Document:

Exhibit 10.3

 

SETTLEMENT AGREEMENT

 

THIS SETTLEMENT
AGREEMENT (this “Settlement Agreement”) is made and entered into as of February 12, 2013 by and between
Precision Optics Corporation, Inc., a Massachusetts corporation (the “Company”), on the one hand, and Arnold
Schumsky, an individual (the “Investor”), on the other hand. The Company and the Investor may be referred to
hereinafter individually as a “Party” and collectively, as the “Parties.”

 

RECITALS

 

WHEREAS, on
February 1, 2007, the Company entered into a purchase agreement with the Investor and other parties thereto (the “2007
Purchase Agreement”), and contemporaneously with the execution of the 2007 Purchase Agreement, the Parties executed a
registration rights agreement (the “2007 Registration Rights Agreement”);

 

WHEREAS, on
June 25, 2008, the Company entered into a purchase agreement with the Investor and other parties thereto (the “2008 Purchase
Agreement”), and contemporaneously with the execution of the 2008 Purchase Agreement, the Parties executed
a registration rights agreement (the “2008 Registration Rights Agreement”);

 

WHEREAS, pursuant
to the terms of the 2007 Registration Rights Agreement and the 2008 Registration Rights Agreement (the “Prior Registration
Rights Agreements”), the Company agreed to use commercially reasonable efforts to maintain the effectiveness of a registration
statement or registration statements to cover the resale of securities sold in the 2007 Purchase Agreement and the 2008 Purchase
Agreement;

 

WHEREAS, the
Parties acknowledge that the Investor may have a potential basis for claims of damages calculated pursuant to the terms of the
respective Prior Registration Rights Agreements;

 

WHEREAS, the
Investor has agreed that, he will accept an aggregate of (i) 10,000 shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), and warrants in the form attached hereto as Exhibit
A (the “Warrants”) to purchase an aggregate of 10,000 shares of Common Stock (the “Warrant Shares”
and, together with the Shares, and the Warrants, the “Securities”) in payment in full of the amounts due under
the Prior Registration Rights Agreements (the “Settlement Consideration”);

 

NOW THEREFORE,
for good and valuable consideration, for the purpose of settling potential claims without litigation, and without admission of
any fault or liability on the part of any Party whatsoever, the Parties hereby agree as follows:

 

Section 1.       Definitions.

 

In addition to those terms defined above
and elsewhere in this Settlement Agreement, for the purposes of this Settlement Agreement, the following terms shall have the meanings
set forth below:

 

“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction
of business.

 

“Person”
means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.

    	1

    	 

    

 

“Securities
Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated
thereunder.

 

“Transaction
Documents” means this Agreement and the Warrants.

 

Section 2.       Issuance of Shares and
Warrants in Settlement. Within three (3) Business Days of the execution and delivery of this Settlement Agreement, the Company
shall issue the Shares and Warrants to the Investor as payment in full of the Settlement Consideration owed to such Investor.

 

Section 3.       Reliance on Independent
Legal Advice. Each Party represents and warrants to the other Party that:

 

		(a)	It has received advice from his or its own respective, independent legal counsel prior to its execution
of this Settlement Agreement;

 

		(b)	The legal nature and effect of this Settlement Agreement has been explained to it by its respective
counsel;

 

		(c)	It fully understands the terms and provisions of this Settlement Agreement and the nature and effect
thereof;

 

		(d)	It is relying solely on the advice of its own legal counsel in executing this Settlement Agreement;
and

 

		(e)	It has carefully read this Settlement Agreement, knows the contents thereof, and is executing the
same freely and voluntarily.

 

Section 4.       Representations and Warranties
of the Company. The Company hereby represents and warrants to the Investor that:

 

		(a)	Due Organization. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. The Company has the corporate power and authority to execute,
deliver and perform this Settlement Agreement to which it is a party and to issue and deliver the Securities.

 

		(b)	Authorization, Validity and Enforceability. The
Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of this Settlement Agreement, (ii) the authorization of
the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance and delivery of
the Securities. When delivered in accordance with the terms hereof, this Settlement Agreement will constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’
rights generally and to general equitable principles.

 

		(c)	Issuance of the Securities. The Shares and the Warrants to purchase shares of the Company’s
Common Stock, when issued pursuant to the Settlement Agreement, have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive or similar rights, and have been issued in compliance with applicable securities laws,
rules and regulations. The Warrant Shares have been duly and validly authorized and reserved for issuance, and, when issued upon
the exercise of the Warrants in accordance with the terms of the Warrants and as described in the Transaction Documents, will be
validly issued, fully paid and nonassessable, and free of any preemptive or similar rights.

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		(d)	No Consents. The execution, delivery and performance by the Company of this Settlement Agreement
and the issuance of the Securities requires no consent of, action by or in respect of, or filing with, any governmental body, agency,
official or other third party, other than filings that have been made pursuant to applicable securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.

 

		(e)	No Conflict. The execution, delivery and performance
of this Settlement Agreement by the Company and the issuance of the Securities will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Articles of Organization,
as amended, or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been filed
on EDGAR), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any subsidiary of the Company or any of their respective assets or properties, or (b) any
agreement or instrument to which the Company or any subsidiary of is a party or by which the Company or a subsidiary is bound or
to which any of their respective assets or properties is subject.

 

		(f)	No General Solicitation. Neither the Company nor any Person acting on its behalf has conducted
any general solicitation or general advertising (as those terms are used in the provisions of Regulation D, promulgated by the
Securities and Exchange Commission (the “Commission”) under the Securities Act) in connection with the issuance
of the Securities.

 

		(g)	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 of any Company security or solicited any offers to buy any security, under circumstances
that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated
hereby or would require registration of the Securities under the Securities Act.

 

		(h)	The issuance of the Securities to the Investor as contemplated hereby is exempt from the registration
requirements of the Securities Act.

 

Section 5.       Representations and Warranties
of the Investor. The Investor represents and warrants to the Company that:

 

		(a)	Purchase for Own Account. Such Investor is acquiring the Securities for such Investor’s
own account for investment purposes only and not with a present view towards the public sale or distribution thereof except for
sales duly registered under the Securities Act. Such Investor is not a registered broker/dealer, nor is an affiliate of a registered
broker/dealer and such Investor does not have any agreement or understanding, directly or indirectly, with any person regarding
the sale or distribution of the Securities or any of the Company’s Common Stock, except this Settlement Agreement. Such Investor
understands that it must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant
to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available.

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		(b)	Accredited Investor Status. Such Investor is an “accredited investor" as that
term is defined in Rule 501(a) of Regulation D, promulgated by the Commission under the Securities Act, and such Investor is capable
of evaluating the merits and risks of its investment in the Securities and has the ability and capacity to protect its interests.

 

		(c)	Information Availability. Such Investor acknowledges that the Company has made available
to Investor all documents and information that Investor has requested relating to an investment in the Securities, and Investor
has had an opportunity to discuss this investment with representatives of the Company and ask questions of them.

 

		(d)	No General Solicitation. Such Investor confirms that he did not learn of the issuance of
the Securities as a result of any general solicitation or general advertising.

 

		(e)	Reliance on Exemptions. Such Investor understands that the Securities are being issued to
such Investor 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 such Investor’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability
of such exemptions and the eligibility of such Investor to acquire the Securities.

 

		(f)	Governmental Review. Such Investor 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.

 

		(g)	Transfer or Resale. Such Investor understands that (i) the sale or resale of the Securities
has not been and is not being registered under the Securities Act or any state securities laws, and the Securities may not be transferred
unless (A) the Investor shall have delivered to the Company an opinion of Company counsel (which opinion 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; or (B) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) (“Rule 144”).

 

		(h)	Authority to Enter into Settlement Agreement. Such Investor has all requisite legal and
other power and authority to execute and deliver this Settlement Agreement and to carry out and perform his obligations under the
terms of this Settlement Agreement. This Settlement Agreement constitutes a valid and legally binding obligation of such Investor
enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to general equity principles.

 

		(i)	Residency. Such Investor is a resident of the state set forth under the name of Investor
on his signature page to this Settlement Agreement.

 

		(j)	Restricted Securities. Such Investor understands that

 

		a.	the Securities are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in
certain limited circumstances.

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		b.	the Securities have not been registered under the Securities Act or any state securities laws and
are being offered in reliance upon specific exemptions from the registration requirements of the Securities Act and state securities
laws, and the Company is relying upon the truth and accuracy of, and Investor’s compliance with, the representations, warranties,
covenants, agreements, acknowledgments and understandings of Investor contained in this Settlement Agreement in order to determine
the availability of such exemptions and the eligibility of Investor to acquire the Securities;

 

		c.	the Securities must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration;

 

		d.	the Securities will bear a legend substantially in the form set forth in Section 5(k) herein; and

 

		e.	the Company will make a notation on its transfer books to such effect.

 

		(k)	Legend. Such Investor understands that until such time as the Securities issued pursuant
to this Settlement Agreement may have been registered under the Securities Act or otherwise may be sold by the Investor under Rule
144, certificates for the Securities may bear a restrictive legend in substantially the following form:

 

		a.	“The securities represented hereby have not been registered with the Securities and Exchange
Commission or the securities commission of any state in reliance upon an exemption from registration under the Securities Act of
1933, as amended, and, accordingly, may not be transferred unless (i) such securities have been registered for sale pursuant to
the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received
an opinion of Company counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under
the Securities Act of 1933 as amended.”

 

		b.	If required by the authorities of any state in connection with the issuance of sale of the Securities,
the legend required by such state authority.

 

		(l)	No Registration Rights. Such Investor further understands that there are no registration
rights associated with the Securities being acquired pursuant to this Settlement Agreement.

 

Section 6.       Fees and Expenses.
Each Party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Settlement Agreement.

 

Section 7.       Entire Agreement.
This Settlement Agreement contains the entire understanding and agreement between the Parties hereto with respect to the matters
referred to herein and supersedes any and all prior and contemporaneous commitments, undertakings and agreements, whether written
or oral. The Parties further acknowledge and agree that parol evidence shall not be required to interpret the intent of the Parties.
No other representations, covenants, undertakings, or other prior or contemporary agreements, whether oral or written, respecting
such matters, which are not specifically incorporated herein, shall be deemed in any way to exist or bind any of the Parties. The
Parties acknowledge that each party has not executed this Settlement Agreement in reliance on any other promise, representation,
or warranty.

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Section 8.       Notices. Any notice
given by any Party under this Settlement Agreement shall in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by facsimile, then
such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three (3) Business Days after such
notice is deposited in first class mail, postage prepaid, (iv) if given by an internationally recognized overnight air courier,
then such notice shall be deemed given one (1) Business Day after delivery to such carrier, and (v) if given by electronic mail,
upon receipt.

 

Section 9.       Severability. In case
any provision of this Settlement Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Settlement Agreement shall not in any way be affected or impaired thereby.

 

Section 10.      Waiver, Amendment, and
Modification of Settlement Agreement. The Parties agree that no waiver, amendment, or modification of any of the terms and/or
conditions of this Settlement Agreement shall be effective unless in writing and signed by all Parties affected by the waiver,
amendment, or modification. No waiver of any term, condition or default of any term of this Settlement Agreement shall be construed
as a waiver of any other term, condition or default.

 

Section 11.      Counterparts; Facsimile
and Electronic Signatures. This Settlement Agreement may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Counterpart
signatures to this Settlement Agreement delivered by facsimile or other electronic transmission shall be acceptable and binding.

 

Section 12.      Headings.
The section and paragraph headings contained in this Settlement Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Settlement Agreement.

 

Section 13.       Governing Law. This
Settlement Agreement and its terms shall be governed by and construed under Massachusetts law.

 

Section 14.      No Admissions By Parties.
Nothing contained in this Settlement Agreement is intended to, or shall be deemed or construed to, be an admission by any Party
hereto, for any liability whatsoever, to the other Party, except as may be otherwise expressly provided for in this Settlement
Agreement.

 

Section 15.      Joint Participation in
Drafting. Each Party to this Settlement Agreement has participated in the negotiation and drafting of this Settlement Agreement.
As such, the language used herein shall be deemed to be the language chosen by the Parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any Party to this Settlement Agreement.

 

[Signature page to follow]

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IN WITNESS WHEREOF,
each of the undersigned has duly executed this Settlement Agreement as of the date first written above.

 

PRECISION OPTICS CORPORATION, INC.

 

22 East Broadway

Gardner, Massachusetts 01440-3338

Fax:   (978) 630-1487

 

 

By: /s/ Joseph N. Forkey

 

Name:  Joseph N. Forkey

Title:  Chief Executive Officer

 

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

 

Amy Trombly, Esq.

Trombly Business Law, P.C.

1320 Centre Street, Suite 202

Newton, MA 02459

Fax: (617) 243-0066

 

 

ARNOLD SCHUMSKY

 

 

/s/ Arnold Schumsky

Arnold Schumsky, an individual

[Address]

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EXHIBIT A

 

Form of Warrant to Purchase Shares of
Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	8Exhibit 4.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT
(this “Agreement”) made as of the last date set forth on the signature page hereof between Clean Wind Energy Tower,
Inc. (the “Company”), and the undersigned (the “Subscriber”).

W I T N E S S E T H:

 

WHEREAS, the Company
is offering a maximum of 500 Units ($500,000) (the “Offering”) on a best efforts basis, at a price of $1,000 per Unit.
Each Unit consisting of a $1,000 convertible debenture of the Company, convertible into common stock, $.0001 par value per share
(the “Common Stock”), at $0.__ per share, in the form attached hereto (the “Debentures”). The Common Stock,
Debentures, and the “Units” are hereinafter occasionally referred to as the Securities;

 

WHEREAS, the Company
intends to offer the Units directly and, may, in its sole discretion, offer a portion of the units through placement agents; and

 

WHEREAS, the Subscriber
desires to purchase that number of Units set forth on the signature page hereof on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration
of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

 

I.                  
SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER

 

1.1             
The Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company such number of Units, and the
Company agrees to sell to the Subscriber as is set forth on the signature page hereof, at a per Unit price equal to $1,000 per
Unit. The purchase price is payable by personal or business check or money order made payable to “Clean Wind Energy Tower,
Inc.” contemporaneously with the execution and delivery of this Agreement by the Subscriber. Subscribers may also pay the
subscription amount by, wire transfer of immediately available funds to:

 

	Name:	CLEAN WIND ENERGY TOWER, INC.
	Bank:	SunTrust Bank
	Account:	1000145330774
	ABA #:	055002707
	Address;	Annapolis, Maryland

 

The Subscriber recognizes that the purchase
of the Units involves a high degree of risk including that set forth in the Confidential Information Memorandum.

 

1.2             
The Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501
of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”),
as indicated by the Subscriber’s responses to the questions contained in Article VII hereof, and that the Subscriber is able
to bear the economic risk of an investment in the Units.

 

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1.3             
The Subscriber hereby acknowledges and represents that (a) the Subscriber has knowledge and experience in business and financial
matters, prior investment experience, including investment in securities that are thinly traded on the OTCBB or the Subscriber
has employed the services of a “purchaser representative” (as defined in Rule 501 of Regulation D), attorney and/or
accountant to read all of the documents furnished or made available by the Company both to the Subscriber and to all other prospective
investors in the Units to evaluate the merits and risks of such an investment on the Subscriber’s behalf; (b) the Subscriber
recognizes the highly speculative nature of this investment; and (c) the Subscriber is able to bear the economic risk that the
Subscriber hereby assumes.

 

1.4             
The Subscriber hereby acknowledges receipt and careful review of this Agreement, the 34 Act Reports (as defined herein),
including all exhibits thereto and the Risk Factors included in our Form 10-K Annual Report filed with the Securities and Exchange,
and any documents which may have been made available upon request as reflected therein (collectively referred to as the “Offering
Materials”) and hereby represents that the Subscriber has been furnished by the Company during the course of the Offering
with all information regarding the Company, the terms and conditions of the Offering and any additional information that the Subscriber
has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company and the terms and conditions of the Offering. Notwithstanding
the foregoing, the Subscriber hereby confirms that it has not received from the Company nor is it in possession of any material
nonpublic information relating to the Company and its operations.  

 

1.5             
(a)          In making the decision to invest in the Units the Subscriber has relied solely upon the information provided by the
Company in the Offering Materials. To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate
professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Units
hereunder. The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course
of Subscriber’s consideration of an investment in the Units other than the Offering Materials.

 

(b)          The Subscriber
represents that (i) the Subscriber was contacted regarding the sale of the Units by the Company (or an authorized agent or representative
thereof) with whom the Subscriber had a prior substantial pre-existing relationship and (ii) no Units were offered or sold to
it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (A)
receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media
or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry
investor conference whose attendees were invited by any general solicitation or general advertising.

 

1.6             
The Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience
or the business or financial experience of the Subscriber’s professional advisors (who are unaffiliated with and not compensated
by the Company or any affiliate or selling agent of the Company, directly or indirectly), has the capacity to protect the Subscriber’s
own interests in connection with the transaction contemplated hereby.

 

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1.7             
The Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange
Commission (the “SEC”) nor any state regulatory authority since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Securities Act pursuant to Regulation D promulgated thereunder. The Subscriber understands that
the Securities have not been registered under the Securities Act or under any state securities or “blue sky” laws and
agrees not to sell, pledge, assign or otherwise transfer or dispose of the Securities unless they are registered under the Securities
Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available.

 

1.8             
The Subscriber understands that the Securities comprising the Units have not been registered under the Securities Act by
reason of a claimed exemption under the provisions of the Securities Act that depends, in part, upon the Subscriber’s investment
intention. In this connection, the Subscriber hereby represents that the Subscriber is purchasing the Securities for the Subscriber’s
own account for investment and not with a view toward the resale or distribution to others. The Subscriber, if an entity, further
represents that it was not formed for the purpose of purchasing the Securities.

 

1.9             
The Subscriber understands that there is a limited public market for the Common Stock issuable upon conversion of the Debentures.
The Subscriber understands that even if more significant public market develops for such Securities, Rule 144 (“Rule 144”)
promulgated under the Securities Act requires for non-affiliates, among other conditions, a six month holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements
under the Securities Act. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register
any of the Securities under the Securities Act or any state securities or “blue sky” laws other than as set forth in
Article V.

 

1.10         
The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Securities that
such Securities have not been registered under the Securities Act or any state securities or “blue sky” laws and setting
forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such
Securities. The legend to be placed on each certificate shall be in form substantially similar to the following:

 

“THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE
SECURITIES OR “BLUE SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

1.11         
The Subscriber understands that the Company will review this Agreement and is hereby given authority by the Subscriber to
call Subscriber’s bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further
agreed that the Company, at its sole discretion, reserves the unrestricted right, without further documentation or agreement on
the part of the Subscriber, to reject or limit any subscription, to accept subscriptions for fractional Units and to close the
Offering to the Subscriber at any time and that the Company will issue stop transfer instructions to its transfer agent with respect
to such Securities.

 

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1.12         
The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof
is the Subscriber’s principal residence if Subscriber is an individual or its principal business address if it is a corporation
or other entity.

 

1.13         
The Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute
and deliver this Agreement and to purchase the Units. This Agreement constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms.

 

1.14         
If the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement
account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to invest in the Company and the person signing
this Agreement on behalf of such entity has been duly authorized by such entity to do so.

1.15         
The Subscriber acknowledges that if he or she is a Registered Representative of an FINRA member firm, he or she must give
such firm the notice required by the FINRA’s Rules of Fair Practice, receipt of which must be acknowledged by such firm in
Section 7.3 below.

 

1.16         
The Subscriber acknowledges that at such time, if ever, as the Securities are registered, sales of the Securities will be
subject to state securities laws.

 

1.17         
The Subscriber represents that the Subscriber has read and fully understands the risks associated with the Company and the
Units.

 

1.18         
(a)          The Subscriber agrees not to issue any public statement with respect to the Subscriber’s investment or proposed
investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior
written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

 

(b)          The Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required
by law.

 

1.19         
The Subscriber agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents
and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs
and expenses incurred by them as a result of (a) any sale or distribution of the Securities by the Subscriber in violation of the
Securities Act or any applicable state securities or “blue sky” laws; or (b) any false representation or warranty or
any breach or failure by the Subscriber to comply with any covenant made by the Subscriber in this Agreement (including the Confidential
Investor Questionnaire contained in Article VII herein) or any other document furnished by the Subscriber to any of the foregoing
in connection with this transaction.

 

1.20         
The Subscriber represents that neither the Subscriber or any affiliates of the Subscriber has an open short position in
the common stock of the Company and the Subscriber agrees that, so long as any of the Securities remain outstanding the Subscriber
will not enter into or effect any “short sales” (as such term is defined in Rule 3b-3 of the 1934 Act) of the Common
Stock, or shares of common stock issuable upon conversion of the Debentures, or hedging transaction which establishes a net short
position with respect to the Common Stock or shares of common stock issuable upon conversion of the Debentures.

 

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II.               
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

 

The Company hereby represents
and warrants to the Subscriber that:

 

2.1             
Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and has full corporate power and authority to conduct its business.

 

2.2             
Capitalization and Voting Rights. The authorized capital stock and outstanding derivative securities of the Company
is as set forth in the 34 Act Reports. All issued and outstanding shares of the Company are validly issued, fully paid and non-assessable.
Except as set forth in the Offering Materials and the 34 Act reports, and as otherwise required by law, there are no restrictions
upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Company’s Articles of Incorporation
(the “Articles of Incorporation”), By-Laws or other governing documents or any agreement or other instruments to which
the Company is a party or by which the Company is bound.

 

2.3             
Authorization; Enforceability. The Company has all corporate right, power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders
necessary for the (i) authorization execution, delivery and performance of this Agreement by the Company; and (ii) authorization,
sale, issuance and delivery of the Securities contemplated hereby and the performance of the Company’s obligations hereunder
has been taken. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable
remedies, and to limitations of public policy. The Common Stock, when issued and fully paid for in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-assessable. The issuance and sale of the Common Stock contemplated hereby
will not give rise to any preemptive rights or rights of first refusal on behalf of any person which have not been waived in connection
with this offering.

 

2.4             
No Conflict; Governmental Consents.

 

(a)               
The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby
will not result in the violation of any material law, statute, rule, regulation, order, writ, injunction, judgment or decree of
any court or governmental authority to or by which the Company is bound, or of any provision of the Articles of Incorporation or
By-Laws of the Company, and will not conflict with, or result in a material breach or violation of, any of the terms or provisions
of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the
Company.

 

    	5

    	 

    
 

(b)              
No consent, approval, authorization or other order of any governmental authority is required to be obtained by the Company
in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the
Units, except such filings as may be required to be made with the SEC, FINRA, NASDAQ and with any state or foreign blue sky or
securities regulatory authority.

 

2.5             
Licenses. Except as otherwise set forth in the 34 Act Reports, the Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business or ownership of properties and is in all material
respects in compliance therewith.

 

2.6             
Litigation. Except as otherwise set forth in the 34 Act Reports, the Company knows of no pending or threatened legal
or governmental proceedings against the Company which could materially adversely affect the business, property, financial condition
or operations of the Company or which materially and adversely questions the validity of this Agreement or any agreements related
to the transactions contemplated hereby or the right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby. The Company is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which could materially adversely affect the business, property,
financial condition or operations of the Company. There is no action, suit, proceeding or investigation by the Company currently
pending in any court or before any arbitrator or that the Company intends to initiate.

 

2.7             
Disclosure. The information set forth in the Offering Materials as of the date hereof contains no untrue statement
of a material fact nor omits to state a material fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.

 

2.8             
Investment Company. The Company is not an “investment company” within the meaning of such term under
the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

 

2.9             
Placement Agent. The Company, in its sole option, may engage, a placement agent to act as agent of the Company in
connection with the transactions contemplated by this Agreement.

 

2.10         
  Intellectual Property.

 

(i)              
To the best of its knowledge, the Company owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its
business as now conducted and as presently proposed to be conducted, without any known infringement of the rights of others. Except
as disclosed in the 34 Act Reports, there are no material outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any material options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase
of “off the shelf” or standard products. The Company has not received any written communications alleging that the
Company has violated or, by conducting its business as presently proposed to be conducted, would violate any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity.

 

    	6

    	 

    
 

(ii)              
Except as disclosed in the 34 Act Reports, the Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree
or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with
the Company’s business as presently conducted.

 

(iii)              
Neither
the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company,
nor the conduct of the Company’s business as presently conducted, will, to the best of the Company’s knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated.

 

(iv)              
To the best of the Company’s knowledge, no employee of the Company, nor any consultant with whom the Company
has contracted, is in material violation of any term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature
of the business conducted by the Company; and to the best of the Company’s knowledge the continued employment by the Company
of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result
in any such material violation. The Company has not received any written notice alleging that any such material violation has occurred.
Except as described in the 34 Act Reports, no employee of the Company has been granted the right to continued employment by the
Company or to any compensation following termination of employment with the Company except for any of the same which would not
have a material adverse effect on the business of the Company.

 

2.11         
Title to Properties and Assets; Liens, Etc. The Company has good and marketable title to its properties and assets,
including the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title
to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent; (b) liens and encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the operations of the Company; and (c) those that have otherwise arisen
in the ordinary course of business. The Company is in compliance with all material terms of each lease to which it is a party or
is otherwise bound.

 

2.12         
Obligations to Related Parties. Except as described in the 34 Act Reports, there are no obligations of the Company
to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary or other compensation for
services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved
by the Board of Directors of the Company). Except as may be disclosed in the 34 Act Reports, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

 

    	7

    	 

    
 

2.13         
34 Act Reports. The Company has provided the Subscriber with its Annual Report on Form 10-K for the year ended December
31, 2011, its Form 10-Q for each of the quarters ended March 31, 2012 and subsequent Form 8-Ks (the “34 Act Reports”).
No statement of fact made by the Company in its 34 Act Reports contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements contained therein not misleading in light of the circumstances under which such
statements were made.

 

III.            TERMS OF SUBSCRIPTION

 

3.1             
Debentures purchased by the Subscriber pursuant to this Agreement will be prepared for delivery to the Subscriber within
15 business days following the Closing at which such purchase takes place. The Subscriber hereby authorizes and directs the Company
to deliver the Debentures purchased by the Subscriber pursuant to this Agreement directly to the Subscriber’s residential
or business address indicated on the signature page hereto.

 

IV.            
CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS

 

4.1             
The Subscriber’s obligation to purchase the Units at the Closing at which such purchase is to be consummated is subject
to the fulfillment on or prior to such Closing of the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:

 

(a)               
Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on
or prior to the date of such Closing shall have been performed or complied with in all material respects.

 

(b)              
No Legal Order Pending. There shall not then be in effect any legal or other order enjoining or restraining the transactions
contemplated by this Agreement.

 

(c)               
No Law Prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting
or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Securities
(except as otherwise provided in this Agreement).

 

V.               INTENTIONALLY LEFT BLANK

 

 

 VI.            
 MISCELLANEOUS

 

6.1             
Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, or delivered by hand against written receipt therefore, addressed as follows:

 

if to the
Company, to it at:

Clean Wind Energy Tower,
Inc.

1997 Annapolis Exchange Parkway, Suite 300

Annapolis, Maryland 21401

Attn: Ronald Pickett, CEO

 

if to the Subscriber, to the Subscriber’s
address indicated on the signature page of this Agreement.

 

    	8

    	 

    
 

Notices shall be deemed to have been given
or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered
when received.

 

6.2             
Except as otherwise provided herein, this Agreement shall not be changed, modified or amended except by a writing signed
by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by
a writing signed by the party to be charged.

 

6.3             
This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as
to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature
among them.

 

6.4             
Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Units as herein provided, subject, however, to the right hereby reserved by the
Company to enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

 

6.5             
NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE
THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF MARYLAND
WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE
SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURT OF COMMON PLEAS IN THE STATE OF MARYLAND
AND FOR THE COUNTY OF BALTIMORE OR THE FEDERAL COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES
HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

 

6.6             
In order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement
succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds
against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their
reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor.

 

6.7             
The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall
not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement
shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part,
such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable
to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision
unless so expressed herein.

 

    	9

    	 

    
 

6.8             
It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.

 

6.9             
The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

 

6.10         
This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.

 

6.11         
Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement.

 

    	10

    	 

    
 

VII.         
CONFIDENTIAL INVESTOR QUESTIONNAIRE

 

7.1             
The Subscriber represents and warrants that he, she or it comes within one category marked below, and that for any category
marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the Subscriber comes within that
category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any
additional information which the Company deems necessary in order to verify the answers set forth below.

 

	Category A  ____	The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.
	 	 
	 	Explanation. In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.
	 	 
	Category B ____	The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.
	 	 
	Category C  ____	The undersigned is a director or executive officer of the Company which is issuing and selling the Securities.
	 	 
	Category D  ____	The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company (“SBIC”); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with investment decisions made solely by persons that are accredited investors. (describe entity)
	 	 
	 	 
	 	 
	Category E ____ 	The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. (describe entity) 
	 	 
	 	 
	 	 
	Category F ____	The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Common Stock and with total assets in excess of $5,000,000. (describe entity)
	 	 
	 	 

 

    	11

    	 

    
 

	 	 
	Category G ____ 	The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.
	 	 
	Category H ____ 	The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories. If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement. (describe entity)
	 	 
	 	 
	 	 
		The undersigned agrees that the undersigned will notify the Company at any time on or prior to the Closing Date in the event that the representations and warranties in this Agreement shall cease to be true, accurate and complete.

  

7.2             
MANNER IN WHICH TITLE IS TO BE HELD. (circle one)

 

(a)Individual
Ownership

(b)Community
Property

(c)Joint
Tenant with Right of Survivorship (both parties must sign)

(d)Partnership*

(e)Tenants
in Common

(f)Company*

(g)Trust*

(h)Other*

 

*If Securities are being
subscribed for by an entity, the attached Certificate of Signatory must also be completed.

 

    	12

    	 

    
 

 

FINRA AFFILIATION.

 

Are you affiliated or associated with an
FINRA member firm (please check one):

 

Yes _________No __________

 

If Yes, please describe:

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

 

*If Subscriber is a Registered Representative
with an FINRA member firm, have the following acknowledgment signed by the appropriate party:

 

The undersigned FINRA member firm acknowledges
receipt of the notice required by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

 

_________________________________

Name of FINRA Member Firm

 

By: ______________________________

Authorized Officer

 

Date: ____________________________

 

7.3             
The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in
the Confidential Investor Questionnaire contained in this Article VII and such answers have been provided under the assumption
that the Company will rely on them.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

    	13

    	 

    
 

NUMBER OF UNITS ____ X $1,000 =
_________(the “Purchase Price”)

  

	 	 	 
	Signature	 	Signature (if purchasing jointly)
	 	 	 
	 	 	 
	Name Typed or Printed	 	Name Typed or Printed
	 	 	 
	 	 	 
	Title (if Subscriber is an Entity)	 	Title (if Subscriber is an Entity)
	 	 	 
	 	 	 
	Entity Name (if applicable)	 	Entity Name (if applicable
	 	 	 
	 	 	 
	 	 	 
	Address	 	Address
	 	 	 
	 	 	 
	City, State and Zip Code	 	City, State and Zip Code
	 	 	 
	 	 	 
	Telephone-Business	 	Telephone-Business
	 	 	 
	 	 	 
	Telephone-Residence	 	Telephone-Residence
	 	 	 
	 	 	 
	Facsimile-Business	 	Facsimile-Business
	 	 	 
	 	 	 
	Facsimile-Residence	 	Facsimile-Residence
	 	 	 
	 	 	 
	Tax ID
# or Social Security #	 	Tax ID
# or Social Security #
	 	 	 
	Name in which securities should be issued:	 	 

  

Dated:____________ , 2012

 

This Securities Purchase
Agreement is agreed to and accepted as of _________ __, 2012.

 

	 	CLEAN WIND ENERGY TOWER,
INC.
	 	 
	 	By: 	
	 	 	Name: Ronald Pickett
Title: Chief Executive Officer

 

    	14

    	 

    
 

CERTIFICATE OF SIGNATORY

 

(To be completed if Units are

being subscribed for by an entity)

 

 

I, ____________________________, am the
____________________________ of __________________________________________ (the “Entity”).

 

I certify that I am empowered and duly
authorized by the Entity to execute and carry out the terms of the Securities Purchase Agreement and to purchase and hold the Securities,
and certify further that the Securities Purchase Agreement has been duly and validly executed on behalf of the Entity and constitutes
a legal and binding obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand
this ________ day of _________________, 2012

 

 

_______________________________________

(Signature)

 

 

 

 

 

 

 

 

 

 

 

 

15

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