Document:

NEITHER
THE ISSUANCE
AND SALE
OF THE
SECURITIES
REPRESENTED
BY THIS CERTIFICATE
NOR THE
SECURITIES
INTO WHICH THESE
SECURITIES ARE
CONVERTIBLE
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.

 

 

 

Principal
Amount:
$32,500.00  

Issue
Date: March
20, 2013

Purchase
Price:
$32,500.00

 

 

 

CONVERTIBLE
PROMISSORY
NOTE

 

FOR
VALUE RECEIVED, IDS SOLAR TECHNOLOGIES,
INC., a Nevada corporation (hereinafter called the “Borrower”),
hereby promises
to pay to the order
of ASHER ENTERPRISES,
INC., a Delaware corporation,
or registered assigns (the “Holder”)
the sum of
$32,500.00 together
with any
interest as
set forth
herein, on December
26, 2013 (the “Maturity
Date”), and to pay
interest
on the unpaid principal
balance hereof at
the rate of eight percent (8%) (the “Interest Rate”)
per annum from the date
hereof (the “Issue Date”) until the
same becomes
due and payable,
whether at maturity
or upon acceleration
or by prepayment
or otherwise. This Note may
not be prepaid
in whole or in part except as
otherwise explicitly set forth
herein. Any amount
of principal
or interest on this Note which is not paid when due shall
bear interest at
the rate of twenty
two percent (22%)
per annum from
the due date thereof
until the same is paid (“Default
Interest”).
Interest shall commence accruing
on the date
that the Note
is fully paid and
shall be computed
on the basis of a 365-day
year and
the actual
number of days elapsed.
All payments due
hereunder (to
the extent
not converted
into common stock,
$0.001 par value per
share (the “Common Stock”)
in accordance
with the terms hereof)
shall be made
in lawful money
of the United States
of America. All payments
shall be made at
such address as the Holder
shall hereafter give to the Borrower by written
notice made
in accordance
with the provisions of this Note. Whenever any amount expressed
to be due by
the terms of this Note is
due on any day which is not a business
day, the
same shall
instead be due on the next
succeeding
day which
is a business
day and, in the case
of any
interest payment
date which is not the date on
which this Note is paid in full,
the extension of
the due date thereof shall
not be taken into account for
purposes
of determining the amount
of interest due on such date.
As used in this Note,
the term “business day”
shall mean any day
other than a Saturday, Sunday
or a day on which commercial
banks in the city
of New York,
New York are authorized
or required by law
or executive
order to remain closed.
Each capitalized
term used herein, and
not otherwise defined,
shall have
the meaning ascribed
thereto
in that certain
Securities Purchase Agreement
dated the date hereof,
pursuant to which this Note was
originally issued (the “Purchase
Agreement”).

    	1

    	 

    

This
Note is free
from all
taxes,
liens, claims
and encumbrances
with respect
to the issue
thereof and
shall not
be subject
to preemptive
rights
or other similar rights
of shareholders
of the Borrower
and will not impose personal
liability
upon the holder
thereof.

 

The following
terms shall
apply
to this Note:

 

ARTICLE
I. CONVERSION
RIGHTS

 

1.1
 Conversion
Right. 
The Holder
shall have
the right
from time
to time,
and
at any
time during
the period
beginning
on the date
which is
one hundred
eighty
(180) days
following the date
of this Note
and ending
on the later
of: (i)
the Maturity
Date and
(ii) the
date of payment
of the Default
Amount (as
defined
in Article
III) pursuant
to Section
1.6(a) or
Article III,
each
in respect
of the
remaining
outstanding
principal
amount of
this Note to
convert
all or any
part
of the outstanding
and unpaid
principal
amount of
this Note into
fully paid
and non-
assessable
shares
of Common Stock,
as such Common
Stock exists
on the Issue Date,
or any shares
of capital
stock or
other securities
of the Borrower
into which
such Common
Stock
shall hereafter
be changed
or reclassified
at the conversion
price 
(the “Conversion
Price”) determined
as provided
herein
(a “Conversion”);
provided,
however,
that in
no event
shall the Holder
be entitled
to convert
any
portion
of this Note
in excess
of that
portion of
this Note upon
conversion
of which the sum of (1)
the number of
shares of Common
Stock beneficially
owned by the
Holder and
its affiliates
(other
than shares
of Common
Stock
which may
be deemed
beneficially
owned through
the ownership
of the unconverted
portion of the Notes
or the unexercised
or unconverted
portion of any
other security
of the Borrower
subject to a
limitation on conversion
or exercise
analogous
to the limitations
contained
herein) and
(2) the
number of
shares of Common
Stock issuable
upon the conversion
of the portion of this Note with respect
to which the
determination
of this
proviso is
being made,
would result
in beneficial
ownership by
the Holder and its affiliates
of more than 9.99%
of the outstanding shares
of Common Stock.
For purposes
of the proviso
to the immediately
preceding
sentence,
beneficial
ownership shall
be determined
 in  accordance
with  Section 
13(d) of the Securities
 Exchange
Act 
of 1934,  as amended
 (the “Exchange
 Act”),
 and 
Regulations
 13D-G 
thereunder,
 except
 as 
otherwise provided
in clause
(1)
of such
proviso, provided,
further,
however,
that the limitations
on conversion
may be waived
by the
Holder upon,
at the
election of
the Holder,
not less
than 61 days’
prior notice
to the Borrower,
and the
provisions
of the conversion
limitation
shall continue to
apply until
such 61st
day (or
such later
date,
as determined
by the Holder,
as may
be specified
in such
notice of waiver).
The number of shares
of Common Stock
to be issued
upon each
conversion
of this Note
shall be
determined
by dividing the Conversion
Amount (as
defined below)
by the applicable
Conversion
Price
then in
effect on
the date
specified
in the notice
of conversion,
in the form
attached
hereto
as Exhibit
A (the “Notice
of Conversion”),
delivered
to the Borrower
by the
Holder
in accordance
with Section
1.4 below;
provided
that the Notice
of Conversion
is submitted by
facsimile or e-mail
(or by
other means resulting
in, or reasonably
expected
to result
in, notice)
to the Borrower
before
6:00 p.m., New
York, New
York time on such
conversion
date (the
“Conversion
Date”).
The term “Conversion
Amount” means, with respect
to any
conversion
of this Note,
the sum of
(1) the
principal
amount
of this Note
to be converted
in such
conversion
plus (2) at
the Holder’s
option, accrued
and unpaid
interest, if any,
on such
principal
amount
at the interest
rates
provided
in this Note to
the Conversion
Date,
plus (3) at
the Holder’s
option, Default
Interest,
if any,
on the amounts
referred
to in the immediately
preceding
clauses
(1) and/or
(2) plus
(4) at
the Holder’s
option, any
amounts
owed to
the Holder pursuant
to Sections 1.3 and
1.4(g)
hereof.

    	2

    	 

    

1.2 Conversion
Price.

 

(a)
Calculation
 of  Conversion
 Price.
 The  conversion
 price
 (the “Conversion
Price”)
shall equal
the Variable Conversion
Price (as
defined
herein) (subject
to equitable 
adjustments 
for  stock
 splits,  stock
 dividends 
or  rights
 offerings
 by
the  Borrower
relating
to the Borrower’s
securities
or the securities
of any
subsidiary of
the Borrower,
combinations, recapitalization,
reclassifications,
extraordinary
distributions and
similar events).
The "Variable
Conversion
Price"
shall
mean 51%
multiplied by
the Market
Price
(as
defined herein)
(representing
a discount rate
of 49%). “Market
Price”
means the average
of the lowest three
(3)
Trading Prices
(as
defined
below)
for the
Common Stock
during the thirty
(30) Trading
Day period
ending on the
latest complete
Trading Day
prior to the Conversion
Date. “Trading
Price”
means,
for any
security
as of
any date,
the closing
bid price
on the Over-the-Counter
Bulletin
Board,
or applicable
trading market
(the “OTCBB”)
as reported
by a reliable
reporting
service
(“Reporting
Service”)
designated
by the Holder
(i.e. Bloomberg)
or, if
the OTCBB
is not the principal
trading
market
for such
security,
the closing
bid price
of such
security
on the principal
securities
exchange
or trading
market
where such
security
is listed
or traded
or,
if no closing
bid price
of such security
is available
in any
of the foregoing
manners,
the average
of the closing bid prices
of any market
makers for
such security
that are
listed in the “pink
sheets” by the National
Quotation Bureau,
Inc.  If the Trading
Price
cannot be calculated
for such security
on such
date in
the manner
provided
above,
the Trading
Price
shall be
the fair
market
value as
mutually
determined
by the Borrower
and the
holders of
a majority
in interest
of the Notes
being converted
for which
the calculation
of the Trading Price
is required
in order
to determine the Conversion
Price
of such Notes.
“Trading
Day”
shall mean
any day
on which
the Common Stock
is tradable
for any
period on
the OTCBB,
or on the
principal
securities
exchange
or other securities
market
on which the Common
Stock is
then being
traded.

 

(b) Conversion  Price  During Major  Announcements.  Notwithstanding anything contained
in Section 1.2(a) to the contrary,
in the event
the Borrower (i) makes
a public announcement
that it intends to consolidate
or merge with any
other corporation (other than a
merger in which the Borrower
is the surviving
or continuing corporation and its capital stock is
unchanged)
or sell or transfer all or substantially all
of the assets
of the Borrower
or (ii) any
person, group or entity (including the Borrower)
publicly announces
a tender
offer
to purchase
50% or more of the Borrower’s Common Stock (or any
other takeover scheme) (the date
of the announcement referred
to in clause (i) or (ii)
is hereinafter referred
to as the  “Announcement
Date”), then the Conversion Price
shall, effective
upon the Announcement
Date and continuing
through the Adjusted
Conversion Price
Termination
Date (as defined
below), be equal
to the lower of (x)
the Conversion Price
which would have
been applicable for a Conversion occurring
on the Announcement
Date and (y)
the Conversion Price
that would otherwise
be in effect. From and after
the Adjusted Conversion Price
Termination Date, the Conversion Price
shall be determined as set forth in this
Section 1.2(a).  For
purposes hereof,
“Adjusted Conversion
Price Termination
Date” shall mean, with respect to any proposed
transaction
or tender
offer (or
takeover scheme) for which
a public announcement as contemplated by this Section 1.2(b) has
been made,
the date upon
which the Borrower (in
the case of clause (i) above)
or the person, group
or entity (in the case of clause (ii) above) consummates
or publicly announces
the termination or abandonment
of the proposed
transaction
or tender
offer (or takeover scheme)
which caused
this Section
1.2(b) to become
operative.

    	3

    	 

    

1.3 
Authorized  Shares.  The  Borrower  covenants  that  during  the  period  the conversion right exists, the Borrower
will reserve from its authorized and unissued Common Stock
a sufficient
number of shares, free from preemptive rights, to provide for
the issuance of Common Stock
upon the full conversion
of this Note issued
pursuant to the Purchase Agreement.
The Borrower
is required at all
times to have authorized and reserved five
times the number of
shares that
is actually
issuable upon full conversion
of the Note (based
on the Conversion Price
of the Notes in effect from
time to time)(the “Reserved
Amount”). The Reserved
Amount shall be increased from
time to time in accordance
with the Borrower’s
obligations pursuant
to Section 4(g)
of the Purchase Agreement.
The Borrower represents
that upon issuance,
such shares
will be duly and
validly issued, fully
paid and
non-assessable.  In addition,
if the Borrower
shall issue any
securities
or make any change
to its capital structure
which would change
the number of
shares  of  Common 
Stock  into  which  the  Notes  shall  be  convertible  at  the
then  current Conversion
Price, the Borrower
shall at
the same time make proper
provision so that thereafter
there shall
be a sufficient
number of shares
of Common
Stock authorized and reserved, free from
preemptive rights, for conversion
of the outstanding Notes. The Borrower (i) acknowledges
that it has
irrevocably
instructed
its transfer agent to issue certificates for the Common Stock
issuable upon conversion
of this Note, and (ii) agrees
that its issuance
of this Note shall constitute full authority
to its officers and agents
who are charged
with the duty of executing
stock certificates
to execute and
issue the necessary certificates for
shares of Common Stock
in accordance
with the terms and conditions
of this Note.

 

If,
at any
time the Borrower
does not
maintain
the Reserved
Amount it will
be considered
an Event of
Default under
Section 3.2 of
the Note.

 

1.4 Method
of Conversion.

 

(a)
Mechanics
of Conversion.
 Subject
to Section
1.1, this
Note may
be converted
by the
Holder in
whole or in
part at
any time
from time
to time after
the Issue
Date,
by (A)
submitting to the Borrower
a Notice of Conversion
(by
facsimile,
e-mail
or other reasonable
means of communication
dispatched
on the Conversion
Date prior to
6:00 p.m., New
York, New
York time)
and (B)
subject
to Section
1.4(b),
surrendering
this Note at the principal
office of the Borrower.

 

(b)
Surrender
of Note
Upon Conversion.
 Notwithstanding anything
to the contrary
set forth
herein, upon
conversion
of this Note
in accordance
with the terms
hereof,
the Holder shall
not be required
to physically
surrender
this Note to
the Borrower
unless the
entire unpaid
principal
amount of
this Note is
so converted.
The Holder
and
the Borrower
shall maintain
records
showing the
principal
amount so converted
and the dates
of such
conversions
or shall use
such other
method,
reasonably
satisfactory
to the Holder
and the
Borrower,
so as not
to require
physical
surrender
of this Note
upon each
such conversion.
 In the event
of any
dispute or discrepancy,
such records
of the Borrower
shall, prima
facie,
be controlling
and determinative
in the absence
of manifest
error. Notwithstanding
the foregoing,
if any
portion
of this Note
is converted
as aforesaid,
the Holder
may not transfer
this Note unless
the Holder
first
physically
surrenders
this Note to the
Borrower,
whereupon
the Borrower
will forthwith
issue and
deliver upon
the order
of the Holder
a new Note of
like tenor, registered
as the Holder
(upon payment
by the Holder
of any
applicable
transfer
taxes)
may request,
representing
in the aggregate
the remaining
unpaid principal
amount of
this Note. The
Holder and
any assignee,
by acceptance
of this Note, acknowledge
and agree
that, by reason
of the provisions
of this paragraph,
following conversion
of a
portion of
this Note,
the unpaid
and unconverted
principal
amount of
this Note represented
by this Note
may be
less than the
amount stated
on the face
hereof.

    	4

    	 

    

 

(c)
Payment
of Taxes.
 The Borrower
shall not
be required
to pay
any
tax which
may be payable
in respect
of any
transfer
involved in
the issue and
delivery
of shares
of Common Stock
or other securities
or property
on conversion
of this Note in a name
other than that
of the Holder (or
in street
name),
and the
Borrower
shall not
be required
to issue or
deliver any
such shares
or other
securities
or property
unless
and until
the person
or persons
(other
than the Holder
or the custodian
in whose street
name such
shares are
to be held
for the Holder’s account)
requesting
the issuance
thereof
shall have
paid to the Borrower
the amount
of any
such tax
or shall have
established to the
satisfaction of
the Borrower
that such
tax has
been paid.

 

(d)
Delivery
of Common
Stock
Upon Conversion.
 Upon receipt
by the Borrower
from the
Holder of
a facsimile
transmission
or e-mail
(or other
reasonable
means
of communication)
of a Notice
of Conversion
meeting the
requirements
for conversion
as provided
in this Section
1.4, the Borrower
shall issue and
deliver
or cause to
be issued
and delivered
to or upon the
order
of the Holder
certificates
for
the Common
Stock
issuable upon such
conversion within
three (3)
business
days
after
such receipt
(the “Deadline”)
(and, solely
in the case
of conversion
of the entire
unpaid principal
amount hereof,
surrender
of this Note)
in accordance
with the terms hereof
and the Purchase
Agreement.

 

(e)
Obligation
of Borrower
to Deliver
Common Stock.
 Upon receipt
by the Borrower
of a Notice
of Conversion,
the Holder shall
be deemed
to be the holder
of record
of the Common Stock
issuable upon
such conversion,
the outstanding
principal
amount and
the amount
of accrued
and unpaid
interest on
this Note shall
be reduced
to reflect
such conversion,
and, unless
the Borrower
defaults on
its obligations
under this Article
I, all
rights
with respect
to the portion
of this Note being
so converted
shall
forthwith
terminate except
the right
to receive
the Common
Stock or other
securities,
cash or
other assets,
as herein
provided,
on such conversion.
If the Holder
shall have
given
a Notice of Conversion
as provided
herein,
the Borrower’s
obligation to
issue and deliver
the certificates
for Common
Stock shall
be absolute and
unconditional,
irrespective
of the absence
of any
action
by the Holder
to enforce
the same,
any waiver
or consent with respect
to any provision
thereof, the recovery
of any judgment
against
any person
or any
action
to enforce
the same,
any
failure
or delay
in the enforcement
of any other
obligation
of the Borrower
to the holder
of record,
or any
setoff,
counterclaim,
recoupment,
limitation or
termination,
or any
breach
or alleged
breach
by the Holder
of any obligation
to the Borrower,
and irrespective
of any other
circumstance
which might
otherwise limit such
obligation of the
Borrower
to the Holder
in connection
with such conversion.
The Conversion
Date specified
in the Notice
of Conversion
shall be
the Conversion
Date so
long as the Notice of Conversion
is received by
the Borrower
before
6:00 p.m., New York, New
York time, on such
date.

 

(f)
 Delivery
 of 
Common  Stock
 by 
Electronic
 Transfer.
 In 
lieu  of delivering
physical
certificates
representing
the Common
Stock
issuable upon
conversion, provided
 the  Borrower
is  participating
 in  the 
Depository Trust
 Company
 (“DTC”)
Fast Automated
Securities
Transfer
(“FAST”)
program,
upon request
of the Holder and its compliance
with the provisions
contained
in Section
1.1 and
in this Section
1.4, the Borrower
shall use its best
efforts to cause
its transfer agent
to electronically
transmit
the Common
Stock issuable
upon conversion
to the Holder
by crediting
the account
of Holder’s
Prime
Broker
with DTC through
its Deposit Withdrawal
Agent Commission (“DWAC”)
system.

    	5

    	 

    

(g)
Failure
to Deliver
Common
Stock
Prior
to Deadline.
 Without
in any
way limiting the
Holder’s
right
to pursue
other remedies,
including
actual
damages
and/or equitable
relief,
the parties
agree
that if
delivery
of the Common Stock
issuable upon
conversion of
this Note is
not delivered
by the Deadline
(other
than a
failure
due to
the circumstances
described
in Section
1.3 above,
which
failure
shall
be governed
by such
Section)
the Borrower
shall pay
to the Holder
$2,000 per
day in
cash,
for each
day beyond
the Deadline
that the Borrower
fails
to deliver
such Common
Stock. 
Such
cash amount
shall be paid
to Holder
by the fifth
day of
the month following
the month in
which it
has accrued
or, at
the option
of the Holder
(by
written
notice to
the Borrower
by the
first
day of
the month
following the
month in which
it has accrued),
shall
be added
to the principal
amount
of this Note,
in which
event
interest
shall accrue
thereon in
accordance
with the terms
of this Note and
such additional
principal
amount shall 
be  convertible
 into  Common
Stock 
in accordance
 with  the 
terms  of 
this  Note. 
The Borrower
agrees
that the right
to convert
is a valuable
right to the Holder.
 The damages
resulting from
a failure,
attempt
to frustrate,
interference
with such
conversion
right
are difficult
if not impossible to qualify.
 Accordingly
the parties
acknowledge
 that the
liquidated damages
provision contained
in this Section 1.4(g)
are justified.

 

1.5
 Concerning
 the  Shares.
 The  shares
 of  Common
 Stock
 issuable 
upon conversion
of this Note
may not
be sold or
transferred
unless  (i)
such shares
are
sold pursuant
to an effective
registration
statement
under the Act
or (ii) the Borrower
or its transfer
agent
shall have been
furnished
with an
opinion of  counsel
(which
opinion shall
be in form,
substance
and scope
customary
for opinions
of counsel
in comparable
transactions)
to the effect
that the
shares to be
sold or transferred
may be sold
or transferred
pursuant
to an exemption
from such
registration
or (iii)
such shares
are sold or
transferred
pursuant to
Rule 144
under the Act
(or a successor rule)
(“Rule 144”)
or (iv) such
shares
are transferred
to an
“affiliate”
(as defined
in Rule 144) of the Borrower
who agrees
to sell or otherwise
transfer
the shares
only in accordance
with this Section
1.5 and who
is an
Accredited
Investor
(as defined
in the Purchase
Agreement).
Except
as otherwise
provided
in the Purchase
Agreement
(and subject
to the removal
provisions set
forth
below),
until such
time as the
shares
of Common
Stock issuable
upon conversion
of this Note
have been
registered
under the Act
or otherwise
may be sold pursuant
to Rule
144 without any
restriction
as to
the number
of securities
as of
a particular
date that
can
then be
immediately
sold, each
certificate
for shares
of Common
Stock issuable
upon conversion
of this Note that
has not been so
included in
an effective
registration
statement
or that has not been
sold pursuant to an
effective
registration
statement
or an exemption
that permits
removal
of the legend,
shall bear
a legend
substantially
in the following form,
as appropriate:

 

“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 BEPLEDGED
IN CONNECTION
WITH
A BONA
FIDE MARGIN
ACCOUNT
OR OTHER
LOAN
OR FINANCING
ARRANGEMENT
SECURED BY
THE SECURITIES.”

    	6

    	 

    

 

The
legend
set forth
above shall
be removed
and the Borrower
shall
issue to the Holder
a new
certificate
therefore
free
of any
transfer
legend
if (i)
the Borrower
or its transfer
agent
shall have
received
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 Common
Stock may
be made
without registration
under the
Act, which
opinion shall be
accepted
by the Company
so that
the sale or
transfer
is effected
or (ii)
in the case
of the Common
Stock issuable
upon conversion
of this Note,
such
security
is registered
for sale
by the
Holder under
an effective
registration
statement
filed
under the
Act
or otherwise
may be
sold pursuant
to Rule

144
without any
restriction
as to
the number
of securities
as of
a particular
date that
can
then be immediately
sold.  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, at
the Deadline,
it will be
considered
an Event
of Default pursuant
to Section 3.2 of
the Note.

 

1.6 Effect
of Certain
Events.

 

(a)
Effect of
Merger,
Consolidation,
Etc.  At
the option
of the Holder,
the sale,
conveyance
or disposition of
all or
substantially
all of
the assets
of the Borrower,
the effectuation
by the Borrower
of a transaction
or series
of related
transactions
in which
more than

50%
of the
voting power
of the
Borrower
is disposed
of, or
the consolidation,
merger
or other business
combination
of the Borrower
with or into
any
other Person
(as
defined
below)
or Persons
when the
Borrower
is not the
survivor shall
either: 
(i) be deemed
to be an
Event
of Default (as
defined
in Article
III) pursuant
to which
the Borrower
shall be required
to pay to
the Holder upon the
consummation
of and as
a condition
to such
transaction
an amount
equal
to the Default Amount (as
defined
in Article III)
or (ii) be treated
pursuant to Section
1.6(b) hereof.
“Person”
shall mean
any individual,
corporation,
limited liability
company,
partnership,
association,
trust or other
entity or
organization.

 

(b) Adjustment Due to Merger, Consolidation, Etc.  If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any
merger,  consolidation,  exchange
of shares,  recapitalization,  reorganization,  or
other similar event, as a result of
which shares of Common
Stock of the Borrower
shall be changed into the
same or a different number
of shares of another class or classes of
stock or securities of
the Borrower or another entity, or in case of any sale
or conveyance
of all or substantially all of the assets of
the Borrower other
than in connection with a
plan of complete
liquidation of the Borrower, then the
Holder of this Note
shall thereafter
have the right to receive
upon conversion
of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock
immediately
theretofore
issuable upon conversion,
such stock, securities or assets which the
Holder would have been entitled to receive in such transaction had
this Note been converted
in full immediately
prior to such transaction (without regard
to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be
made with respect to the rights and interests of the
Holder of this Note
to the end that the
provisions hereof (including,
without limitation, provisions for adjustment
of the Conversion Price and of
the number of shares issuable
upon conversion of
the Note) shall thereafter
be applicable, as
nearly as
may be practicable
in relation to any
securities
or assets thereafter
deliverable upon the conversion hereof.  The Borrower shall not affect any
transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior
written notice (but in any event at least fifteen (15) days prior written notice) of the record date
of the special meeting of shareholders to approve, or if there
is no such record date, the consummation  of,  such  merger,  consolidation,  exchange of  shares,  recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the
resulting successor or acquiring entity (if not the Borrower) assumes by
written instrument
the obligations of this Section 1.6(b).
The above
provisions shall similarly apply
to successive consolidations,
mergers,
sales, transfers
or share exchanges.

    	7

    	 

    

 

(c)
Adjustment Due
to Distribution.
 If
the Borrower
shall declare
or make any
distribution of
its assets
(or rights
to acquire
its assets)
to holders
of Common
Stock
as a dividend,
stock repurchase,
by way
of return
of capital or otherwise
(including
any dividend
or distribution to the Borrower’s
shareholders
in cash or shares
(or rights
to acquire shares)
of capital stock
of a subsidiary
(i.e., a
spin-off))
(a “Distribution”),
then the
Holder of this Note shall
be entitled,
upon any
conversion
of this Note
after
the date
of record
for
determining
shareholders
entitled to such
Distribution, to receive
the amount of
such assets
which would have
been payable
to the Holder
with respect
to the shares
of Common
Stock issuable
upon such conversion
had such
Holder been
the holder of such
shares of Common
Stock on
the record
date for
the determination
of shareholders
entitled to such
Distribution.

 

(d)
Adjustment Due
to Dilutive Issuance.
 If,
at any
time when
any
Notes are issued
and outstanding,
the Borrower
issues or
sells, or
in accordance
with this Section
1.6(d) hereof
is deemed
to have
issued or
sold, any
shares
of Common
Stock for
no consideration
or for
a consideration
per share
(before
deduction
of reasonable
expenses
or commissions or underwriting
discounts or
allowances
in connection
therewith) less
than
the Conversion
Price
in effect
on the date
of such
issuance
(or deemed
issuance)
of such
shares
of Common
Stock
(a “Dilutive
Issuance”),
then immediately
upon the Dilutive Issuance,
the Conversion
Price
will be reduced
to the amount
of the
consideration
per share
received
by the
Borrower
in such
Dilutive Issuance.

 

The Borrower
shall be deemed to have
issued or sold shares of Common Stock if the Borrower in any
manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable, to subscribe for
or to purchase Common
Stock or other securities convertible
into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock
or Convertible Securities are
hereinafter referred
to as “Options”) and the
price per
share for
which Common Stock is
issuable upon the exercise of such Options is less than the
Conversion Price then in effect, then the Conversion Price shall be equal to such
price per share. For
purposes of the preceding
sentence,
the “price per
share for
which Common Stock
is issuable upon the exercise of
such Options” is determined by
dividing (i) the total amount,
if any, received or
receivable
by the Borrower as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration,
if any, payable
to the Borrower upon the exercise
of all such Options, plus, in the case of
Convertible Securities
issuable upon the exercise
of such Options, the
minimum aggregate amount of additional consideration payable upon the conversion or exchange
thereof at the time
such Convertible Securities first become
convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise
of all such Options (assuming full conversion
of Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be
made upon the actual
issuance of such Common Stock
upon the exercise of such
Options or upon the conversion
or exchange of Convertible Securities
issuable upon exercise of such
Options.

    	8

    	 

    

 

Additionally,
the Borrower
shall be
deemed
to have
issued or
sold shares
of Common
Stock
if the
Borrower
in any
manner
issues or
sells any
Convertible
Securities,
whether 
or  not  immediately
convertible
 (other
 than 
where 
the  same
 are 
issuable 
upon  the exercise
of Options),
and
the price per
share
for which
Common Stock
is issuable upon
such conversion
or exchange
is less
than the Conversion
Price
then in
effect,
then the Conversion
Price
shall be equal
to such price
per share.
 For
the purposes of the preceding
sentence,
the “price
per
share for
which Common
Stock is
issuable upon
such conversion
or exchange”
is determined
by dividing
(i) the
total amount,
if any,
received
or receivable
by the Borrower
as consideration
for the issuance
or sale of all
such Convertible
Securities,
plus the minimum aggregate
amount  of additional
 consideration,
 if any,
 payable
to  the Borrower
upon  the conversion
or exchange
thereof
at the time such
Convertible Securities
first become
convertible
or exchangeable,
by (ii) the maximum
total number
of shares of Common
Stock issuable
upon the conversion
or exchange
of all
such Convertible
Securities.
No further
adjustment
to the Conversion
Price will
be made upon the actual
issuance
of such
Common Stock
upon conversion
or exchange
of such
Convertible
Securities.

 

(e)
Purchase
Rights. 
If,
at any
time when
any
Notes
are issued
and outstanding,
the Borrower
issues any
convertible
securities
or rights
to purchase
stock, warrants,
securities
or other
property
(the “Purchase
Rights”)
pro rata
to the record
holders of
any class
of Common  Stock,
 then 
the Holder of this 
Note will  be entitled
 to  acquire,
 upon  the terms
applicable to
such Purchase
Rights,
the aggregate
Purchase
Rights
which such
Holder could
have acquired
if such Holder
had held
the number of shares
of Common Stock
acquirable upon complete
conversion of this Note (without
regard
to any limitations
on conversion contained
herein) immediately
before
the date
on which
a record
is taken
for
the grant,
issuance
or sale
of such Purchase
Rights
or, if no
such record
is taken,
the date as
of which the record
holders of Common
Stock are
to be determined
for the
grant,
issue or sale
of such Purchase
Rights.

 

(f)
Notice of Adjustments.
 Upon the occurrence
of each
adjustment
or readjustment
of the Conversion
Price
as a
result of
the events
described
in this
Section
1.6, the Borrower,
at its
expense,
shall promptly
compute
such adjustment
or readjustment
and prepare
and furnish
to the Holder
a certificate
setting
forth
such adjustment
or readjustment
and showing
in detail
the facts
upon which
such adjustment
or readjustment
is based.
 The Borrower
shall, upon the
written
request
at any
time of the
Holder,
furnish
to such
Holder
a like certificate
setting forth
(i) such
adjustment
or readjustment, (ii)
the Conversion Price
at the time in effect
and (iii)
the number
of shares
of Common Stock
and the
amount, if
any,
of other
securities
or property
which at
the time would be
received
upon conversion
of the Note.

 

1.7
Trading
Market
Limitations. 
Unless permitted
by the
applicable
rules
and regulations
of the principal
securities
market
on which the
Common Stock
is then
listed or
traded, in no event
shall the Borrower
issue upon conversion
of or otherwise
pursuant to this Note and
the other Notes
issued pursuant
to the Purchase
Agreement
more than
the maximum number
of shares
of Common
Stock
that the
Borrower
can issue
pursuant
to any
rule of
the principal
United States
securities
market
on which
the Common Stock
is then
traded
(the “Maximum
Share
Amount”),
which shall
be 9.99%
of the total
shares outstanding
on the Closing Date
(as defined
in the Purchase
Agreement),
subject to equitable
adjustment from
time to time for
stock splits,
stock
dividends,
combinations,
capital
reorganizations
and similar
events
relating to
the Common
Stock
occurring
after
the date
hereof.
 Once
the Maximum
Share
Amount has been
issued, if
the Borrower
fails to
eliminate
any prohibitions
under applicable
law or
the rules
or regulations
of any
stock
exchange,
interdealer
quotation system
or other
self-regulatory
organization
with jurisdiction
over the
Borrower
or any
of its
securities
on the Borrower’s
ability to
issue shares
of Common
Stock
in excess
of the Maximum
Share
Amount, in
lieu of
any further
right
to convert this Note,
this will be considered
an Event of Default
under Section
3.3 of the Note.

    	9

    	 

    

 

1.8
Status
as Shareholder.
 Upon submission
of a Notice
of Conversion
by a Holder,
(i) the
shares
covered
thereby
(other
than
the shares,
if any,
which cannot
be issued because
their issuance
would exceed
such Holder’s
allocated
portion of the
Reserved
Amount or Maximum
Share
Amount) shall
be deemed
converted
into shares
of Common
Stock
and (ii)
the Holder’s rights
as a
Holder of
such converted
portion of
this Note shall cease
and terminate,
excepting
only the right
to receive
certificates
for such
shares
of Common Stock
and to
any remedies
provided herein
or otherwise available
at law or in equity
to such Holder because
of a failure by
the Borrower
to comply
with the terms of this Note. Notwithstanding
the foregoing,
if a Holder has
not received
certificates
for all
shares
of Common Stock
prior to the tenth
(10th) business
day after
the expiration
of the Deadline
with respect
to a conversion
of any
portion of this Note for
any reason,
then (unless
the Holder otherwise
elects
to retain
its status as a holder
of Common
Stock
by so notifying
the Borrower)
the Holder
shall
regain
the rights
of a Holder
of this Note with respect to such
unconverted
portions of this Note and
the Borrower
shall, as soon as
practicable,
return
such unconverted
Note to
the Holder or,
if the Note has
not been
surrendered,
adjust its
records
to reflect
that
such portion
of this Note has
not been
converted.
In all cases,
the Holder shall retain
all of its rights
and remedies
(including,
without limitation, (i) the right
to receive
Conversion
Default
Payments
pursuant
to Section
1.3 to the extent
required thereby
for such
Conversion
Default and
any subsequent
Conversion
Default
and (ii)
the right
to have the Conversion
Price with
respect
to subsequent
conversions
determined
in accordance
with Section 1.3)
for the Borrower’s
failure
to convert
this Note.

 

1.9 Prepayment.  Notwithstanding anything to the contrary contained in this Note, at any
time during the period beginning on the Issue Date and ending on the date which is ninety (90) days following
the issue date, the Borrower shall have the right, exercisable on not less than
three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any
notice of prepayment hereunder (an “Optional
Prepayment Notice”)
shall be delivered to the
Holder of the Note at
its registered addresses and
shall state: (1) that
the Borrower is exercising
its right to prepay
the Note, and (2) the date of prepayment
which shall be not more
than three (3) Trading
Days from
the date of the Optional Prepayment
Notice. On the date fixed for
prepayment (the “Optional Prepayment Date”), the Borrower shall make
payment of the
Optional Prepayment
Amount (as defined below) to or upon the order of the Holder as specified by
the Holder in
writing to the Borrower at
least one (1) business
day prior to the
Optional Prepayment
Date. If
the Borrower exercises its right to prepay
the Note, the Borrower shall make payment to the
Holder of an amount in
cash (the “Optional Prepayment Amount”) equal to 135%, multiplied by
the sum of: (w) the then
outstanding principal amount
of this Note plus (x)
accrued and unpaid
interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts
owed to the
Holder pursuant to
Sections 1.3 and 1.4(g)
hereof. If
the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the
Note within two
(2) business
days
following
the Optional
Prepayment
Date,
the Borrower
shall forever
forfeit
its right to prepay
the Note pursuant
to this Section 1.9.

    	10

    	 

    

 

  

Notwithstanding
anything
to the contrary
contained
in this Note,
at any
time during the period
beginning 
on the date
which is
ninety-one
 (91)
days
following the
issue date and
ending on the date
which is one hundred twenty
(120) days
following the issue date,
the Borrower
shall have
the right,
exercisable
on not less
than three
(3) Trading
Days
prior written
notice to the Holder
of the Note to prepay
the outstanding Note (principal
and accrued
interest),
in full, in accordance
with this Section 1.9. Any
Optional Prepayment
Notice shall
be delivered
to the Holder
of the Note at
its registered
addresses
and shall
state:
(1) that
the Borrower
is exercising
its right
to prepay
the Note, and
(2) the date
of prepayment
which
shall be
not more than
three
(3)
Trading
Days
from the
date
of the Optional
Prepayment
Notice. On
the Optional Prepayment
 Date,
 the  Borrower
shall  make
payment
 of the Second
 Optional 
Prepayment
Amount (as
defined
below)
to or upon
the order
of the Holder
as specified
by the
Holder in writing
to the Borrower
at least one
(1) business day
prior to the
Optional Prepayment
Date. If the
Borrower
exercises
its right
to prepay
the Note,
the Borrower
shall
make payment
to the Holder of an
amount in
cash (the
“Second
Optional Prepayment
Amount”) equal
to 145%, multiplied
by the
sum of:
(w) the
then outstanding
principal
amount of
this Note plus
(x)
accrued
and unpaid
interest on
the unpaid
principal
amount of
this Note to the
Optional
Prepayment
Date plus (y)
Default Interest,
if any,
on the amounts
referred
to in clauses
(w) and
(x) plus
(z) any
amounts owed
to the Holder
pursuant to
Sections 1.3
and 1.4(g)
hereof.
If the Borrower
delivers an
Optional Prepayment
Notice and
fails
to pay the
Second
Optional Prepayment
Amount due to the
Holder of
the Note
within two (2)
business days
following the Optional
Prepayment
Date,
the Borrower
shall forever
forfeit its right
to prepay
the Note
pursuant to this Section
1.9.

 

Notwithstanding
anything
to the contrary
contained
in this Note,
at any
time during the
period beginning
 on the
date which
is one hundred
twenty -one
 (121)
days following
the issue date
and ending
on the date
which is
one hundred
eighty
(180) days
following the
issue date, the
Borrower
shall have
the right,
exercisable
on not less
than three
(3) Trading
Days
prior written
notice to
the Holder
of the Note
to prepay
the outstanding
Note (principal
and accrued
interest),
in full,
in accordance
with this Section
1.9. Any Optional
Prepayment
Notice shall
be delivered
to the Holder of
the Note at its
registered
addresses
and shall
state:
(1) that
the Borrower
is exercising
its right
to prepay
the Note, and
(2) the
date of
prepayment
which shall
be not more
than three
(3) Trading
Days
from the
date of the
Optional Prepayment
Notice. On the Optional
Prepayment
Date,
the Borrower
shall make
payment
of the Third
Optional Prepayment
Amount (as
defined
below)
to or upon
the order
of the Holder
as specified
by the
Holder in writing
to the Borrower
at least one (1)
business day prior
to the Optional Prepayment
Date. If the
Borrower
exercises
its right
to prepay
the Note,
the Borrower
shall
make payment
to the Holder of
an amount
in cash
(the “Third
Optional Prepayment
Amount”) equal
to 150%, multiplied
by the
sum of:
(w) the
then outstanding
principal
amount of
this Note plus
(x)
accrued
and unpaid
interest on
the unpaid
principal
amount of
this Note to the
Optional
Prepayment
Date plus (y)
Default Interest,
if any,
on the amounts
referred
to in clauses
(w) and
(x) plus
(z) any
amounts owed
to the Holder
pursuant
to Sections
1.3 and
1.4(g)
hereof.
If the Borrower
delivers an
Optional Prepayment
Notice and
fails to
pay the
Third Optional
Prepayment
Amount due
to the Holder
of the
Note within two (2)
business days
following the Optional
Prepayment
Date,
the Borrower
shall forever
forfeit its right
to prepay
the Note
pursuant to this Section
1.9.

    	11

    	 

    

After
the expiration
of one
hundred eighty
(180)
following the
date of
the Note, the
Borrower
shall have
no right of
prepayment.

 

 

 

ARTICLE
II. 
CERTAIN
COVENANTS

 

2.1
Distributions on
Capital
Stock. 
So long
as the Borrower
shall
have  any
obligation
under this
Note,
the Borrower
shall not
without the Holder’s
written
consent
(a) pay,
declare
or set
apart
for such
payment,
any
dividend
or other
distribution
(whether
in cash, property
or other
securities)
on shares of
capital
stock other
than dividends
on shares of
Common Stock
solely in
the form of
additional
shares
of Common Stock
or (b)
directly
or indirectly
or through
any subsidiary
make any
other payment
or distribution
in respect
of its capital
stock except
for distributions
pursuant to any
shareholders’
rights plan
which is approved
by a
majority
of the Borrower’s
disinterested
directors.

 

2.2
Restriction
on Stock
Repurchases.
 So
long as
the Borrower
shall have
any obligation
under this Note,
the Borrower
shall not
without the Holder’s
written
consent
redeem,
repurchase
or otherwise
acquire
(whether
for cash
or in exchange
for property
or other
securities
or otherwise)
in any
one transaction
or series
of related
transactions
any
shares of
capital stock
of the Borrower
or any
warrants,
rights or
options to purchase
or acquire
any such
shares.

 

2.3
Borrowings.
 So
long as
the Borrower
shall have
any
obligation
under this Note,
the Borrower
shall
not, without the Holder’s
written
consent,
create,
incur,
assume guarantee,
 endorse,
 contingently
agree
 to  purchase
 or  otherwise
 become
 liable 
upon  the obligation
of any
person,
firm,
partnership,
joint venture
or corporation,
except
by the endorsement
of negotiable
instruments
for deposit
or collection,
or suffer
to exist
any liability
for borrowed
money, except
(a) borrowings
in existence
or committed
on the date hereof
and of which
the Borrower
has informed
Holder in
writing prior
to the date
hereof,
(b) indebtedness
to trade creditors
or financial
institutions incurred
in the ordinary
course
of business
or (c) borrowings,
the proceeds
of which shall
be used to
repay this Note.

 

2.4
Sale
of Assets. 
So long
as the
Borrower
shall
have any
obligation
under this Note,
the Borrower
shall not,
without the
Holder’s
written
consent,
sell,
lease or
otherwise dispose of
any
significant
portion of
its assets
outside the ordinary
course
of business. Any consent
to the disposition of any
assets may
be conditioned
on a specified
use of the proceeds
of disposition.

 

2.5
Advances
and Loans.
 So
long as
the Borrower
shall have
any
obligation
under this
Note, the
Borrower
shall not,
without the Holder’s
written
consent,
lend money,
give credit
or make
advances
to any
person, firm,
joint venture
or corporation,
including,
without limitation, officers,
directors, employees,
subsidiaries and
affiliates
of the Borrower,
except
loans, credits
or advances
(a) in existence
or committed
on the date hereof
and which
the Borrower
has
informed
Holder in writing
prior
to the date hereof,
(b) made
in the ordinary
course
of business or
(c)
not in excess
of $100,000.

 

ARTICLE
III. 
EVENTS OF DEFAULT

 

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

    	12

    	 

    

3.1
Failure
to Pay
Principal
or Interest.
 The
Borrower
fails
to pay
the principal
hereof or interest
thereon
when due on
this Note,
whether
at maturity,
upon acceleration
or otherwise.

 

3.2
Conversion
and the
Shares.
 The
Borrower
fails to
issue shares
of Common Stock
to the Holder
(or announces
or threatens
in writing
that it
will not honor
its obligation
to do so) upon exercise by
the Holder of the conversion
rights of the Holder
in accordance
with the terms of this Note, fails
to transfer
or cause its transfer
agent
to transfer
(issue) (electronically
or in certificated
form)
any certificate
for shares
of Common Stock
issued to the
Holder upon conversion
of or otherwise
pursuant to this Note as
and when required
by this Note, the Borrower
directs
its transfer
agent
not to transfer
or delays,
impairs,
and/or hinders
its transfer
agent in transferring
(or issuing)
(electronically
or in certificated
form)
any certificate
for shares
of Common Stock
to be issued
to the Holder
upon conversion
of or otherwise
pursuant
to this Note as and
when required
by this Note, or fails
to remove (or directs
its transfer agent
not to remove or impairs,
delays,
and/or hinders
its transfer
agent
from removing)
any restrictive
legend
(or
to withdraw
any
stop transfer
instructions
in respect
thereof)
on any certificate
for any shares
of Common Stock
issued to
the Holder upon conversion
of or otherwise pursuant
to this Note as
and when
required
by this
Note (or
makes
any
written
announcement,
statement
or threat that
it does not intend to honor the obligations
described
in this paragraph)
and any such
failure shall
continue uncured
(or any
written
announcement,
statement
or threat
not to honor
its obligations shall
not be rescinded
in writing)
for three
(3) business
days after
the Holder
shall have delivered
a Notice of
Conversion. It is an
obligation
of the Borrower
to remain
current
in its obligations
to its transfer
agent.
It shall
be an event
of default
of this Note,
if a conversion
of this Note is delayed,
hindered or frustrated
due to a balance
owed by the Borrower
to its transfer agent.
If at the option of the Holder, the Holder
advances
any funds to the Borrower’s
transfer
agent
in order
to process
a conversion,
such advanced
funds shall
be paid by
the Borrower
to the Holder within forty
eight
(48) hours
of a demand
from the
Holder.

 

3.3
Breach
of Covenants.
 The Borrower
breaches
any
material
covenant
or other material
term or
condition
contained
in this Note
and any
collateral
documents
including but not limited
to the Purchase
Agreement
and such
breach
continues for
a period
of ten (10)
days
after written
notice thereof
to the Borrower
from the Holder.

 

3.4
Breach
of Representations
and Warranties.
 Any
representation
or warranty
of the Borrower
made
herein
or in any
agreement,
statement
or certificate
given
in writing
pursuant
hereto or
in connection
herewith (including,
without limitation,
the Purchase
Agreement),
shall be false
or misleading
in any material
respect
when made
and the breach
of which has
(or with the
passage
of time
will have)
a material
adverse
effect
on the rights
of the Holder
with respect
to this Note or the
Purchase
Agreement.

 

3.5
Receiver
or Trustee.
 The
Borrower
or any
subsidiary
of the
Borrower
shall make
an assignment
for the
benefit
of creditors,
or apply
for or
consent
to the appointment
of a receiver
or trustee
for it
or for
a substantial
part of
its property
or business,
or such
a receiver
or trustee
shall otherwise
be appointed.

 

3.6 Judgments.  Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more
than $50,000, and shall remain unvacated, unbonded or
unstayed for a
period of twenty (20)
days
unless otherwise
consented
to by
the Holder,
which consent
will not be
unreasonably
withheld.

    	13

    	 

    

 

3.7
Bankruptcy.
 Bankruptcy,
 insolvency,
 reorganization
 or  liquidation
proceedings
or other
proceedings,
voluntary
or involuntary,
for relief
under
any
bankruptcy
law or any
law for the relief
of debtors shall
be instituted by or against
the Borrower
or any subsidiary
of the
Borrower.

 

3.8
Delisting of
Common Stock.
The Borrower
shall fail
to maintain
the listing
of the Common
Stock
on at
least one
of the OTCBB
or an
equivalent
replacement
exchange,
the Nasdaq
National
Market,
the Nasdaq
SmallCap
Market,
the New York
Stock Exchange,
or the American Stock
Exchange.

 

3.9
Failure
to Comply
with the Exchange
Act.  The
Borrower
shall fail
to comply
with the reporting
requirements
of the Exchange
Act; and/or
the Borrower
shall cease
to be subject to the
reporting
requirements
of the Exchange
Act.

 

3.10
Liquidation. 
Any dissolution,
liquidation,
or winding up
of Borrower
or any
substantial portion
of its business.

 

3.11
Cessation
of Operations.
 Any
cessation
of operations
by Borrower
or Borrower
admits it
is otherwise
generally
unable
to pay its
debts as
such debts
become due,
provided, however,
that any
disclosure
of the Borrower’s
ability
to continue
as a “going
concern”
shall not be an admission
that the Borrower
cannot pay
its debts as they
become
due.

 

3.12
Maintenance
of Assets.
 The  failure
 by 
Borrower
 to  maintain
 any
material
intellectual
property
rights,
personal,
real
property
or other
assets
which are
necessary
to conduct its business
(whether
now or in the future).

 

3.13
Financial
Statement
Restatement.
 The  restatement
 of  any
financial
statements
filed
by the Borrower
with the SEC
for
any date
or period
from
two years
prior to
the Issue
Date of
this Note and
until this Note
is no longer
outstanding,
if the result
of such restatement
would, by comparison
to the unrestated
financial
statement,
have constituted
a material
adverse
effect
on the rights
of the Holder
with respect
to this Note or
the Purchase
Agreement.

 

3.14Reverse
Splits.The  Borrower
 effectuates
 a  reverse
 split  of 
its

Common
Stock without
twenty
(20) days
prior
written
notice to the
Holder.

 

 

3.15
Replacement
of Transfer
Agent. In
the event
that the
Borrower
proposes to replace
its transfer
agent,
the Borrower
fails to
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.

    	14

    	 

    

3.16
Cross-Default.
 Notwithstanding
anything
to the contrary
contained
in this Note or
the other
related
or companion
documents,
a breach
or default
by the Borrower
of any
covenant
or other
term
or condition
contained
in any
of the Other
Agreements,
after
the passage
of all applicable
notice and
cure
or grace
periods,
shall, at the
option of the Holder,
be considered
a default
under this Note
and the
Other Agreements,
in which
event
the Holder shall
be entitled
(but in
no event
required)
to apply
all rights
and remedies
of the
Holder
under
the terms
of this Note  and
 the  Other
 Agreements
 by reason
 of  a 
default
 under 
said  Other
 Agreement
 or hereunder.
“Other
Agreements”
means, collectively,
all agreements
and instruments
between, among
or by:
(1) the Borrower,
and, or for
the benefit
of, (2)
the Holder and
any
affiliate of
the Holder, including,
without limitation,
promissory
notes; provided,
however,
the term
“Other Agreements”
shall not
include
the related
or companion
documents
to this
Note. Each
of the loan transactions
will be cross-defaulted
with each
other loan
transaction
and with
all other
existing
and future
debt of
Borrower
to the Holder.

 

Upon
the occurrence
and
during the
continuation
of any
Event of
Default
specified
in Section
3.1 (solely
with respect
to failure
to pay
the principal
hereof or
interest
thereon when
due at the
Maturity
Date),
the Note shall
become immediately
due and
payable
and the
Borrower
shall pay
to the Holder,
in full
satisfaction
of its obligations
hereunder,
an amount
equal
to the Default
Sum (as
defined
herein). 
UPON
THE OCCURRENCE
AND DURING
THE CONTINUATION
 OF ANY 
EVENT  OF DEFAULT
 SPECIFIED
 IN  SECTION
 3.2,  THE NOTE SHALL
BECOME
IMMEDIATELY
DUE AND PAYABLE
AND THE BORROWER
SHALL PAY
TO THE
HOLDER, IN
FULL SATISFACTION
OF ITS
OBLIGATIONS
HEREUNDER,
AN AMOUNT
EQUAL TO: (Y)
THE DEFAULT
SUM (AS
DEFINED HEREIN);
MULTIPLIED
BY (Z)
TWO (2).
Upon the
occurrence
and during
the continuation
of any
Event of
Default
specified
in Sections
3.1 (solely
with respect
to failure
to pay the
principal
hereof or interest
thereon
when due
on this Note
upon a Trading
Market
Prepayment
Event pursuant
to Section
1.7 or
upon acceleration),
3.3, 3.4, 3.6,
3.8, 3.9, 3.11,
3.12, 3.13,
3.14, and/or 3.15
exercisable
through the delivery
of written
notice to the Borrower
by such
Holders (the
“Default
Notice”),
and upon
the occurrence
of an
Event of
Default
specified
the remaining
sections of
Articles
III (other
than failure
to pay the
principal
hereof
or interest
thereon at
the Maturity
Date specified
in Section
3,1 hereof),
the Note shall
become immediately
due and payable
and the
Borrower
shall pay
to the Holder,
in full
satisfaction
of its obligations
hereunder,
an amount
equal
to the greater
of (i)
150% times
the sum of
(w) the
then outstanding
principal
amount of
this Note plus (x)
accrued
and unpaid
interest on
the unpaid principal
amount of
this Note to the
date of
payment
(the “Mandatory
Prepayment
Date”)
plus (y)
Default Interest,
if any,
on the amounts
referred
to in clauses
(w) and/or
(x)
plus (z)
any amounts
owed to
the Holder pursuant
to Sections
1.3 and
1.4(g)
hereof
(the then
outstanding principal
amount of
this Note to the
date of
payment
plus the amounts
referred
to in clauses
(x),
(y) and
(z)
shall collectively
be known as
the “Default
Sum”)
or (ii)
the “parity
value”
of the Default
Sum to
be prepaid,
where parity
value
means (a)
the highest
number of
shares
of Common
Stock
issuable upon
conversion of
or otherwise
pursuant
to such
Default
Sum in
accordance
with Article
I, treating
the Trading
Day immediately
preceding
the Mandatory
Prepayment
Date as
the “Conversion
Date”
for purposes
of determining
the lowest applicable
Conversion
Price,
unless the
Default
Event arises
as a
result of
a breach
in respect
of a specific
Conversion
Date in
which
case such
Conversion
Date shall
be the Conversion
Date),
multiplied by
(b) the
highest
Closing Price
for the
Common Stock
during the period
beginning
on the date of first
occurrence
of the Event of Default
and ending
one day
prior to
the Mandatory
Prepayment
Date (the
“Default
Amount”) and
all other
amounts payable
hereunder
shall immediately
become
due and payable,
all without demand,
presentment
or notice, all of which
hereby
 are
expressly
 waived,
together
with all costs, including,
without limitation,
legal
fees
and expenses,
of collection,
and
the Holder
shall be entitled
to exercise
all other rights
and remedies
available
at law or in
equity.

    	15

    	 

    

 

If
the Borrower
fails to
pay the
Default
Amount within five
(5) business
days
of written
notice that
such amount
is due and
payable,
then
the Holder
shall
have the
right
at any
time, so long as
the Borrower
remains
in default
(and so
long and to
the extent
that there
are sufficient
authorized
shares),
to require
the Borrower,
upon written
notice,
to immediately
issue, in
lieu of the
Default
Amount, the number
of shares
of Common
Stock
of the Borrower
equal
to the Default Amount divided
by the Conversion
Price
then in effect.

 

ARTICLE
IV. MISCELLANEOUS

 

4.1
Failure
or Indulgence
Not Waiver.
 No failure
or delay
on the part
of the Holder
in the
exercise
of any power,
right
or privilege
hereunder
shall
operate
as a waiver
thereof, nor shall
any
single or partial
exercise
of any such
power, right
or privilege preclude
other or further
exercise
thereof or of any
other right,
power or privileges.
All rights and
remedies
existing
hereunder
are cumulative
to, and not exclusive
of, any
rights
or remedies
otherwise available.

 

4.2
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 Borrower,
to:

 

IDS
SOLAR
TECHNOLOGIES,
INC.

533 Birch
Street

Lake
Elsinore, CA 92530

Attn: BRUCE
R. KNOBLICH,
Chief
Executive
Officer
facsimile:

 

With
a copy
by fax
only to (which
copy
shall not constitute
notice): [enter
name of
law firm]
--- Attn: [attorney
name]

[enter
address line 1] [enter
city, state,
zip] facsimile:
[enter
fax number]

    	16

    	 

    

If
to the Holder:

 

ASHER
ENTERPRISES,
INC.

1 Linden
Pl., Suite
207

Great
Neck, NY.
11021

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

 

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

 

4.3
Amendments. 
This Note
and any
provision
hereof
may only
be amended
by an
instrument
in writing
signed
by the Borrower
and the
Holder. 
The term
“Note”
and all
reference
thereto,
as used
throughout
this instrument,
shall mean
this instrument
(and the other
Notes issued
pursuant
to the Purchase
Agreement)
as originally
executed,
or if later
amended
or supplemented,
then as so
amended
or supplemented.

 

4.4
Assignability.
This  Note 
shall  be 
binding  upon 
the  Borrower
 and 
its successors
and assigns,
and shall
inure to be the benefit
of the Holder and
its successors
and assigns.
 Each
transferee
of this Note must
be an
“accredited
investor” (as
defined
in Rule 501(a)
of the 1933
Act).
 Notwithstanding
anything
in this Note
to the
contrary,
this Note may be pledged
as collateral
in connection with a bona fide
margin
account
or other lending arrangement.

 

4.5 Cost
of Collection.If
 default is made
in the  payment
of this Note, 
the

Borrower
shall pay
the Holder
hereof
costs of collection,
including reasonable
attorneys’
fees.

 

4.6 Governing Law.  This Note shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought
by either party against the
other concerning the
transactions contemplated by
this Note shall be brought only
in the state courts of
New York or
in the federal courts located in the
state and county of
Nassau.
The parties to this
Note hereby irrevocably
waive any
objection to
jurisdiction and
venue of any action
instituted hereunder and
shall not assert any defense
based on lack of jurisdiction or
venue or based upon forum non conveniens.
The Borrower and Holder
waive trial by
jury. The prevailing
party
shall be entitled
to recover from
the other party
its reasonable attorney's fees and costs.
In the event
that any provision
of this Note or any other agreement delivered in connection
herewith is invalid or
unenforceable under any applicable
statute or rule of
law, then such provision shall be
deemed inoperative
to the extent that it may conflict
therewith and shall
be deemed
modified to conform
with such statute or rule of
law. Any such provision which may
prove invalid or unenforceable
under any law
shall not affect the
validity or enforceability  of any
other provision
of any agreement.
Each party  hereby
irrevocably waives personal service of
process and consents to process being served in any
suit, action or proceeding
in connection with this Agreement
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.

    	17

    	 

    

 

4.7
Certain
Amounts.  Whenever
pursuant
to this Note
the Borrower
is required
to pay an
amount in
excess
of the outstanding
principal
amount (or
the portion
thereof required
to be paid
at that
time)
plus accrued
and unpaid
interest plus
Default Interest
on such interest,
the Borrower
and the Holder
agree that
the actual
damages
to the Holder
from the receipt
of cash payment
on this Note
may be difficult
to determine
and the amount
to be so paid
by the Borrower
represents
stipulated damages
and not a penalty
and is intended
to compensate
the Holder in part
for loss of the opportunity
to convert
this Note and
to earn
a return
from
the sale of shares
of Common Stock
acquired
upon conversion
of this Note at a price
in excess
of the price paid
for such
shares
pursuant to
this Note. The Borrower
and the Holder
hereby agree
that such amount
of stipulated
damages
is not plainly disproportionate
to the possible loss to the Holder from
the receipt
of a cash payment
without the opportunity to convert
this Note into shares of Common
Stock.

 

4.8
Purchase
Agreement.
 By
its acceptance
of this Note,
each
party
agrees
to be bound by
the applicable
terms of
the Purchase
Agreement.

 

4.9
Notice of
Corporate
Events.  Except
as otherwise
provided
below, the
Holder of
this Note shall
have
no rights
as a
Holder of
Common Stock
unless and
only to the
extent
that it converts
this Note into
Common Stock.
The Borrower
shall provide
the Holder
with prior notification
of any
meeting
of the Borrower’s
shareholders
(and copies
of proxy
materials
and other
information
sent
to shareholders).
In the event
of any
taking
by the Borrower
of a record
of its shareholders
for the
purpose of
determining
shareholders
who are
entitled
to receive
payment
of any
dividend or
other distribution,
any right
to subscribe
for,
purchase
or otherwise
acquire
(including
by way
of merger,
consolidation,
reclassification
or recapitalization)
any share
of any
class
or any
other
securities
or property,
or to receive
any other
right,
or for
the purpose
of determining
shareholders
who are
entitled
to vote
in connection
with any
proposed
sale,
lease
or conveyance
of all
or substantially
all of
the assets
of the Borrower
or any
proposed
liquidation, dissolution or winding up of the Borrower,
the Borrower
shall mail a notice
to the Holder, at least
twenty (20)
days
prior to
the record
date specified
therein
(or thirty
(30) days
prior to
the consummation
of the transaction
or event,
whichever
is earlier),
of the
date on
which any
such record
is to be taken
for the purpose of
such dividend,
distribution, right
or other event,
and a brief
statement
regarding
the amount and
character
of such
dividend, distribution,
right
or other
event
to the extent
known at
such time.
 The Borrower
shall make
a public announcement
of any
event
requiring
notification
to the Holder
hereunder
substantially
simultaneously
with the notification
to the Holder
in accordance
with the terms of
this Section 4.9.

 

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

    	18

    	 

    

 

 

 

IN
WITNESS
WHEREOF,
Borrower
has
caused
this Note
to be signed
in its
name by
its duly authorized
officer
this March 20, 2013.

 

IDS
SOLAR TECHNOLOGIES,
INC.

 

By:
/s/ BRUCE R.
KNOBLICH

BRUCE
R. KNOBLICH
Chief Executive
Officer

    	19

    	 

    

EXHIBIT
A

 

NOTICE
OF CONVERSION

 

The undersigned
hereby elects to convert
$ ___________ principal amount
of the Note (defined
below) into that number of shares of Common Stock
to be issued
pursuant to the conversion of the
Note (“Common Stock”) as set forth below, of IDS SOLAR
TECHNOLOGIES, INC.,
a Nevada corporation (the “Borrower”) according
to the conditions
of the convertible note of the Borrower
dated as
of March 20, 2013 (the “Note”), as of
the date written
below.  No fee will be charged
to the Holder for any conversion, except for
transfer taxes,
if any.

 

Box
Checked
as to applicable
instructions:

 

[
]  The Borrower
shall electronically
transmit
the Common
Stock
issuable pursuant
to this Notice
of Conversion
to the account
of the undersigned
or its nominee
with DTC through
its Deposit Withdrawal
Agent
Commission system
(“DWAC
Transfer”).

 

Name
of DTC Prime
Broker:
Account Number:

 

[
 ]  The 
undersigned
 hereby
 requests
 that
 the  Borrower
 issue  a 
certificate
 or certificates
for the
number of shares
of Common
Stock set
forth
below (which
numbers are
based
on the Holder’s
calculation
attached
hereto)
in the name(s)
specified
immediately
below or,
if additional
space is
necessary,
on an
attachment
hereto:

 

ASHER
ENTERPRISES,
INC.

1 Linden
Pl., Suite
207

Great
Neck, NY.
11021

Attention:
Certificate
Delivery

(516)
498-9890

 

Date
of Conversion:

Applicable Conversion Price:$
Number of Shares
of Common Stock
to be Issued Pursuant
to Conversion of the Notes:
Amount of Principal Balance
Due remaining
Under the Note
after this conversion:

 

ASHER
ENTERPRISES,
INC.

 

By:

Name:
Curt Kramer
Title:  President
Date:

1 Linden
Pl., Suite
207

Great
Neck, NY.
11021

    	20SECURITIES
PURCHASE
AGREEMENT

 

This  SECURITIES  PURCHASE  AGREEMENT  (the “Agreement”),  dated  as  of
March  20,  2013,  by  and  between  IDS  SOLAR  TECHNOLOGIES,  INC.,  a  Nevada corporation,
with headquarters
located at 533 Birch
Street, Lake
Elsinore, CA 92530 (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
are
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
$32,500.00 (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
Note 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 or about March
26, 2013, 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
 inSection
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.

    	2

    	 

    

 

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.

 

f.
 Transfer
or Re-sale.
 The Buyer
understands
that (i)
the sale
or re-
sale 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 Buyer,
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 Buyer,
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.

 

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):

 

    	3

    	 

    

“NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTEDBYTHISCERTIFICATENORTHE SECURITIESINTOWHICH THESESECURITIES
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.
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.
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, at the
Deadline, it
will be considered
an Event of
Default
pursuant
to Section 3.2 of
the Note.

 

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:

    	4

    	 

    

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)  90,000,000 shares of Common Stock, $0.001 par value per
share, of which 2,583,333 shares are
issued and outstanding; and (ii) 10,000,000 shares of Preferred Stock, $0.001 par
value per share, of
which no shares are
issued and outstanding; 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) exercisable for, or convertible
into or exchangeable for
shares of Common Stock and
2,300,0000 shares are reserved for
issuance upon conversion
of the Note. All of such
outstanding shares of capital
stock are,
or upon issuance will be, duly authorized,
validly issued, fully
paid and non-assessable.
No shares of capital stock of the
Company are subject to preemptive rights or any other similar rights of the
shareholders of the Company
or any liens or encumbrances
imposed through
the actions
or failure to act of the Company.
As of the 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,

    	5

    	 

    

(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.

 

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,

    	6

    	 

    

By-laws
or other
organizational
documents
and neither
the Company
nor any
of its Subsidiaries
is in default
(and no
event
has occurred
which with
notice or lapse of time
or both could
put the Company
or any of its
Subsidiaries
in default) under,
and neither
the Company
nor any of its Subsidiaries
has taken
any
action
or failed
to take
any
action that
would give
to others
any rights
of termination,
amendment,
acceleration
or cancellation
of, any
agreement,
indenture or instrument
to which
the Company
or any
of its Subsidiaries
is a party
or by
which any
property
or assets
of the Company
or any
of its Subsidiaries
is bound or affected,
except
for possible defaults
as would
not, individually
or in the aggregate,
have a Material
Adverse Effect.
The businesses
of the Company
and its
Subsidiaries,
if any,
are
not being
conducted,
and shall
not be conducted
so long as
the 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-the-
Counter 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”).
Upon written request
the Company
will deliver
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 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

    	7

    	 

    

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 November
30, 2012, 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
November
30, 2012,
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.

    	8

    	 

    

 

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).

    	9

    	 

    

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 the
Buyer
is not acting
as a
financial
advisor or
fiduciary
of the Company
(or in
any
similar capacity)
with respect
to this Agreement
and the transactions
contemplated
hereby
and any
statement
made by
the Buyer
or any of its respective
representatives
or agents
in connection
with this Agreement
and the transactions
contemplated
hereby is
not advice
or a recommendation
and is
merely incidental
to the 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
November 
30,  2012,  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.

 

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.

    	10

    	 

    

 

(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.
 Upon written
request
the Company
will provide to the
Buyer
true and
correct
copies
of all policies
relating
to directors’
and officers’
liability coverage,
errors
and omissions coverage,
and commercial
general
liability coverage.

    	11

    	 

    

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,
it will be considered
an Event of
default under
Section 3.4 of
the Note.

 

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.

    	12

    	 

    

 

 

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
for general
working capital
purposes.

 

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
(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.

 

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. The Company’s obligation with respect to
this transaction is to reimburse Buyer’ expenses
shall be $2,500.

    	13

    	 

    

 

f.
 Financial
Information.
 Upon written
request
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.[INTENTIONALLY
DELETED]

 

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 the 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
the 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
the 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.

    	14

    	 

    

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

 

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 its affiliates
has an
open short position in the
common stock of the
Company
and the Buyer
agree
that it shall
not, and that it
will cause
its affiliates
not to, engage
in any
short
sales
of or hedging
transactions
with respect
to the common stock of
the Company.

 

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

    	15

    	 

    

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 the
Buyer
provides
the Company,
at the cost
of the Buyer,
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
the 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 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 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 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 authority
over the
matters
contemplated
hereby
which
prohibits the
consummation
of any
of the transactions
contemplated
by this Agreement.

    	16

    	 

    

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
the 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.

 

h.The Buyer
shall
have received
an officer’s
certificate
described
in Section 3(c)
above,
dated
as of the
Closing Date.

    	17

    	 

    

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.
 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.

 

 

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 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.

    	18

    	 

    

 

 

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:

 

IDS
SOLAR
TECHNOLOGIES,
INC.

533 Birch
Street

Lake
Elsinore, CA 92530

Attn: BRUCE
R. KNOBLICH,
Chief
Executive
Officer
facsimile: [enter
fax number]

 

With
a copy
by fax
only to
(which copy
shall not constitute
notice): [enter
name of
law firm]

 

Attn: [attorney
name] [enter
address line 1] [enter
city, state,
zip]

facsimile:
[enter
fax number]

 

If
to the Buyer:

 

ASHER
ENTERPRISES,
INC.

1
Linden Pl.,
Suite 207

Great
Neck, NY.
11021

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

 

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.

    	19

    	 

    

 

 

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 the 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),
the Buyer
may assign
its rights
hereunder
to any
person
that purchases
Securities
in a private
transaction
from the 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
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 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 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 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
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.

    	20

    	 

    

 

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

 

 

 

IDS
SOLAR TECHNOLOGIES,
INC.

 

By:
/s/ BRUCE R.
KNOBLICH

BRUCE
R. KNOBLICH
Chief Executive
Officer

 

ASHER
ENTERPRISES,
INC.

 

 

 

By:
/s/ Curt Kramer

Name:
Curt Kramer

Title:
President

 

1 Linden
Pl., Suite
207

Great
Neck, NY.
11021

 

 

 

AGGREGATE
SUBSCRIPTION
AMOUNT:

 

Aggregate
Principal
Amount of Note:$32,500.00

 

Aggregate
Purchase
Price:$32,500.00

 

 

 

 

3245(1)
3-120-13

bruce.knoblich@idssolartech.com

patrick.gaynes@gmail.com

    	21

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