**Exhibit 4.1.11**

** **

**AGREEMENT TO EXCHANGE SERIES B PREFERRED SHARES**

**FOR SERIES E PREFERRED SHARES**

 

**THIS AGREEMENT**, dated as of July 19, 2002,is entered into by and between **STRATUSSERVICES GROUP, INC.**, a Delaware corporation, with headquarterslocated at 500 Craig Road, Suite 201, Manalapan, New Jersey 07726 (the“Company”) and Transworld Management Services, Inc. a New York corporation,with offices located at 500 Craig Road, Suite 201, Manalapan, New Jersey 07726(“Transworld”).

 

**WITNESSETH:**

** **

**WHEREAS,** on March 11, 2002, theCompany entered into a certain Agreement to Cancel Promissory Note in Exchangefor Preferred Shares (the “Note Exchange Agreement”), whereby Transworldexchanged $160,000 of the Note for an aggregate of 32,000 shares of Series BPreferred Stock; and

 

**WHEREAS**, the Company also owes Transworld certainmonies for dividends and penalties due and owing on such Preferred Stock, andTransworld agrees to waive same; and

 

**WHEREAS**, Transworld is desirous of exchanging theremaining 32,000 shares of Series B Preferred Stock for a Series E preferredstock equity interest in the Company, the terms of such preferred stock (the“Series E Preferred Stock”) being substantially in the form of the Certificateof Designation attached as Exhibit A hereto.

 

**NOW, THEREFORE,** in consideration for theforegoing, the parties hereto agree as follows:

 

1.               Transworld’s32,000 shares of Series B Preferred Stock in the principal amount of $160,000will be exchanged on July 19, 2002 for 1,600 shares of Series E Preferred Stock,$.01 par value per share.

 

2.               If Series EPreferred Stock is to be issued in the name of an entity other than Transworld,Transworld will pay all transfer taxes payable with respect thereto.  No fee will be charged to Transworld for theexchange except for such transfer taxes, if any.

 

3.               As set forth inItems 5c and 5f below, the Series E Preferred Stock cannot be converted intoCommon Stock until the Company’s proposal to amend its Amended and RestatedCertificate of Incorporation to increase the number of authorized shares ofCommon Stock to 100,000,000 is approved. In the event

 

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thatthe same is not approved by the stockholders within one hundred and twenty(120) days from the date hereof, then the Series E Preferred Stock shall becomeimmediately redeemable, in cash.

 

4.               **Transworld’s Representations, Warranties, Etc.; Access To Information;Independent Investigation**.  Transworld represents and warrants to, and covenants and agreeswith, the Company as follows:

 

a.               Transworld isexchanging the Series B Preferred Stock and accrued dividends and penalties forthe Series E Preferred Stock for its own account for investment only and notwith a view towards the public sale or distribution thereof and not with a viewto or for sale in connection with any distribution thereof.

 

b.              Transworld is(i) an “accredited investor” as that term is defined in Rule 501 of the GeneralRules and Regulations under the 1933 Act by reason of Rule 501(a)(3), and (ii)experienced in making investments of the kind described in this Agreement andthe related documents, (iii) able, by reason of the business and financialexperience of its officers (if an entity) and professional advisors (who arenot affiliated with or compensated in any way by the Company or any of its affiliatesor selling agents), to protect its own interests in connection with thetransactions described in this Agreement, and the related documents, and (iv)able to afford the entire loss of its investment in the Preferred.

 

c.               Transworld understands thatthe 32,000 shares of Series B Preferred Stock are being exchanged for theSeries E Preferred Stock in reliance on specific exemptions from theregistration requirements of United States federal and state securities lawsand that the Company is relying upon the truth and accuracy of, andTransworld’s compliance with, the representations, warranties, agreements,acknowledgements and understandings of Transworld set forth herein in order todetermine the availability of such exemptions and the eligibility of Transworldto acquire the Preferred Stock.

 

d.              Transworld andits advisors, if any, have been furnished with all materials relating to thebusiness, finances and operations of the Company and materials relating to theexchange of the Series B Preferred Stock and the issuance of Series E PreferredStock which have been

 

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 requested by Transworld.  Transworld and its advisors, if any, havebeen afforded the opportunity to ask questions of the Company and have receivedcomplete and satisfactory answers to any such inquiries;

 

e.               Transworldunderstands that no United States federal or state agency or any othergovernment or governmental agency has passed on or made any recommendation orendorsement of the Series E Preferred Shares.

 

f.                 This Agreementhas been duly and validly authorized, executed and delivered on behalf ofTransworld and is a valid and binding agreement of Transworld enforceable inaccordance with its terms, subject as to enforceability to general principlesof equity and to bankruptcy, insolvency, moratorium and other similar lawsaffecting the enforcement of creditors’ rights generally.

 

5.               **        Company Representations,Etc**.  The Company represents and warrants to Transworld that:

 

a.               Concerning theCommon Stock**.**   There are no preemptive rights of any stockholder of theCompany, as such, to acquire the Company’s Series E Preferred.

 

b.              Reporting Company Status.  The Company is a corporation duly organized,validly existing and in good standing under the laws of the State of Delaware,and has the requisite corporate power to own its properties and to carry on itsbusiness as now being conducted.  TheCompany is duly qualified as a foreign corporation to do business and is ingood standing in each jurisdiction where the nature of the business conductedor property owned by it makes such qualification necessary other than thosejurisdictions in which the failure to so qualify would not have a material andadverse effect on the business, operations, properties, prospects or condition(financial or otherwise) of the Company. The Company has registered its Common Stock pursuant to Section 12 ofthe Securities Exchange Act of 1934, as amended (the “1934 Act”), and theCommon Stock is listed and traded on the OTC Bulletin Board Market.

 

c.               AuthorizedShares**.** Upon the Company obtainingstockholder approval to increase its authorized shares of Common Stock to100,000,000, the shares of Common Stock issuable upon conversion of the SeriesE Preferred Stock will be duly authorized and, when issued to

 

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Transworld,will be duly and validly issued, fully paid and non-assessable and will notsubject the holder thereof to personal liability by reason of being such holder.

 

d.              ConversionAgreement.  ThisAgreement and the transactions contemplated hereby, have been duly and validlyauthorized by the Company.  ThisAgreement has been duly executed and delivered by the Company and is a validand binding agreement of the Company enforceable in accordance with its terms,subject as to enforceability to general principles of equity and to bankruptcy,insolvency, moratorium, and other similar laws affecting the enforcement ofcreditors’ rights generally.

 

e.               Non-contravention. ** **Theexecution and delivery of this Agreement by the Company, the issuance of theSeries E Preferred Stock, and the consummation by the Company of the othertransactions contemplated by this Agreement do not and will not conflict withor result in a breach by the Company of any of the terms or provisions of, orconstitute a default under (i) the articles of incorporation or by-laws of theCompany, (ii) any indenture, mortgage, deed of trust, or other materialagreement or instrument to which the Company is a party or by which it or anyof its properties or assets are bound, (iii) to its knowledge, any existingapplicable law, rule, or regulation or any applicable decree, judgment, or (iv)to its knowledge, order of any court, United States federal or state regulatorybody, administrative agency, or other governmental body having jurisdictionover the Company or any of its properties or assets, except such conflict,breach or default which would not have a material adverse effect on thetransactions contemplated herein. The Company is not in violation of anymaterial laws, govern­men­tal orders, rules, regula­tions or ordinances towhich its  property, real, personal,mixed, tangible or intangible,  or itsbusinesses related to such properties, are subject.

 

f.                 Approvals.  No authorization, approval or consent of anycourt, governmental body, regulatory agency, self-regulatory organization, orstock exchange or market is required to be obtained by the Company for theissuance and sale of the Series E Preferred Stock to Transworld as contemplatedby this Agreement, except such authorizations, approvals and consents that havebeen obtained, and except for the stockholder approval needed to increase theCompany’s

 

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authorizedshares of Common Stock to 100,000,000 to insure that there are sufficientshares of Common Stock underlying the Series E Preferred Stock upon conversion.

 

g.              SEC Documents,Financial Statements.  The CommonStock of the Company is registered pursuant to Section 12(g) of the 1934 Actand the Company has filed all reports, schedules, forms, statements and otherdocuments required to be filed by it with the SEC pursuant to the reportingrequirements of the Exchange Act, including material filed pursuant to Section13(a) or 15(d), in addition to one or more registration statements andamendments thereto heretofore filed by the Company with the SEC under the Act(all of the foregoing including filings incorporated by reference therein beingreferred to herein as the “SEC Documents”). The Company, through its agent, has delivered to Transworld true andcomplete copies of the SEC Documents (except for exhibits and incorporateddocuments).  The Company has notprovided to Transworld any information which, according to applicable law, ruleor regulation, should have been disclosed publicly by the Company but which hasnot been so disclosed, other than with respect to the transactions contemplatedby this Agreement.

 

As of their respective dates, the SEC Documentscomplied in all material respects with the requirements of the Act or theExchange Act as the case may be and the rules and regulations of the SECpromulgated thereunder and other federal, state and local laws, rules andregulations applicable to such SEC Documents, and none of the SEC Documentscontained any untrue statement of a material fact or omitted to state amaterial fact required to be stated therein or necessary in order to make thestatements therein, in light of the circumstances under which they were made,not misleading.  The financialstatements of the Company included in the SEC Documents comply as to form inall material respects with applicable accounting requirements and the publishedrules and regulations of the SEC or other applicable rules and regulations withrespect thereto.  Such financialstatements have been prepared in accordance with generally accepted accountingprinciples applied on a consistent basis during the periods involved (except(i) as may be otherwise indicated in such financial statements or the notesthereto or (ii) in the case of unaudited interim statements, to the extent theymay not include

 

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footnotesor may be condensed or summary statements) and fairly present in all materialrespects the financial position of the Company as of the dates thereof and theresults of operations and cash flows for the periods then ended (subject, inthe case of unaudited statements, to normal year-end audit adjustments).

 

h.              Absence ofCertain Changes**.**  Since March 31, 2002, there has been no material adverse changeand no material adverse development in the business, properties, operations,financial condition, or results of operations of the Company.

 

i.                  Full Disclosure**.**  There is no fact known to theCompany (other than general economic conditions known to the public generally)or as disclosed in the documents referred to in Section 2(g), that has not beendisclosed in writing to Transworld that (i) would reasonably be expected tohave a material adverse effect on the business or financial condition of theCompany or (ii) would reasonably be expected to materially and adversely affectthe ability of the Company to perform its obligations pursuant to thisAgreement.

 

6.                       **CertainCovenants And Acknowledgments.**

 

a.               Filings.  The Company undertakes and agrees to makeall necessary filings in connection with the exchange of the Series E PreferredStock to Transworld under any United States laws and regulations, or by anydomestic securities exchange or trading market, and to provide a copy thereofto Transworld promptly after such filing.

 

b.              Reporting Status.  So long as Transworld beneficially owns anyof the Series E Preferred Stock, the Company shall file all reports required tobe filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act,  and the Company shall not terminate itsstatus as an issuer required to file reports under the 1934 Act even if the1934 Act or the rules and regulations thereunder would permit such termination.

** **

7.                       **Covenantto Register**.

 

a.               For purposes ofthis Section, the following definitions shall apply:

 

i.      The terms “register”, “registered” and“registration” refer to a registration under the 1933 Act, effected bypreparing and filing a registration statement or similar

 

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documentin compliance with the 1933 Act, and the declaration or ordering ofeffectiveness of such registration statement, document or amendment thereto.

 

ii.     The term “Registrable Securities” means theSeries E Preferred Stock, and any securities of the Company or securities ofany successor corporation issued as or issuable upon the conversion or exerciseof any warrant, right or other security that is issued as a dividend or otherdistribution with respect to, or in exchange for, or in replacement of, theSeries E Preferred Stock.

 

iii.    The term “holder of Registrable Securities”means Transworld and any permitted assignee of registration rights pursuant toSection 7(g).

 

b.                                       i.     The Company shall use its best efforts toprepare and file a registration statement on Form S-1 within sixty (60) days ofthe date hereof and cause such registration statement to become effective assoon as possible, but no later than one hundred and twenty (120) days from thedate of this Agreement.

 

ii.     The Company may suspend, on no more thantwo (2) occasions per twelve-month period, the effectiveness of anyregistration effected pursuant to this Subsection (b) in the event and for suchperiod of time as, such a suspension is required by the rules and regulationsof the Securities and Exchange Commission (“SEC”).  The Company will use its best efforts to cause such suspension toterminate at the earliest possible date.

 

iii.    If a registration statement covering allRegistrable Securities is not effective by one hundred and twenty (120) daysafter the date of this Agreement (the “Target Date”), the Company shall payTransworld as liquidated damages an amount equal to fifteen percent (15%) ofthe total Purchase price of the Series E Preferred Stock.  Thereafter, the Company will pay additionalpenalty payments of fifteen percent (15%) of the purchase price of the Series EPreferred Stock for every successive one hundred and twenty (120) day periodthat a registration statement has still not been declared effective.  Each such payment shall be made toTransworld by cashier’s check or wire transfer in immediately available fundsto such account as shall be designated in writing by Transworld.

 

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c.               Wheneverrequired under this Section 7 to effect the registration of any RegistrableSecurities, the Company shall, as expeditiously as reasonably possible:

 

i.      Prepare and file with the SEC aregistration statement or amendment thereto with respect to such RegistrableSecurities and use its best efforts to cause such registration to becomeeffective as provided in Section 7(b)(i) hereof, and keep such registrationstatement effective for so long as any holder of Registrable Securities desiresto dispose of the securities covered by such registration statement; provided,however, that in no event shall the Company be required to keep theregistration statement effective for a period greater than three (3) years fromthe closing date;

 

ii.     Prepare and file with the SEC suchamendments and supplements to such registration statement and the prospectusused in connection with such registration statement as may be necessary tocomply with the provisions of the 1933 Act with respect to the disposition ofall securities covered by such registration statement and notify the holders ofthe filing and effectiveness of such Registration statement and any amendmentsor supplements;

 

iii.    Furnish to Transworld such numbers of copiesof a current prospectus, including preliminary prospectus, conforming with therequirements of the 1933 Act, copies of the registration statement anyamendment or supplement to any thereof and any documents incorporated byreference therein, and such other documents as Transworld may reasonablyrequire in order to facilitate the disposition of the shares of Common Stockissuable under the Series E Preferred Stock;

 

iv.    Use its best efforts to register and qualifythe securities covered by such registration statement under such othersecurities or “Blue Sky” laws of such jurisdictions as shall be reasonablyrequested by Transworld;

 

v.     Notify Transworld immediately of thehappening of any event as a result of which the prospectus included in suchregistration statement, as then in effect, includes an untrue statement ofmaterial fact or omits to state a material fact required to be stated

 

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thereinor necessary to make the statements therein not misleading in light of thecircumstances then existing, and use its best efforts to promptly update and/orcorrect such prospectus.

 

d.              Upon request ofthe Company, Transworld will furnish to the Company in connection with anyregistration under this Section such information regarding itself, thesecurities of the Company held by it, and the intended method of disposition ofsuch securities as shall be reasonably required to affect the registration ofthe****securities held by Transworld.

 

e.                                                               i.      To the fullest extent permitted by law,the Company shall indemnify, defend and hold harmless Transworld and eachholder of Registrable Securities which are included in a registration statementand each of its officers, directors, employees, agents, partners or controllingpersons (within the meaning of the 1933 Act) (each, an “indemnified party”)from and against, and shall reimburse such indemnified party with respect to,any and all claims, suits, demands, causes of action, losses, damages,liabilities, costs or expenses (“Liabilities”) to which such indemnified partymay become subject under the 1933 Act or otherwise, arising from or relating to(A) any untrue statement or alleged untrue statement of any material factcontained in such registration statement, any prospectus contained therein orany amendment or supplement thereto, or (B) the omission or alleged omission tostate therein a material fact required to be stated therein or necessary tomake the statements therein, in light of the circumstances in which they weremade, not misleading; *provided, however,*thatthe Company shall not be liable in any such case to the extent that any suchLiability arises out of or is based upon an untrue statement or omission somade in strict conformity with information furnished by such indemnified partyin writing specifically for use in the registration statement.

 

ii.     In the event of any registration under the1933 Act of Registrable Securities, Transworld agrees to indemnity, defend andhold harmless the Company, and its officers, directors, employees, agents,partners, or controlling persons (within the meaning of the 1933 Act) (each, an“indemnified party”) from and against, and shall reimburse such

 

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indemnifiedparty with respect to, any and all Liabilities to which such indemnified partymay become subject under the 1933 Act or otherwise, arising from or relating to(A) any untrue statement or alleged untrue statement of any material factcontained in such registration statement, any prospectus contained therein orany amendment or supplement thereto, or (B) the omission or alleged omission tostate therein a material fact required to be stated therein or necessary tomake the statements therein, in light of the circumstances in which they weremade, not misleading;*****provided, that*****Transworld will be liable in any such case to the extent andonly to the extent, that any such Liability arises out of or is based upon anuntrue statement or alleged untrue statement or omission or alleged omissionmade in such registration statement, prospectus or amendment or supplementthereto in reliance upon and in conformity with written information furnishedby Transworld specifically for use in the preparation thereof, and suchLiability may in no event exceed the value of the Registrable Securities soregistered.

 

iii.    Promptly after receipt by any indemnifiedparty of notice of the commencement of any action, such indemnified partyshall, if a claim in respect thereof is to be made against another party (the“indemnifying party”) hereunder, notify such party in writing thereof, but theomission so to notify such party shall not relieve such party from anyLiability which it may have to the indemnified party other than under thisSection and shall only relieve it from any Liability which it may have to theindemnified party under this Section if and to the extent an indemnifying partyis materially prejudiced by such omission. In case any such action shall be brought against any indemnified partyand such indemnified party shall notify an indemnifying party of thecommencement thereof, the indemnifying party shall be entitled to participatein and, to the extent it shall wish, to assume and undertake the defensethereof with counsel reasonably satisfactory to such indemnified party, and,after notice from the indemnifying party to the indemnified party of itselection so to assume and undertake the defense thereof, the indemnifying partyshall not be liable to the indemnified party under this Section for any legalexpenses subsequently incurred

 

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bythe indemnified party in connection with the defense thereof other thanreasonable costs of investigation and of liaison with counsel so selected; *provided, however,*that if the defendantsin any such action include both parties and the indemnified party shall havereasonably concluded that there may be reasonable defenses available to themwhich are different from or additional to those available to the indemnifyingparty or if the interests of the indemnified party reasonably may be deemed toconflict with the interests of the indemnifying party, the indemnified partyshall have the right to select a separate counsel and to assume such legaldefenses and otherwise to participate in the defense of such action, with thereasonable expenses and fees of one such separate counsel and other reasonableexpenses related to such participation to be reimbursed by the indemnifyingparty as incurred.

 

f.                 With respect tothe above-referenced registration statement, all fees, costs and expenses ofand incidental to such registration, inclusion and public offering shall beborne by the Company; provided, however, that any security holdersparticipating in such registration shall bear their pro-rata share of theunderwriting discounts and commission, if any, incurred by them in connectionwith registration.

 

g.              The rights tocause the Company to register all or any portion of securities pursuant to thisSection 7 may be assigned by Transworld to a proper transferee or assignee asdescribed herein.  Within a reasonabletime after such transfer, Transworld shall notify the Company of the name andaddress of such transferee or assignee, and the securities with respect towhich such registration rights are being assigned.  Such assignment shall be effective only if, (i) Transworld agreesin writing with the transferee or assignee to assign such rights, and a copy ofsuch agreement is furnished to the Company within a reasonable time after suchtransfer or assignment (subject to the purchase price of the shares being keptconfidential by Transworld and such transferee or assignee, (ii) theCompany  is, within a reasonable timeafter such transfer or assignment, furnished with written notice of (A) thename and address of such transferee or assignee, (B) the securities withrespect to which such

 

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registrationrights are being assigned, (iii) following such transfer or assignment, the furtherdisposition of the Registrable Securities by the transferee or assignee isrestricted under the 1933 Act and applicable state securities laws, (iv) at orbefore the time that the Company receives the written notice contemplated byclause (ii) of this sentence the transferee or assignee agrees in writing withthe Company to be bound by all of the provisions contained herein, (v) suchtransfer shall have been made in accordance with the applicable requirements ofthe purchase agreement covering the transaction and (vi) such transferee shallbe an “accredited investor”, as that term is defined in Rule 501 of RegulationD, promulgated under the 1933 Act.

 

8.               **Governing Law:  Miscellaneous****.**  This Agreement shall begoverned by and interpreted in accordance with the laws of the State of NewJersey.  A facsimile transmission ofthis signed Agreement shall be legal and binding on all parties hereto.  This Agreement may be signed in one or morecounterparts, each of which shall be deemed an original.  The headings of this Agreement are forconvenience of reference and shall not form part of, or affect theinterpretation of, this Agreement.  Ifany provision of this Agreement shall be invalid or unenforceable in anyjurisdiction, such invalidity or unenforceability shall not affect the validityor enforceability of the remainder of this Agreement or the validity orenforceability of this Agreement in any other jurisdiction.  This Agreement may be amended only by aninstrument in writing signed by the party to be charged with enforcement.  This Agreement, and the related agreementsreferred to herein, contain the entire agreement of the parties with respect tothe subject matter hereto, superceding all prior agreements, understandings ordiscussions.

 

9.               **Notices****.**  Any notice required or permitted hereunder shall be given inwriting (unless otherwise specified herein) and shall be deemed effectivelygiven, (i) on the date delivered, (a) by personal delivery, or (b) if advancecopy is given by fax, (ii) seven business days after deposit in the United States Postal Service byregular or certified mail, or (iii) three business days mailing byinternational express courier, with postage and fees prepaid, addressed to eachof the other parties thereunto entitled at the following addresses, or at suchother addresses as a party may designate by ten days advance written notice toeach of the other parties hereto.

 

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|   | **COMPANY**:    |                                | STRATUS SERVICES GROUP,  INC.         |
|--------|-----------------|-------------------------------------|---------------------------------------|
|   |            |                                | 500 Craig Road, Suite 201             |
|   |            |                                | Manalapan, NJ 07726                   |
|   |            |                                | Attn: Suzette Nanovic  Berrios, Esq.  |
|   |            |                                | Telecopier No.:  (732)294-1133        |
|   |            |                                |                                  |
|   | **TRANSWORLD**: |                                | TRANSWORLD MANAGEMENT  SERVICES, INC. |
|   |            | 500 Craig Road, Suite 201           |
|   |            | Manalapan, New Jersey  07726        |
|   |            | Attn:  Joseph J. Raymond, Sr.  |
|   |            | Telecopier No.:  (732)294-1133 |

 

10.         **Successors And Assigns****.**   This Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective successors andpermitted assigns.

** **

**IN WITNESS WHEREOF,** the Company and Transworldhave caused this Agreement to be executed by their duly authorizedrepresentatives on the date as first written above.

 

** **
| **STRATUS  SERVICES GROUP, INC.**                  |                       | **TRANSWORLD  MANAGEMENT SERVICES, INC.** |
|----------------------------------------------------|----------------------------|-------------------------------------------|
|                                               |                       |                                      |
|                                               |                       |                                      |
| By:                                                |  /s/ Michael Maltzman |                                      |   | By: |  /s/ Joseph J. Raymond |   |
| Name:  Michael Maltzman                       |                       | Name:  Joseph J. Raymond, Sr.        |   |
| Title:    Chief Fiananacial Officer |                       | Title:     President  |   |
|                                                    |                            |                                           |  |  |  |  |

 

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