reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
Purchaser Control Persons (if any), as the case may be, of the Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchaser, any such Affiliate and any such Person. The Company also agrees that
neither the Purchaser nor any such Affiliate, partner, director, agent, employee
or Purchaser Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Documents, except as may be expressly and specifically provided in
or contemplated by this Agreement.

 

b. All claims for indemnification by any Indemnified Party (as defined below)
under this Section shall be asserted and resolved as follows:

 

(i) In the event any claim or demand in respect of which any Person claiming
indemnification under any provision of this Section (an "Indemnified Party")
might seek indemnity under paragraph (a) of this Section is asserted against or
sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a "Third Party Claim"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of this Section against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

 

Page 21

 

 

(ii) If the Indemnifying Party notifies the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this paragraph (b) of this Section,
then the Indemnifying Party shall have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to paragraph (a) of this Section). The Indemnifying Party shall
have full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence of
this subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be necessary or
appropriate protect its interests; and provided further, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this subparagraph (x), and except as provided in the preceding
sentence, the Indemnified Party shall bear its own costs and expenses with
respect to such participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to indemnity under
paragraph (a) of this Section with respect to such Third Party Claim.

 

(iii) If the Indemnifying Party fails to notify the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to paragraph (b) of this Section, or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this subparagraph (y), if the Indemnifying Party has notified the Indemnified
Party within the Dispute Period that the Indemnifying Party disputes its
liability or the amount of its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in favor of
the Indemnifying Party in the manner provided in subparagraph(z) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this subparagraph (y) or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.

 

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(iv) If the Indemnifying Party notifies the Indemnified Party that it does not
dispute its liability or the amount of its liability to the Indemnified Party
with respect to the Third Party Claim under paragraph (a) of this Section or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the amount of Damages
specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under paragraph (a) of this Section and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.

 

(v) In the event any Indemnified Party should have a claim under paragraph (a)
of this Section against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under paragraph (a) of this Section specifying the nature of
and basis for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an
"Indemnity Notice") with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a) of
this Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that it the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems appropriate.

 

c. The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.

 

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11. JURY TRIAL WAIVER. The Company and the Purchaser hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the Parties
hereto against the other in respect of any matter arising out or in connection
with the Transaction Documents.

 

12. GOVERNING LAW: MISCELLANEOUS.

 

a.           (i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
state courts of the State of Nevada as in connection with any dispute arising
under this Agreement or any of the other Transaction Documents and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions or to any claim that such venue of the suit, action or
proceeding is improper. To the extent determined by such court, the Company
shall reimburse the Purchaser for any reasonable legal fees and disbursements
incurred by the Purchaser in enforcement of or protection of any of its rights
under any of the Transaction Documents. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.

 

(ii) The Company and the Purchaser acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement and the other Transaction Documents and to
enforce specifically the terms and provisions hereof and thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

 

b. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.

 

d. All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.

 

e. A facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.

 

f. This Agreement may be signed in one or more counterparts, each of which shall
be deemed an original.

 

g. The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.

 

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h. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

 

i. This Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement thereof.

 

j. This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.

 

13. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of

 

(a) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,

 

(b) the fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or

 

(c) the third Trading Day after mailing by domestic or international express
courier, with delivery costs and fees prepaid,

 

in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days’ advance written notice similarly given to each of the other
parties hereto):

 

COMPANY: At the address set forth at the head of this Agreement.  

Attn: Ronald W. Pickett

Telephone No.: 410-972-4713 or 910-619-3171

Telecopier No.:

    PURCHASER:

JDF CAPITAL INC.

Attn: John Fierro

Telephone No.: 718-290-4058

Telecopier No.: 800-319-6863

 

14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s and the
Purchaser’s representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
payment of the Purchase Amount, and shall inure to the benefit of the Purchaser
and the Company and their respective successors and assigns.

 

[Balance of page intentionally left blank]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed by the Purchaser and
the Company as of the date set first above written.

 

 

                JDF CAPITAL INC.                 By: /s/ John Fierro       Name:
John Fierro       Title: President           SOLAR WIND ENERGY TOWER, INC.      
          By:         (Signature of Authorized Person)               /s/ Ronald
W. Pickett       Ronald W. Pickett, President and Chief Executive Officer      

 

 

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