Document:

hsnex102102010.htm

Exhibit 10.2

 

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made effective as of 5th day of January, 2007 (hereinafter referred to as the “Effective Date”), by and between HEALTHWAY SHOPPING NETWORK INC. (hereinafter referred to as “HEALTHWAY SHOPPING NETWORK”), a Florida corporation, whose principal offices are located at 8895 N Military Trail, Suite 203B, Palm Beach Gardens, FL 33410 and CAROLYN SHIVER, who resides at 818 West Plaquemine St, Church Point, LA 70525(hereinafter referred to as “PRESIDENT”).

 

WITNESSETH:

 

WHEREAS, HEALTHWAY SHOPPING NETWORK desires to employ PRESIDENT and to secure for itself the experience, abilities and services of PRESIDENT in the capacity of President of HEALTHWAY SHOPPING NETWORK upon the terms and conditions specified herein; and

 

WHEREAS, PRESIDENT desires to so provide his services to HEALTHWAY SHOPPING NETWORK upon the terms and conditions specified herein;

 

NOW, THEREFORE, the parties hereto intending to be legally bound, hereby agree as follows:

 

1.                 Employment

 

HEALTHWAY SHOPPING NETWORK hereby offers employment to PRESIDENT, and PRESIDENT hereby accepts employment in HEALTHWAY SHOPPING NETWORK on the terms and conditions set forth in this Agreement.

 

2.                 Employment Duties

 

(a)               PRESIDENT’s objective is the maximization of corporate assets.

 

(b)               PRESIDENT’s primary duties or tasks are as follows:

 

(1) Establishment of corporate identity;

 

(2) Drawing up and realization of a short-term, middle-term and long-term vision; and

 

(3) Initial Public Offering at the earliest possible time (hereinafter referred to as “IPO”).

 

(c)               PRESIDENT shall be accountable for the performance of all the strategic activities of HEALTHWAY SHOPPING NETWORK, including but not limited to the following issues:

 

 

  

  

  

 

(1) Planning

 

(2) Profitability

 

(3) Productivity

 

(4) Growth

 

(5) Recruiting

 

(6) Training

 

(7) Organization

 

(8) Finance

 

(9) Information

 

(10) Research

 

(11) Licensing

 

(12) Alliance

 

(d)               Subject to the provisions of this section, PRESIDENT agrees to devote his entire business time, energy and skill to further the interests of HEALTHWAY SHOPPING NETWORK during the performance of his employment hereunder. PRESIDENT shall not engage in any business activities other than activities set forth in Article 2(a), (b) and (c), on either a paid or unpaid basis, during the term of this Agreement hereunder without the prior consent of HEALTHWAY SHOPPING NETWORK’S Board of Directors, and any such outside activities approved by HEALTHWAY SHOPPING NETWORK’S Board of Directors shall not materially detract from nor impair PRESIDENT’s ability to fulfill his obligations and responsibilities hereunder. PRESIDENT shall be entitled to vacation of four (4) calendar weeks per annum.

 

(e)               PRESIDENT agrees to observe and comply with all rules, regulations, policies and practices adopted or instructed by HEALTHWAY SHOPPING NETWORK’S Board of Directors, either orally or in writing, both as they now exist and as they may be adopted or modified from time to time.

 

(f)                PRESIDENT shall be based at 8895 N Military Trail, Suite 203B, Palm Beach Gardens, Fl 33410.

 

 

  

  

  

 

3.                 Term

 

The term of this Agreement shall be the term of the PRESIDENT’s employment hereunder. This Agreement shall commence on the Effective Date and expire on the third anniversary of Effective Date (hereinafter referred to as “Second Term”). Unless PRESIDENT and HEALTHWAY SHOPPING NETWORK agree, in writing, to extend this Agreement for additional three (3) years from the end of the Second Term, discussion of which agreement shall be planned to be commenced by six (6) months before the end of the Second Term, this Agreement shall expire at the end of the Second Term. This Agreement may, however, be terminated pursuant to Article 5 of this Agreement.

 

4.                 Compensation and Benefits

 

In consideration of all services rendered by PRESIDENT to HEALTHWAY SHOPPING NETWORK, HEALTHWAY SHOPPING NETWORK hereby agrees to pay compensation and benefits to PRESIDENT for any and all services provided by PRESIDENT consisting of:

 

(a)    Annual Base Salary

 

An annual base salary (before tax and other withholding) shall be paid to PRESIDENT in the amount of $50,000 per annum, payable in equal semi-monthly installments (hereinafter referred to as “Base Salary”). HEALTHWAY SHOPPING NETWORK’S Board of Directors shall review the Base Salary as of January 1 of each year during the term hereof, and HEALTHWAY SHOPPING NETWORK’S Board of Directors may, in its sole discretion, increase or decrease the Base Salary amount, taking into consideration any changes in the Consumer Price Index applicable to Palm Beach, Florida area during the immediately preceding year, plus a merit increase if determined by HEALTHWAY SHOPPING NETWORK’S Board of Directors;

 

(b)    Annual Bonus

 

PRESIDENT’s annual bonus shall be determined in accordance with HEALTHWAY SHOPPING NETWORK’S annual Senior Executive Bonus Plan as approved by the Board of Directors or the Compensation Committee of the Board of Directors (hereinafter referred to as “Annual Bonus”);

 

(c)    Incentive Bonus

 

HEALTHWAY SHOPPING NETWORK’S Board of Directors may, in its sole discretion, determine to provide PRESIDENT with an incentive bonus;

 

(d)    Stock Options

 

The PRESIDENT shall be eligible to receive options to purchase HEALTHWAY SHOPPING NETWORK’S common stock (“Common Stock”), under HEALTHWAY SHOPPING NETWORK’S Stock Option Plan, or such other option plans as may be adopted and in effect at any time during the term of this Agreement, as may be granted from time to time by the Board of Directors or a Compensation Committee of the Board of Directors;

 

(e)                Retirement Plan

 

 

  

  

  

 

PRESIDENT shall be entitled to HEALTHWAY SHOPPING NETWORK’S Retirement Plan which is the combination of the 401(k) plan and HEALTHWAY SHOPPING NETWORK’S Matching Plan (a supplemental benefit to the 401(k) plan) with a 1 to 1 matching contribution rate for the aggregate of PRESIDENT’s Base Salary and Annual Bonus (hereinafter referred to as “Annual Income”). ;

 

(f)    Additional Insurance

 

HEALTHWAY SHOPPING NETWORK shall use its best efforts to purchase for PRESIDENT at HEALTHWAY SHOPPING NETWORK’S expense additional insurance policies to cover $800,000 additional Life Insurance and $600,000 additional Accidental Death Insurance over and above the amounts normally provided by HEALTHWAY SHOPPING NETWORK to its personnel, with beneficiaries to be designated by PRESIDENT;

 

(g)    Other Benefits

 

Other benefits provided to other personnel of HEALTHWAY SHOPPING NETWORK from time to time including, without limitation, life insurance, AD&D and medical, pharmaceutical, dental and vision benefits, as may be established or modified by HEALTHWAY SHOPPING NETWORK from time to time, for so long as such benefits are made available to other personnel; and

 

(h)    Vacation

 

Subject to the provisions of Section 1 (d) of this Agreement, PRESIDENT shall be, during the term of this Agreement, entitled to vacations of four (4) calendar weeks per annum on a prorated basis.

 

(i)    Reimbursement of Expenses

 

HEALTHWAY SHOPPING NETWORK shall reimburse the PRESIDENT for all normal, usual and necessary expenses incurred by the PRESIDENT in furtherance of the business and affairs of HEALTHWAY SHOPPING NETWORK, including reasonable travel and entertainment, against receipt by the Corporation of appropriate vouchers or other proof of the PRESIDENT’s expenditures and otherwise in accordance with such Expense Reimbursement Policy as may from time to time be adopted by the Board of Directors of the Corporation. HEALTHWAY SHOPPING NETWORK shall withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and such other amounts as may be required by law and any plans pursuant to which such compensation is generated or as agreed upon by the parties with respect to the compensation payable to the PRESIDENT pursuant to this Agreement.

 

5.                Termination

 

 

  

  

  

 

(a)               If during the term of this Agreement, PRESIDENT should be unable to perform his duties hereunder on account of incapacity, and such incapacity should continue for a period of more than thirty (30) working days, which may be non-consecutive, within any six (6) month period, HEALTHWAY SHOPPING NETWORK’S Board of Directors shall thereafter have the right to terminate this Agreement, and his right to all compensation and benefits shall cease on the date of termination of this Agreement; provided, however, that PRESIDENT shall be entitled to receive the compensation and benefits pursuant to a prorated amount of Articles 4(a) Base Salary, 4(c) Incentive Bonus, 4(d) Stock Option, 4(e) Retirement Plan, 4(f) Additional Insurance, 4(g) Other Benefits , and 4(h) Vacation that shall have accrued prior to such date of termination.

 

(b)               In the event of PRESIDENT’s death during the term of this Agreement, all compensation and benefits under Article 4 shall cease on the day after the day on which such event occurs. The compensation and benefits pursuant to a prorated amount of Articles 4(a) Base Salary, 4(b) Annual Bonus, 4(c) Incentive Bonus, 4(d) Stock Option, 4(e) Retirement Plan, 4(f) Additional Insurance, 4(g) Other Benefits, and 4(h) Vacation owing at the time of PRESIDENT’s death, which is not payable to a designated beneficiary, shall be paid to the representative of PRESIDENT’s estate.

 

(c)               In the event PRESIDENT voluntarily terminates this Agreement with causes other than PRESIDENT Just Cause as defined herein (“Without PRESIDENT Just Cause”), his rights to all compensation and benefits shall cease on the date of such termination of this Agreement; provided, however, that PRESIDENT shall be entitled to receive the compensation and benefits pursuant to a prorated amount of Articles 4(a) Base Salary, 4(b) Annual Bonus, 4(c) Incentive Bonus, 4(d) Stock Option, 4(e) Retirement Plan, 4(f) Additional Insurance, 4(g) Other Benefits, and 4(h) Vacation that shall have accrued prior to such date of termination. PRESIDENT shall provide HEALTHWAY SHOPPING NETWORK with notice three (3) months prior to such voluntary termination.

 

(d)               In the event that HEALTHWAY SHOPPING NETWORK’S Board of Directors should terminate  this Agreement with causes other than Just Cause as defined herein (“Without Cause”), this Agreement shall terminate as of the date designated by HEALTHWAY SHOPPING NETWORK. In the event such termination of this Agreement Without Cause occurs, PRESIDENT shall be entitled to receive the prorated compensation and benefits pursuant to Articles 4(a) Base Salary, 4(b) Annual Bonus, 4(c) Incentive Bonus, 4(e) Retirement Plan, 4(f) Additional Insurance, 4(g) Other Benefits, and 4(h) Vacation that shall have accrued prior to such date of termination and as a severance pay, shall be entitled to receive Base Salary pursuant to Article 4 plus average Annual Bonus for a period equal to the longer of (i) remainder of the term of this Agreement or (ii) twelve (12) months from such date of termination regardless of the status of PRESIDENT’s employment status. In addition, any unvested installments of options held by PRESIDENT as of the termination date shall become immediately vested and exercisable in full. In addition, HEALTHWAY SHOPPING NETWORK shall provide continuation of health benefits for a period equal to the longer of (A) a remainder of the term of this Agreement or (B) twelve (12) months from such date of termination to the extent authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (Commonly known as “COBRA”), as in effect on the date of termination unless PRESIDENT is receiving comparable benefits from a new employer.

 

 

 

  

  

  

 

(e)               In the event that HEALTHWAY SHOPPING NETWORK’S Board of Directors determines that this Agreement should be terminated for Just Cause, as defined herein, PRESIDENT’s right to all compensation and benefits shall cease as of the date of termination of this Agreement. In such event, PRESIDENT shall be entitled to the compensation and benefits pursuant to a prorated amount of Articles 4(a) Base Salary and 4(e) Retirement Plan that shall have accrued prior to such date of termination, and he shall not be entitled to any further cash or non-cash compensation or benefits pursuant to Article 4, or severance pay. For the purpose of this Agreement, termination for “Just Cause” shall mean (i) a termination due to (A) gross neglect or fault of the duties for which PRESIDENT is employed or (B) willful misconduct or omission in the performance of such duties, (ii) a termination due to PRESIDENT’s committing fraud, misappropriation or embezzlement in connection with his duties as an personnel of HEALTHWAY SHOPPING NETWORK, (iii) a termination due to PRESIDENT’s insubordination, breach of his obligations under this Agreement, or (iv) a termination due to PRESIDENT’s committing any crime for which he is convicted or to which he pleads guilty or no contest and which, as determined by HEALTHWAY SHOPPING NETWORK, constitutes a crime involving moral turpitude or results in actual or potential harm to HEALTHWAY SHOPPING NETWORK, (v) a termination due to PRESIDENT’s absence from work without notice for three (3) or more days.

 

(f)                In the event that PRESIDENT should terminate this Agreement with just cause as defined herein (“PRESIDENT Just Cause”), PRESIDENT shall be entitled to receive the compensation and benefits pursuant to a prorated amount of Article 4(a) Base Salary, 4(b) Annual Bonus, 4(c) Incentive Bonus, , 4(e) Retirement Plan, 4(f) Additional Insurance, 4(g) Other benefits, and 4(h) Vacation that shall have accrued prior to such date of termination, and as a severance pay, shall be entitled to receive Base Salary pursuant to Article 4 plus average Annual Bonus for a period equal to the longer of (a) the remainder of the term of this Agreement, or (b) twelve (12) months from such date of termination, regardless of the status of PRESIDENT’s employment status. In addition, any unvested installments of options held by PRESIDENT as of the termination date shall become immediately vested and exercisable in full. In addition, HEALTHWAY SHOPPING NETWORK shall provide continuation of health benefits for a period equal to the longer of (a) the remainder of the term of this agreement, or (b) twelve (12) months from such date of termination to the extent authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (Commonly known as “COBRA”), unless PRESIDENT is receiving comparable benefits from a new employer.

 

For the purpose of this Agreement, termination for “PRESIDENT Just Cause” shall mean termination due to (i) material breach by HEALTHWAY SHOPPING NETWORK of any provision of this Agreement which is not cured by HEALTHWAY SHOPPING NETWORK within forty-five (45) days of notice thereof from PRESIDENT or (ii) any action by HEALTHWAY SHOPPING NETWORK to intentionally harm PRESIDENT or (iii) a Change in Control of HEALTHWAY SHOPPING NETWORK (as defined below).

 

For purposes of this Agreement, a “Change in Control of HEALTHWAY SHOPPING NETWORK” shall be deemed to have occurred upon any of the following events:

 

(i)       The date on which shares of HEALTHWAY SHOPPING NETWORK Common Stock arefirst purchased pursuant to a tender offer or exchange offer (other than such an offer by HEALTHWAY SHOPPING NETWORK or any employee benefit plan of HEALTHWAY SHOPPING NETWORK or any entity holding shares or other securities of HEALTHWAY SHOPPING NETWORK for or pursuant to the terms of such plan), whether or not such offer is approved or opposed by HEALTHWAY SHOPPING NETWORK and regardless of the number of shares purchased pursuant to such offer;

 

 

 

  

  

  

 

(ii)      The date HEALTHWAY SHOPPING NETWORK acquires knowledge that any person or group deemed a person under Section 13(d)-3 of the Securities Exchange Act of 1934 (“Exchange Act”) (other than HEALTHWAY SHOPPING NETWORK, any employee benefit plan of HEALTHWAY SHOPPING NETWORK or any entity holding shares of Common Stock or other securities of HEALTHWAY SHOPPING NETWORK for or pursuant to the terms of any such plan or any individual or entity or group or affiliate thereof which acquired its beneficial ownership interest prior to the date of this Agreement), in a transaction or series of transactions, has become the beneficial owner, directly or indirectly (with beneficial ownership determined as provided in Rule 13d-3, or any successor rule, under the Exchange Act), of securities of HEALTHWAY SHOPPING NETWORK entitling the person or group to 50% or more of all votes (without consideration of the rights of any class or stock to elect directors by a separate class vote) to which all stockholders of HEALTHWAY SHOPPING NETWORK would be entitled in the election of the Board of Directors were an election held on such date;

 

(iii)      The date, during any period of two consecutive years, when individuals who at the beginning of such period constitute the Board of Directors of HEALTHWAY SHOPPING NETWORK cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the stockholders of HEALTHWAY SHOPPING NETWORK, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period;

 

(iv)      the date of approval by the stockholders of HEALTHWAY SHOPPING NETWORK of an agreement (a “reorganization agreement”) providing for:

 

(A)             The merger or consolidation of HEALTHWAY SHOPPING NETWORK with another  corporation where the stockholders of HEALTHWAY SHOPPING NETWORK, immediately prior to the merger or consolidation, do not beneficially own, immediately after the merger or consolidation, shares of the corporation issuing cash or securities in the merger or consolidation entitling such stockholders to 65% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of such corporation would be entitled in the election of directors or where the members of the Board of Directors of HEALTHWAY SHOPPING NETWORK, immediately prior to the merger or consolidation, do not, immediately after the merger or consolidation, constitute a majority of the Board of Directors of the corporation issuing cash or securities in the merger or consolidation; or

 

(B)              The sale or other disposition of all or substantially all the assets of HEALTHWAY SHOPPING NETWORK; or

 

 

  

  

  

 

(g)       Anything in this Agreement to the contrary notwithstanding, in the event it shall be determinedthat as a result of any payment or distribution by HEALTHWAY SHOPPING NETWORK to or for the benefit of the PRESIDENT whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), the PRESIDENT would be subject to the excise tax imposed by Section 49999 of the Internal Revenue Code (the “Code”) or any interest or penalties are incurred by the PRESIDENT with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), the PRESIDENT shall be entitled to promptly receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the PRESIDENT of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment, the PRESIDENT is in the same after-tax position as if no Excise Tax had been imposed upon the PRESIDENT with respect to the Payments. Notwithstanding the foregoing provisions of this Section, if it shall be determined that the PRESIDENT is entitled to a Gross-Up Payment, but that the PRESIDENT, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and Excise Tax) as compared to the net after-tax proceeds to the PRESIDENT resulting from the elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the “Reduced Amount”) such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the PRESIDENT and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

 

6.                Confidential Information

 

(a)       PRESIDENT acknowledges that during the term of this Agreement, PRESIDENT will have access to and become acquainted with HEALTHWAY SHOPPING NETWORK’S confidential records, secrets, and information, including without limitation, its manufacturing processes, formulae, research and development activities, product development, marketing activity, licensing activity, financial, personnel and other practices of HEALTHWAY SHOPPING NETWORK and HEALTHWAY SHOPPING NETWORK’S customers, licensees, licensors and affiliated entities (hereinafter referred to as the “Confidential Information”). PRESIDENT agrees that all such Confidential Information is and shall remain the sole and exclusive property of HEALTHWAY SHOPPING NETWORK, regardless of whether or not PRESIDENT develops such Confidential Information during the term of this Agreement, and that PRESIDENT shall not use or disclose any such Confidential Information other than in the course of performing his duties pursuant to this Agreement. PRESIDENT further agrees that, upon termination of this Agreement, regardless of whether voluntary, involuntary or upon non-renewal, PRESIDENT shall not take or use any such Confidential Information, records or files of HEALTHWAY SHOPPING NETWORK or any copies thereof, and that PRESIDENT shall promptly return to HEALTHWAY SHOPPING NETWORK all such Confidential Information, records and files that PRESIDENT may have previously removed to assist him in performing his duties, as well as any copies thereof or notes with respect thereto then in PRESIDENT’s custody or possession. PRESIDENT’s obligations under this Article 6 shall survive any termination or expiration of this Agreement for three (3) years from the date of such termination or expiration of this Agreement.

 

 

  

  

  

 

 

(b)       PRESIDENT shall disclose promptly to HEALTHWAY SHOPPING NETWORK any and all ideas, inventions, discoveries, proprietary matters, and its equivalents (regardless of whether such are patentable, copyrightable) conceived or made by PRESIDENT, existent or contemplated, alone or with others, prior to or during the term of this Agreement and related, connected or pertinent to the business or activities of HEALTHWAY SHOPPING NETWORK. PRESIDENT acknowledges that such ideas, inventions, discoveries, proprietary matters, and its equivalents are and shall be the property of HEALTHWAY SHOPPING NETWORK and hereby assigns and agrees to assign all of PRESIDENT’s interest therein to HEALTHWAY SHOPPING NETWORK or its nominee. Whenever requested to do so by HEALTHWAY SHOPPING NETWORK, PRESIDENT shall execute without charge to HEALTHWAY SHOPPING NETWORK any and all applications, assignments, or other instruments which HEALTHWAY SHOPPING NETWORK deems necessary to apply for and obtain copyrights, patents or other intellectual property rights in the United States or any other foreign country or to protect or otherwise confirm HEALTHWAY SHOPPING NETWORK’S interest and ownership in such ideas, inventions, discoveries, proprietary matters, and its equivalents. PRESIDENT shall otherwise assist HEALTHWAY SHOPPING NETWORK in every way, at HEALTHWAY SHOPPING NETWORK’S reasonable expense, to obtain and enforce copyrights, patents and other intellectual property rights in the United States or any other foreign country, including testifying in any suit or other proceedings, involving any such copyrights, patents and other intellectual property rights. PRESIDENT further agrees that the obligations under Article 6(b) shall survive any termination or expiration of this Agreement for one year from the date of such termination or expiration of this Agreement. Under Section 2870 of the California Labor Code, PRESIDENT’s obligation under this Article does not apply to an invention (i) for which no equipment, supplies, facility or the Confidential Information of HEALTHWAY SHOPPING NETWORK was used and which was developed entirely on PRESIDENT’s own time, (ii) which does not relate to the business of HEALTHWAY SHOPPING NETWORK, (iii) which does not relate to HEALTHWAY SHOPPING NETWORK’S actual or demonstrably anticipated research or development and (iv) which does not result from any work performed by PRESIDENT for HEALTHWAY SHOPPING NETWORK. If after the term of this Agreement, HEALTHWAY SHOPPING NETWORK wishes to use PRESIDENT’s services to assist HEALTHWAY SHOPPING NETWORK in obtaining or defending any intellectual property rights obtained during this Agreement, HEALTHWAY SHOPPING NETWORK and PRESIDENT shall negotiate in good faith the terms of a Consultant Agreement for this purpose.

 

(c)       PRESIDENT acknowledges and agrees that the violation of Article 6(a) shall cause irreparable harm to HEALTHWAY SHOPPING NETWORK, and that HEALTHWAY SHOPPING NETWORK shall be entitled to specific performance of this Agreement or an injunction without proof of special damages, together with the costs and reasonable attorneys’ fees incurred by HEALTHWAY SHOPPING NETWORK in enforcing its rights under Article 6(a).

 

7.                 Solicitation of PRESIDENTs

 

PRESIDENT shall be called upon to work closely with other personnel of HEALTHWAY SHOPPING NETWORK in performing services under this Agreement. PRESIDENT shall not during the term of this Agreement, and for one year thereafter, solicit, scout or recruit any personnel of HEALTHWAY SHOPPING NETWORK. In addition, all information about such personnel which becomes known to PRESIDENT during the course of this Agreement and which is not otherwise known to the public is Confidential Information of HEALTHWAY SHOPPING NETWORK and shall not be used by PRESIDENT in soliciting, scouting or recruiting personnel of HEALTHWAY SHOPPING NETWORK at any time during or after termination of this Agreement.

 

 

  

  

  

 

8.             Conflicting Agreement

 

PRESIDENT hereby represents and warrants to HEALTHWAY SHOPPING NETWORK that PRESIDENT’s entering into this Agreement and the obligations and duties undertaken by him hereunder will not conflict with, violate or constitute a breach of the terms of any employment or other agreement to which he is a party and that he is not required to obtain the consent of any person, firm, corporation or other entity in order to enter into this Agreement.

 

9.             Entire Agreement

 

This Agreement sets forth the entire agreement between the parties hereto and shall supersede and cancel any other and all prior agreements between the parties hereto, express or implied, relating to the subject matter hereof. PRESIDENT and HEALTHWAY SHOPPING NETWORK further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no parol or extrinsic evidence whatsoever may be introduced in any proceeding involving this Agreement. No provisions or terms of this Agreement shall be changed, altered, modified or amended except in writing signed by PRESIDENT and a member of HEALTHWAY SHOPPING NETWORK’S Board of Directors.

 

10.               Non-Waiver

 

The failure or refusal of either party to insist upon the strict performance of any provision of this Agreement or to exercise any right in any one or more instances or circumstances shall not be construed as a waiver or relinquishment of such provision or right, nor shall such failure or refusal be deemed a custom or practice contrary to such provision or right.

 

11.               Non-Assignment

 

PRESIDENT shall have no right to assign to any third party any of the rights, nor to delegate any of the duties under this Agreement, and any assignment or attempted assignment of PRESIDENT’s rights, and any delegation or attempted delegation of PRESIDENT’s duties shall be null and void. In all other respects, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, beneficiaries, personal representatives, successors, assigns, officers and directors. Subject to the provisions of Section 5 (f) of this Agreement, PRESIDENT agrees that if HEALTHWAY SHOPPING NETWORK causes or has caused the creation of an affiliated corporation which will succeed HEALTHWAY SHOPPING NETWORK, such corporation shall be substituted for HEALTHWAY SHOPPING NETWORK as the employer of PRESIDENT, and such corporation shall succeed HEALTHWAY SHOPPING NETWORK with respect to this Agreement in all respects.

 

12.               Severability

 

If any article, section, paragraph, term or provision of this Agreement should be held or determined to be unenforceable, the balance of this Agreement shall nevertheless continue in full force and effect unaffected by such holding or determination. In addition, in any such event, the parties agree that it is their intention and agreement that any such article, section, paragraph, term or provision which is held or determined to be unenforceable as written, shall nonetheless be enforced and binding to the fullest extent permitted by law as though such article, section, paragraph, term or provision had been written in such a manner and to such an extent as to be enforceable under the circumstances.

 

 

  

  

  

 

13.               Notice

 

All notices hereunder shall be in writing. Notices may be delivered personally, or by mail, postage prepaid, to the respective addresses first written above. Either party may designate a new address for purposes of this Agreement by notice to the other party.

 

14.               Governing Law and Arbitration

 

(a)               Governing Law and Arbitration - While HEALTHWAY SHOPPING NETWORK may seek in a court of competent jurisdiction injunctive relief to enforce the provisions of Article 6 (a) (Confidential Information) of this Agreement, any claim (except with respect to the judicial remedy of injunction), arising out of or relating to this Agreement, the relationship created hereby, performance in connection herewith or the breach or termination or non-renewal hereof (including, but not limited to, claims arising under federal, state or local employment discrimination statutes), shall be settled solely by binding arbitration in California, and the judgment on the award may be entered in any court of competent jurisdiction. This Agreement shall be interpreted and enforced pursuant to and under the laws of the State of Florida.

 

(b)              Rules of Arbitration - The arbitration shall be governed by the Employment Dispute Resolution Rules of the American Arbitration Association in effect at the time of the arbitration proceeding, except that the Expedited Procedures of the Employment Dispute Resolution Rules shall not be applicable, regardless of the amount in dispute.

 

15.               Captions and Titles

 

Captions and titles have been used in this Agreement only for convenience, and shall in no way define, limit or describe the meaning of this Agreement or any part thereof.

 

16.               Acknowledgment

 

PRESIDENT acknowledges that PRESIDENT has consulted with or have had the opportunity to consult with independent counsel of his own choice concerning this Agreement and have been advised to do so by HEALTHWAY SHOPPING NETWORK, and that PRESIDENT has read and understood this Agreement, are fully aware of its legal effect, and have entered into it freely based on its own judgment.

 

IN WITNESS WHEREOF, the parties have signed this Agreement. HEALTHWAY SHOPPING NETWORK, INC.

 

By:          

                                                        

 

Print Name of Authorized Person Signing AgreementUnassociated Document

EXHIBIT 4.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 26, 2010, by and between SOLAR ENERGY INITIATIVES, INC., a Delaware corporation, with headquarters located at 818 AIA North - Suite 201, Ponte Vedra, Florida 32082 (the “Company”), and ASHER ENTERPRISES, INC., a Delaware corporation, with its address at 1 Linden Place, Suite 207, Great Neck, NY 11021 (the “Buyer”).

 

WHEREAS:

 

A. The Company and the Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $40,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

 

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1. Purchase and Sale of Note.

 

a.            Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

 

b.            Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

  

1

  

c.            Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on October 28, 2010, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

 

a.            Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b.            Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c.            Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

d.            Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

 

e.            Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

  

2

  

 

f.            Transfer or Re-sale. The Buyer understands that (i) the sale or re­sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within three (3) business days of delivery of the opinion to the Company, the Company shall pay to the Buyer liquidated damages of five percent (5%) of the outstanding amount of the Note per day plus accrued and unpaid interest on the Note, prorated for partial months, in cash or shares at the option of the Buyer (“Standard Liquidated Damages Amount”). If the Buyer elects to be pay the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price (as defined in the Note) at the time of payment.

 

g.            Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (c) such holder provides the Company with reasonable assurances that such Security can be sold pursuant to Rule 144 or Regulation S. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.

 

h.            Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

i.            Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

 

3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:

  

3

  

a.            Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b.            Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c.            Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: (i) 100,000,000 shares of Common Stock, $0.001 par value per share, of which 33,110,437 shares are issued and outstanding; and (ii) there are no authorized shares of Preferred Stock; no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note, two (2) prior convertible promissory notes in favor of the Buyer (a) prior convertible promissory note in favor of the Buyer dated June 29, 2010 in the amount of $100,000.00 for which 4,918,033 shares of common stock are presently reserved and (b) prior convertible promissory note in favor of the Buyer dated August 9, 2010 in the amount of $53,000.00 for which 3,341,740 shares of common stock are presently reserved; in addition there is a prior convertible promissory note in favor of JDF Capital, Inc. dated July 15, 2010 in the amount of $150,000) exercisable for, or convertible into or exchangeable for shares of Common Stock and 2,107,578 shares are reserved for issuance upon conversion of the Note (subject to adjustment pursuant to the Company’s covenant set forth in Section 4(g) below). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in Schedule 3(c), as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

 

d.            Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

  

4

  

 

e.            Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

f.            No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as a Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the­Counter Bulletin Board (the “OTCBB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

g.           SEC Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC

  

5

  

Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to April 30, 2010, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act.

 

h.            Absence of Certain Changes. Since April 30, 2010, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

i.            Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j.            Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

k.            No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

  

6

  

 

l.            Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

 

m.            Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

n.            Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

o.            Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by any Buyer or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

p.            No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q.            No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

 

r.            Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since April 30, 2010, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

  

7

  

s.             Environmental Matters.

 

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t.             Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u.           Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. The Company has provided to Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.

  

8

  

v.            Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

w.            Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

x.            Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year.

 

y.            No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

 

z.            Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in

 

addition to any other remedies available to the Buyer pursuant to this Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Company, until such breach is cured. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

4. COVENANTS.

 

a.            Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b.            Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c.            Use of Proceeds. The Company shall use the proceeds from the sale of the Note in the manner set forth in Schedule 4(d) attached hereto and made a part hereof and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

 

 

d.            Right of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering, including the terms and conditions thereof and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the period beginning on the Closing Date and ending twelve (12) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two (72) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten public offering

  

9

  

(excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Company. The Right of First Refusal also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company. The Right of First Refusal also shall not apply to Future Offerings in excess of $500,000.00.

 

e.            Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer Notwithstanding anything herein to the contrary, the Company’s obligation to reimburse Buyer’ expenses shall be $2,500.

 

f.            Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders.

 

g.            Authorization and Reservation of Shares. The Company shall at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the full conversion or exercise of the outstanding Note and issuance of the Conversion Shares in connection therewith (based on the Conversion Price of the Note in effect from time to time) and as otherwise required by the Note. The Company shall not reduce the number of shares of Common Stock reserved for issuance upon conversion of Note without the consent of the Buyer. The Company shall at all times maintain the number of shares of Common Stock so reserved for issuance at an amount (“Reserved Amount”) equal to five times the number that is then actually issuable upon full conversion of the Note and Additional Note (based on the Conversion Price of the Note in effect from time to time). If at any time the number of shares of Common Stock authorized and reserved for issuance (“Authorized and Reserved Shares”) is below the Reserved Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without

 

limitation, calling a special meeting of shareholders to authorize additional shares to meet the Company’s obligations under this Section 4(g), in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the Reserved Amount. If the Company fails to obtain such shareholder approval within thirty (30) days following the date on which the number of Reserved Amount exceeds the Authorized and Reserved Shares, the Company shall pay to the Buyer the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Buyer. If the Buyer elects to be paid the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment. In order to ensure that the Company has authorized a sufficient amount of shares to meet the Reserved Amount at all times, the Company must deliver to the Buyer at the end of every month a list detailing (1) the current amount of shares authorized by the Company and reserved for the Buyer; and (2) amount of shares issuable upon conversion of the Note and as payment of interest accrued on the Note for one year. If the Company fails to provide such list within five (5) business days of the end of each month, the Company shall pay the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Buyer, until the list is delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

h.            Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as any Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as any Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCBB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

 

i.            Corporate Existence. So long as a Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

  

10

  

j.            No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

k.            Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of Buyer, until such breach is cured. If the Buyer elects to pay the Standard Liquidated Damages Amount in shares, such shares shall be issued at the Conversion Price at the time of payment.

 

l.            Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

 

m.            Trading Activities. Neither the Buyer nor their affiliates has an open short position in the common stock of the Company and the Buyer agree that they shall not, and that they will cause their affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

 

5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If a Buyer provides the Company, at the cost of the Company, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to a Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

 

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

c. The representations and warranties of the applicable Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the applicable Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the applicable Buyer at or prior to the Closing Date.

 

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having

  

11

  

authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7.Conditions to The Buyer’s Obligation to Purchase. The obligation of the

Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

 

b. The Company shall have delivered to the Buyer duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

 

c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

 

d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

 

e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

g. The Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not have been suspended by the SEC or the OTCBB.

  

12

  

h.The Buyer shall have received an officer’s certificate described in

Section 3(c) above, dated as of the Closing Date.

 

8. Governing Law; Miscellaneous.

 

a.            Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

b.            Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

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

 

d.            Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e.            Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the

  

13

  

matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

f. Notices. All notices, demands, requests, consents, approvals, and

other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

 

SOLAR ENERGY INITIATIVES, INC. 818 AIA North - Suite 201

Ponte Vedra, Florida 32082

Attn: DAVID FANN, Chief Executive Officer facsimile: (904) 644-6098

 

	
  

	
With a copy by fax only to (which copy shall not constitute notice): Law Offices of Stephen M. Fleming

 

Attn: Stephen M. Fleming, Esq. 49 Front Street, Suite 206

Rockville Centre, NY 11570 facsimile: (516) 977-1209

 

If to the Buyer:

 

ASHER ENTERPRISES, INC. 1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President facsimile: 516-498-9894

  

14

  

With a copy by fax only to (which copy shall not constitute notice):

 

Naidich Wurman Birnbaum & Maday, LLP 80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

 

facsimile: 516-466-3555

 

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

 

g.            Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from a Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h.            Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i.            Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless each of the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j.            Publicity. The Company, and each of the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of each of the Buyer, to make any press release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although each of the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

k.            Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably

  

15

  

request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

l.            No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

m.            Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

SOLAR ENERGY INITIATIVES, INC.

 

By:  /s/ David Fann

DAVID FANN

Chief Executive Officer

 

ASHER ENTERPRISES, INC.

 

By: /s/ Curl Kramer

Name: Curt Kramer 

Title: President

 

1 Linden Pl., Suite 207 Great Neck, NY. 11021

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Note: $40,000.00

 

Aggregate Purchase Price:   $40,000.00

 

16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}]]