ICP Solar Technologies, Inc.: Exhibit 10.1 - Prepared by TNT Filings
   Inc.




  




Exhibit 10.1

SECURITIES PURCHASE AGREEMENT 

SECURITIES PURCHASE AGREEMENT (this "Agreement,"
“Purchase Agreement,” or “Securities Purchase Agreement”), dated
as of June 13, 2008, by and among ICP Solar Technologies, Inc., a Nevada
corporation, ("Company"), and each buyer listed on the Schedule of Buyers
attached hereto that has executed this Agreement (each, including its successors
and assigns, a “Buyer” and collectively the “Buyers”). Buyers may
include individuals or entities identified by the Company, subject to the
approval of the Lead Investor (as defined below), such approval which shall not
be unreasonably withheld. 

WHEREAS:

                 
A.       The Company and the Buyers are executing
and delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the
“Commission” or the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act"); 

                 B.      
Buyers desire to purchase and the Company desires to issue and sell in a private
offering, upon the terms and conditions set forth in this Agreement, (i) senior
secured convertible debentures (the “Debentures”) of the Company and (ii)
Warrants (as defined in Section 1(a) in the form described in this Agreement, to
purchase shares of common stock, par value $0.00001 per share, of the Company
(“Common Stock”). The aggregate Purchase Price of this offering of the
Debentures and Warrants to all of the Buyers shall be a minimum amount of Two
Million U.S. Dollars (U.S. $2,000,000)(the “Minimum Offering Amount”) and
a maximum amount of Three Million U.S. Dollars (U.S. $3,000,000)(the “Maximum
Offering Amount”)(collectively, the “Offering”);

                 C.      
The terms of the Debentures, including the terms on which the Debentures may be
converted into Common Stock, are set forth in Debenture, in the form attached
hereto as Exhibit A; 

                 
D.       Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as Exhibit B
(the "Registration Rights Agreement"), pursuant to which the Company has
agreed to provide certain registration rights under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities
laws.

                 E.      
The Debentures will rank senior to all outstanding and future indebtedness of
the Company, guaranteed by each of the Company's Active Subsidiaries pursuant to
the subsidiary guarantee attached hereto as Exhibit C-1 (the
"Subsidiary Guarantee"), and secured by a first priority,
perfected security interest in certain of the assets of the Company and the
stock and certain of the assets of each of the Company's subsidiaries, as
evidenced by the security agreement attached hereto as Exhibit C-2 (the
"Security Agreement") and the Intellectual Property Security Agreement
attached hereto as Exhibit C-3 (the "Intellectual Property Security
Agreement"). 

1 




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

           
1.       PURCHASE AND
SALE OF DEBENTURES AND WARRANTS. 

                       
(a)       Certain
Definitions. The Company and the each Buyer (severally and not
jointly) mutually agree to the terms of each of the Transaction Documents. For
purposes hereof: 

           
“1934 Act” shall mean the Securities Exchange Act of 1934, as
amended. 

           "Approved
Stock Plan" means any employee benefit plan which has been duly adopted by
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, pursuant to
which the Company's securities may be issued to any employee, consultant,
officer or director for services provided to the Company; provided, however,
that no more than an aggregate of 2,000,000 shares of Common Stock Equivalents
may be issued in connections with all Approved Stock Plans. 

           “Active
Subsidiaries” shall mean all of the Company’s Subsidiaries, other than the
Inactive Subsidiaries. 

           "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. 

           “Closing
Bring-Down Certificate” shall have the meaning set forth in Section 3(c)
below. 

           
“Closing Certificate” shall have the meaning set forth in
Section 1(b)(iv)(B) below. 

           
“Closing Legal Opinion” shall have the meaning set forth in Section
1(b)(iv)(C) below. 

           
“Collateral” shall have the meaning ascribed to it in the Security
Agreement. 

           
  “Common Stock” shall have the meaning set forth in
  Recital “B” above.

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

           
“Conversion Shares” shall have the meaning set forth in Section
2(a) below. 

           
“Convertible Securities” shall have the meaning ascribed to it in the
Debenture. 

           
“Designated Insiders” shall have the meaning set forth in Section 4(n)
below. 

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“Effective Date” shall have the meaning set forth in the
Registration Rights Agreement. 

           "Eligible
Market" means the over the counter Bulletin Board (“OTC-BB”), the New York
Stock Exchange, Inc., the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the American Stock Exchange. 

           “Escrow
Agreement” shall mean an Escrow Agreement, in form of Exhibit D
hereto, by and between the Escrow Agent, the Company and the Buyers. 

           
“Escrow Account” shall have the meaning ascribed to it in the
Escrow Agreement. 

           
“Escrow Agent” shall have the meaning ascribed to it in the
Escrow Agreement. 

           
“Exempt Issuance” means the issuance of (a) any Common Stock issued or
issuable in connection with any Approved Stock Plan at a price equal to or
greater than 75% of the initial Conversion Price (as defined in the Debenture),
up to a maximum of five percent (5%) of the outstanding Common Stock, in the
aggregate (provided that no such options shall be issued to consultants or
advisors unless such options are not registered, either at the time of issuance
or at any time thereafter, and are subject to volume limitations under Rule
144), except that, as to any anti-dilution provisions or Subsequent Issuance
Adjustments in the Debentures or Warrants, this item (a) shall not constitute an
Exempt Issuance until after the 90th day following the Effective
Date, (b) securities upon the exercise, exchange of, conversion or redemption
of, or payment of interest or liquidated or similar damages on, any Securities
issued hereunder, provided that the principal amount thereof if not increased
and the terms thereof are not otherwise amended or modified after the Closing
Date (c) other securities exercisable, exchangeable for, convertible into, or
redeemable for shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to directly or indirectly effectively increase the number of such
securities or to decrease the exercise, exchange or conversion price of such
securities (and including any issuances of securities pursuant to the
anti-dilution provisions of any such securities), and (d) any Common Stock
issued or issuable in connection with any acquisition by the Company, whether
through an acquisition of stock or a merger of any business, assets or
technologies the primary purpose of which is not to raise equity capital.
Notwithstanding anything to the contrary herein, no issuance of Variable Equity
Securities shall be an Exempt Issuance. 

           
“Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services including
(without limitation) “Capital Leases” in accordance with generally
accepted accounting principles (other than trade payables entered into in the
ordinary course of business, consistent with prior practice), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such 

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indebtedness (even though the rights and remedies of the seller
or bank under such agreement in the event of default are limited to repossession
or sale of such property), (F) all monetary obligations under any leasing or
similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; and (y) "Contingent Obligation" means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto. 

           “Inactive
Subsidiaries” shall mean ICP Asia Ltd., a Hong Kong corporation, and ICP
Global Tech PTY Ltd., an Australian corporation. 

           
“Intellectual Property” shall have the meaning set forth in
Section 3(j) below. 

           “Intellectual
Property Security Agreement” shall have the meaning ascribed to it in
Recital “E” above. 

           
“Intellectual Property Rights” shall have the meaning set forth
in Section 3(j) below. 

           
“Legend Removal Date” shall have the meaning set forth in
Section 6(a). 

           
“Lien” shall have the meaning set forth in Section 5 below.


           “Limited
Standstill Agreements” shall have the meaning set forth in Section 4(n)
below. 

           "Market
Price," for any security as of any date, shall have the meaning ascribed to
it in the applicable security. 

           
“Material Adverse Effect” shall have the meaning set forth in
Section 3(a) below. 

           
“Officer’s Certificate” shall have the meaning set forth in
Section 8(c) below. 

           “Ongoing
Share Reservation Requirement” shall have the meaning set forth in Section
4(e) below. 

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“Options” shall have the meaning ascribed to it in the
Debenture. 

           
“Patents” shall have the meaning set forth in Section 3(j)
below.

           
“Payment Shares” shall mean (i) Default Shares (as defined in
the Debenture), (ii) Interest Payment Shares (as defined in the Debenture),
(iii) Monthly Redemption Shares and (iv) shares issuable upon conversion of
Liquidated Damages (as defined in the Debenture) and other Required Cash
Payments (as each is defined in the Debenture) into Common Stock of the Company.
The Payment Shares shall be treated as Common Stock issuable upon conversion of
the Debentures for all purposes hereof and thereof and shall be subject to all
of the limitations and afforded all of the rights of the other shares of Common
Stock issuable hereunder or thereunder, including without limitation, the right
to be included in the Registration Statement (as defined in the Registration
Rights Agreement) filed pursuant to the Registration Rights Agreement.

           “Permitted
Liens” shall mean: (i) Liens on equipment purchased in the ordinary course
of business, consistent with prior practice (ii) Liens subordinate to those
created by this Agreement as long as the lienholder enters into a subordination
agreement acceptable to the Buyers in their reasonable discretion, (iii)
landlords', carriers', warehousemen's, mechanics' and other similar Liens
arising by operation of law in the ordinary course of the Company's business;
provided, however, that all such Liens shall be discharged or bonded off within
sixty (60) days from the filing thereof; and (iv) Liens for taxes (excluding any
Lien imposed pursuant to any provision of ERISA) not yet due or which are being
contested in good faith by appropriate proceedings and the Company maintains
appropriate reserves in respect thereto provided that in Buyer's judgment such
Lien does not adversely affect Buyer's rights or the priority of Buyer's Lien in
the Collateral. 

           “Person”
shall mean an individual, a limited liability company, a partnership, a joint
venture, an exempted company, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof. 

           
“Principal Market” shall have the meaning set forth in Section
4(g) below. 

           
“Purchase Price” shall have the meaning set forth in Section
1(b)(ii) below. 

           “Registration
Rights Agreement” shall have the meaning set forth in Recital “D” above.


           “Registration
Statement” shall have the meaning set forth in the Registration Rights
Agreement. 

           
“Required Holders” shall have the meaning ascribed to it in the
Debenture. 

           
“Security Agreement” shall have the meaning ascribed to it in
Recital “E” above. 

           
“SEC Documents” shall have the meaning set forth in Section
3(g) below. 

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“Securities” shall have the meaning set forth in Section 2(a)
below. 

           “Security
Documents” shall mean the Security Agreement, the form of Subsidiary
Guarantee, the Intellectual Property Security Agreement and any other documents
and filing required thereunder in order to grant the Buyers a first priority
security interest in the assets of the Company and the Subsidiaries as provided
in the Security Agreement, including but not limited to all UCC-1 filing
receipts and documentation evidencing filing of liens with the United States
Patent and Trademark Office.

           
“Series A Warrants” shall have the meaning set forth in Section
1(c) below. 

           
“Series A Warrant Amount” shall have the meaning set forth in
Section 1(c) below. 

           
“Series B Warrants” shall have the meaning set forth in Section
1(d) below. 

           
“Series B Warrant Amount” shall have the meaning set forth in
Section 1(d) below. 

           
“Series C Warrants” shall have the meaning set forth in Section
1(d) below. 

           
“Subscription Amount” shall have the meaning set forth in
Section 10 below. 

           
“Subsidiaries” shall have the meaning set forth in Section 3(a)
below. 

           "Trading
  Day" shall mean any day on which the Common Sock is traded for any period
  on the Principal Market, or on the principal securities exchange or other securities
  market on which the Common Stock is then being traded.

           “Trading
Market” means the Eligible Market on which the Common Stock is listed or
quoted for trading on the date in question. 

           “Transaction
Documents” shall mean this Securities Purchase Agreement, the Debenture, the
Registration Rights Agreement, the Security Documents, the Warrants, and any
other agreements delivered together with this Agreement or in connection
herewith. 

           “Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion
or redemption of the Debentures or as Payment Shares, issued and issuable upon
exercise of the Warrants and issued and issuable in lieu of the cash payment of
interest on the Debentures in accordance with their terms. 

           
“Variable Equity Securities” shall have the meaning set forth
in Section 4(d)(ii) below. 

           “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by 

6 




Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not
then listed or quoted for trading on a Trading Market and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Buyers of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Company. 

           
“Warrants” shall mean all Series A Warrants, Series B Warrants,
the Series C Warrants. 

           
“Warrant Amount” shall mean the Series A Warrant Amount or Series B Warrant
Amount, as applicable. 

           
“Warrant Shares” shall have the meaning set forth in Section
2(a) below. 

                       (b)
  Closing of Purchase of Debentures and Warrants; Escrow.
  Subject to the satisfaction or waiver of the terms and conditions of this
  Agreement, on the Closing Date (as defined below), the Company shall issue and
  sell to each Buyer and each Buyer, severally and not jointly, agrees to purchase
  from the Company a Debenture in the principal amount equal to the Subscription
  Amount (as defined in Section 10), divided by -90, to account for the Original
  Issue Discount (as defined below) and an accompanying number of Series A Warrants,
  Series B Warrants and Series C Warrants (as each is defined below) to purchase
  a number of shares of Common Stock equal to the applicable Warrant Amount (as
  defined below).

                                   
(i) Form of Debenture. The Debenture shall be in the form annexed hereto
as Exhibit A. 

                                   (ii)
Form of Payment. The purchase price for each Debenture and the Warrants
to be purchased by each Buyer at the Closing (the "Purchase Price") shall
be $ 0.90 for each $1.00 of principal amount of Debentures and related Warrants
to be purchased by such Buyer at the Closing, representing a ten percent (10%)
original issue discount (the “Original Issue Discount”), and such amount shall
be the amount set forth opposite such Buyer's name in column (5) of the Schedule
of Buyers annexed hereto. On or before the Closing Date (as defined below), (i)
each Buyer shall pay the Purchase Price for the Debentures and the Warrants to
be issued and sold to it at the Closing (as defined below) by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of a duly executed Debenture
having an aggregate initial principal amount (the “Original Principal
Amount”) equal to the Purchase Price divided by 0.90 (to account for the
Original Issue Discount) and the number of Warrants equal to the applicable
Warrant Amount, and (ii) the Company shall deliver such Debentures and Warrants
duly executed on behalf of the Company, to such Buyer, against delivery of such
Purchase Price. Notwithstanding the receipt by the Escrow Agent of funds
representing a Buyer’s Purchase Price prior to June 13, 2008, the consideration
for each Buyer’s Debenture and Warrants shall be deemed to have been delivered
on June 13, 2008 for purposes of the Rule 144 holding period. 

7 




                                   
(iii) Closing Date. Subject to the satisfaction or waiver of the
terms and conditions of this Agreement, the "Closing" with respect to a Buyer
shall occur when subscriber funds representing the aggregate Purchase Price of
the Debenture being purchased by such Buyer are transmitted by wire transfer of
immediately available funds by each Buyer to the Company, assuming that the
Transaction Documents are signed by both parties prior to or within three (3)
Business Days following such transmission. The date of the Closing shall be
referred to herein as the “Closing Date.” Unless otherwise mutually
agreed by the parties, the last Closing hereunder shall occur not later than
June 16, 2008. The Closing contemplated by this Agreement shall occur on the
applicable Closing Date at the offices of the Company, or at such other location
as may be agreed to by the parties.

                                   
(iv) Closing Deliveries. Closing deliveries required hereunder shall be
made to the Escrow Agent pursuant to Section 1(d) below. On the Closing Date,
the Company will deliver or cause to be delivered to each Buyer (the “Company
Documents”):

                                               (A)
the items required to be delivered to Buyer pursuant to Section 8, duly executed
by the Company where so required, 

                                               
(B) a certificate ("Closing Certificate") signed by its chief executive
officer or chief financial officer (1) representing the truth and accuracy of
all the representations and warranties made by the Company contained in this
Agreement, as of the applicable Closing Date, as if such representations and
warranties were made and given on all such dates, (2) adopting the covenants and
conditions set forth in this Agreement in relation to the applicable Debenture
and Warrants, and (3) certifying that an Event of Default has not occurred, 

                                               (C)
a legal opinion of the Company's counsel, dated as of the Closing Date, in form,
scope and substance reasonably satisfactory to the Buyer and in substantially
the same form as Exhibit F attached hereto in relation to the Company,
the applicable Debenture, the applicable Warrant and the Transaction Documents
("Closing Legal Opinion"),

                                               (D)
a duly executed Debenture with a principal amount equal to such Buyer’s
Subscription Amount divided by 0.90 to account for the Original Issue
Discount, registered in the name of such Buyer, 

                                               (E)
a duly executed Series A Warrant registered in the name of such Buyer to
purchase up to a number of shares of Common Stock equal to the Series A Warrant
Amount (as defined in Section 1(c)), and a duly executed Series B Warrant
registered in the name of such Buyer to purchase up to a number of shares of
Common Stock equal to the Series B Warrant Amount (as defined in Section 1(d),
and a duly executed Series C Warrant registered in the name of such Buyer to
purchase up to a number of shares of Common Stock equal to the Series C Warrant
Amount (as defined in Section 1(e)), 

                                               (F)
Limited Standstill Agreements, duly executed by each of the Designated Insiders
(as defined in Section 4(n)), 

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                                               (G)
The Company shall have delivered to such Buyer a true copy of certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity's jurisdiction of formation issued by the Secretary
of State (or comparable office) of such jurisdiction, as of a date within ten
(10) days of the Closing Date, 

                                               (H)
The Company shall have delivered to such Buyer a true copy of one or more
certificates evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business and in which failure to so
qualify would have a Material Adverse Effect, as of a date within five (5) days
of the Closing Date, and 

                                               (I)
The Company shall have delivered to such Buyer a certified copy of the Articles
of Incorporation as certified by the Secretary of the State of Nevada as of a
date that is five (5) days prior to the Closing Date. 

           
On the Closing Date, each Buyer shall deliver or cause to be delivered to the
Company the following (the “Buyer Documents”): 

                                               (A)
this Securities Purchase Agreement and the Registration Rights Agreement duly
executed by such Buyer, 

                                               (B)
such Buyer’s Subscription Amount by wire transfer to the account as specified in
writing by the Company (subject to offsets for any expenses to which such Buyer
is entitled). 

                       
(c)  Warrants.

                                   
(i) Series A Warrants. Each Buyer’s Debenture shall be
accompanied by a warrant (“Series A Warrant”) to purchase a number of
shares equal to 100% of the Original Principal Amount of the Debenture being
purchased by such Buyer, divided by the Initial Conversion Price (as defined in
the Debenture) (the “Series A Warrant Amount”). The Series A Warrants
shall be in the form of the Warrant annexed hereto as Exhibit E-1, except
that the “Initial Exercise Price,” as defined therein, shall equal fifty cents
($0.50), subject to adjustment therein. The Series A Warrants shall contain
Exercise Price adjustment provisions that are consistent with the adjustment
provisions afforded to the Conversion Price of the Debenture in the Debenture
and shall have a six (6) year term. 

                                   (ii)
Series B Warrants. Each Buyer’s Debenture shall be accompanied by a warrant
(“Series B Warrant”) to purchase a number of shares equal to 100% of the
Original Principal Amount of the Debenture being purchased by such Buyer,
divided by the Initial Conversion Price (as defined in the Debenture) (the
“Series B Warrant Amount”). The Series B Warrants shall be in the form of
the Warrant annexed hereto as Exhibit E-2, except that the “Initial
Exercise Price,” as defined therein, shall equal one dollar ($1.00), subject to
adjustment therein. The Series B Warrants shall contain Exercise Price
adjustment provisions that are 

9 




consistent with the adjustment provisions afforded to the
Conversion Price of the Debenture in the Debenture and shall have a six (6) year
term. 

                                   (iii)
Series C Warrants. Each Buyer’s Debenture shall be accompanied by a warrant
(“Series B Warrant”) to purchase a number of shares equal to 100% of the
Original Principal Amount of the Debenture being purchased by such Buyer,
divided by the Initial Conversion Price (as defined in the Debenture) (the
“Series C Warrant Amount”). The Series C Warrants shall be in the form of
the Warrant annexed hereto as Exhibit E-3, except that the “Initial
Exercise Price,” as defined therein, shall equal one dollar ($1.00), subject to
adjustment therein. The Series C Warrants shall contain Exercise Price
adjustment provisions that are consistent with the adjustment provisions
afforded to the Conversion Price of the Debenture in the Debenture and shall
have a six (6) year term. The Series C Warrants shall not be exercisable until
after all of the Series B Warrants of the Holder have been exercised in full.


                       (d)
Escrow. In order to facilitate the Closing, the Company
and the Buyers have agreed to establish an Escrow Account with Company Counsel,
into which each Buyer participating in the Closing shall deposit its
Subscription Amount, by way of check or wire transfer of immediately available
funds to the Escrow Account specified in the Escrow Agreement. For purposes of
Closing, the Subscription Amount and Investor Documents deposited into the
Escrow Account by the Buyers on account of the Company are deemed to have been
delivered to the Company and the Company Documents deposited into the Escrow
Account by the Company on account of the Buyers are deemed to have been
delivered to the Buyers. All funds and documents delivered into the Escrow
Account will be held and disbursed in accordance with the terms and provisions
of the Escrow Agreement. 

           2.      
BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer
represents and warrants to the Company solely as to such Buyer that: 

                       (a)
Investment Purpose. As of the date hereof, the Buyer is
purchasing the Debenture and the shares of Common Stock issuable upon conversion
of the Debenture or otherwise pursuant to the Debenture and the other
Transaction Documents (including, without limitation, the Payment Shares) (such
shares of Common Stock being collectively referred to herein as the
“Conversion Shares") and the Warrants and the shares of Common Stock
issuable upon exercise thereof (the "Warrant Shares" and, collectively
with the Debenture, Warrants and Conversion Shares, 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 and applicable state securities
laws.

                       (b)
Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the 1933 Act (an "Accredited Investor").

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                       (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 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 afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk. 

                       (e)
Transfer Or Re-Sale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, 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
or resold 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 an opinion of counsel (which opinion shall be in form, substance and
scope reasonably satisfactory to counsel to the Company) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, (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(e) and who is an
Accredited Investor, or (d) the Securities are sold pursuant to Rule 144 or Rule
144; and (ii) any sale of such Securities made in reliance on Rule 144 or Rule
144 may be made only in accordance with the terms of said Rule. 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. 

                       (f)
Organization; Authorization; Enforcement. Buyer is a
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Buyer has all requisite power and
authority to enter into and perform this Agreement and the other Transaction
Documents to which Buyer is a signatory and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the other Transaction Documents
to which Buyer is a signatory have been duly and validly authorized and no
further consent or authorization of Buyer, its manager or members is required.
This Agreement has been duly executed and delivered on behalf of the Buyer, and
this Agreement constitutes, and upon execution and delivery by the Buyer of the
other Transaction Documents to which Buyer is a signatory, such agreements will
constitute, legal, valid and binding agreements of the Buyer enforceable in
accordance with their terms except (i) as limited by general equitable
principles and applicable 

11 




bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.


                       
(g) Residency. The Buyer’s residency is as indicated on
its signature page hereto.

                       (h)
Knowledge And Experience. Buyer has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Securities. 

                       (i)
Short Sales Prior To The Date Hereof. Buyer and its
Affiliates have not from the time that such Buyer first received a term sheet
(written or oral) from the Company or any other person setting forth the
material terms of the transactions contemplated hereunder until the date hereof
entered into or effected, or attempted to induce any third party to enter into
or effect, any short sales of the Common Stock, or any hedging transaction which
establishes a net short position with respect to the Common Stock.

                       
(j) Independent Investment Decision. Such Buyer has
independently evaluated the merits of its decision to purchase the Securities
pursuant to the Transaction Documents, and such Buyer confirms that it has not
relied on the advice of any other Buyer's business and/or legal counsel in
making such decision.

           3.      
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that, except as set forth on the Company’s
disclosure schedules referred to herein and attached hereto or any update
thereto prior to the Closing Date (collectively, the “Disclosure
Schedules”): 

                       (a)
Organization And Qualification. The Company and each of
its Active 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, their principal corporate address, and the jurisdiction in which each
is incorporated. The Company and each of its Active 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
(i) the Securities, (ii) the business, operations, assets, financial condition
or prospects of the Company and its Active Subsidiaries, if any, taken as a
whole, (iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith or (iv) the authority or
the ability of the Company to perform its obligations under this Agreement, the
Registration Rights Agreement, the Debenture or the Warrants. "Subsidiaries"
means any corporation or other organization, whether incorporated or 

12 




unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest. Neither of the Inactive
Subsidiaries currently has any assets. 

                       (b)
Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Security Documents, the Registration Rights Agreement, the
Debenture and the Warrants and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) except as otherwise set forth in Schedule 3(b),
the execution and delivery of this Agreement, the Security Documents, the
Registration Rights Agreement, the Debenture and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Debenture and the Warrants
and the issuance and reservation for issuance of the Conversion Shares issuable
upon conversion of or otherwise pursuant to the Debenture and the Warrant Shares
issuable upon exercise of or otherwise pursuant to the Warrants) 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 stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes, and upon execution and delivery by
the Company of the Security Documents, the Registration Rights Agreement, the
Debenture and the Warrants, each of such agreements and instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

                       (c)
Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth on Schedule 3(c-1). The
authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, of which approximately 34,140,195 shares are outstanding as
of the date hereof and 100,000,000 shares of preferred stock, par value
$0.00001 per share, of which none are outstanding as of the date hereof.
There are no outstanding securities which are convertible into shares of Common
Stock, whether such conversion is currently exercisable or exercisable only upon
some future date or the occurrence of some event in the future, except as
disclosed on Schedule 3(c-1). If any such securities are listed on the
Schedule 3(c-1), the number or amount of each such outstanding
convertible security and the conversion terms are set forth in said Schedule
3(c-1). All of such outstanding shares of capital stock set forth in
Schedule 3(c-1) are, or upon issuance will be, duly authorized, validly
issued, fully paid and nonassessable. 

           No
shares of capital stock of the Company are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in Schedule 3(c-2), 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 exercisable or exchangeable for any
shares of capital stock of the Company or any of its 

13 




Subsidiaries, or arrangements by which the Company or any of
its Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) 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 Debenture, the Warrants, the Conversion Shares, the Payment
Shares, or the Warrant Shares. The Company has furnished to each Buyer true and
correct copies of the Company's and each Subsidiary’s Articles of Incorporation
as in effect on the date hereof ("Articles of Incorporation"), the
Company's Bylaws, 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.
In the event that the date of execution of this Agreement is not the Closing
Date, the Company shall provide each Buyer with a written update of this
representation signed by the Company's President and Chief Executive or Chief
Financial Officer on behalf of the Company as of the Closing Date (“Closing
Bring-Down Certificate”). No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the best knowledge of the
Company, between or among any of the Company’s stockholders. 

                       (d)
Issuance of Shares. Upon issuance upon conversion of
the Debenture and upon exercise of the Warrants in accordance with their
respective terms, and receipt of the exercise price therefor, the Conversion
Shares and Warrant Shares, along with any Payment Shares or any other shares
issued pursuant to the terms of the Transaction Documents, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof, other than restrictions on transfer under the
Transaction Documents, applicable state and federal securities laws, or liens or
encumbrances created by or imposed by a Buyer.

                       (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 or otherwise pursuant to
the Debentures or upon issuance of the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of or otherwise pursuant
to the Debentures, to issue Warrant Shares upon exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement, and to otherwise
issue Payment Shares or other shares of Common Stock to the Buyer is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in its
good faith business judgment, that the issuance of the Securities hereunder and
under the Debentures and the Warrants and the consummation of the transactions
contemplated hereby and thereby are in the best interest of the Company and its
stockholders. 

14 




                       (f)
No Conflicts. Except as otherwise set forth in
Schedule 3(f), the execution, delivery and performance of each of the
Transaction Documents 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 and Warrant
Shares) will not (i) conflict with or result in a violation of any provision of
the Certificate of Incorporation or By-laws, (ii) trigger any resets of
conversion or exercise prices in other outstanding convertible securities,
warrants or options of the Company, (iii) trigger the issuance of securities by
the Company to any third party, (iv) 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 would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, or to the knowledge of the Company, patent, patent license
or instrument to which the Company or any of its Active Subsidiaries is a party,
or (v) 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 Active
Subsidiaries or by which any property or asset of the Company or any of its
Active Subsidiaries is bound or affected (except, in the case of clauses (i),
(iv) and (v) above, 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
Active Subsidiaries is in violation of its Articles of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its Active
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 Active Subsidiaries in
default) under, and neither the Company nor any of its Active 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 Active
Subsidiaries is a party or by which any property or assets of the Company or any
of its Active 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 Active Subsidiaries, if any, are not being
conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, the violation of which would have a Material Adverse Effect. Except as
disclosed in Schedule 3(f) or as specifically contemplated by this
Agreement or as required under the 1933 Act, the 1934 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 Registration Rights Agreement, the
Debentures or the Warrants in accordance with the terms hereof or thereof or to
issue and sell the Debentures and Warrants in accordance with the terms hereof
and to issue the Conversion Shares upon conversion of or otherwise pursuant to
the Debentures and the Warrant Shares upon exercise of or otherwise pursuant to
the Warrants. Except as disclosed in Schedule 3(f), 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 and its Active Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing.


15 




                       (g)
SEC Documents; Financial Statements. Since at least the
beginning of the most recent fiscal quarter that began more than two (2) years
prior to the Closing Date, 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 1934 Act (all of the foregoing
filed prior to the date hereof and since at least the beginning of the most
recent fiscal quarter that began more than two (2) years prior to the Closing
Date, 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"). For purposes of this Agreement, “Timely Filed” shall
mean that the applicable document was filed (i) by its original due date under
the 1934 Act, or, if a request for an extension was timely filed, (ii) by such
extended due date. True and complete copies of the SEC Documents are available
on the SEC’s internet website (www.sec.gov), except for such exhibits and
incorporated documents. Upon the request of a Buyer, the Company will promptly
provide copies of the SEC Documents to such Buyer. 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 to the date hereof). As of their respective dates, the financial
statements of the Company (and the Buyers thereto) 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 (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business, consistent with prior practice, subsequent to the
date of the Company’s most recent 10-QSB or 10-KSB and (ii) obligations under
contracts and commitments incurred in the ordinary course of business,
consistent with prior practice, 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.

                       
(h) Absence of Certain Changes. Except for losses
incurred in the ordinary course of business, consistent with prior practice,
that have been publicly disclosed at least five (5) days prior to the date
hereof or as set forth on Schedule 3(h) hereof, since the date of the
Company’s most recent 10-Q or 10-K, there has been no material adverse change
and no material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results 

16 




of operations or prospects of the Company or any of its
Subsidiaries. For purposes of this Section 3(h), the terms "Material Adverse
Change" and "Material Adverse Development" shall exclude continuing
losses that are consistent with the Company's historical losses. Except as
disclosed in Schedule 3(h), since the date of the Company’s most recent
audited financial statements contained in a Form 10-KSB, neither the Company nor
any of its Subsidiaries has 

                                   
(i) declared or paid any dividends on its Common Stock; 

                                   (ii)
sold any assets, individually or in the aggregate, in excess of $100,000 outside
of the ordinary course of business, consistent with prior practice;

                                   (iii)
except as set forth in Schedule 3(h), had capital expenditures,
individually or in the aggregate, in excess of $100,000; 

                                   (iv)
issued any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto; 

                                   (v)
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent) except current liabilities incurred in the ordinary course of
business, consistent with prior practice, which are comparable in nature and
amount to the current liabilities incurred in the ordinary course of business,
consistent with prior practice, during the comparable portion of its prior
fiscal year, as adjusted to reflect the current nature and volume of the
Company's or such subsidiary's business; 

                                   (vi)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business, consistent with prior practice; 

                                   (vii)
declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock; 

                                   (viii)
sold, assigned or transferred any other tangible assets, or canceled any debts
or claims, in either case in excess of $100,000, except in the ordinary course
of business, consistent with prior practice; 

                                   (ix)
sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights, or disclosed any proprietary confidential information to any person
except to customers in the ordinary course of business, consistent with prior
practice, or to the Purchasers or their representatives; 

                                   (x)
suffered any material losses or waived any rights of material value, whether or
not in the ordinary course of business, or suffered the loss of any material
amount of prospective business; 

17 




                                   (xi)
made any changes in employee compensation except in the ordinary course of
business and consistent with past practices; 

                                   (xii)
made capital expenditures or commitments therefor that aggregate in excess of
$100,000; 

                                   
(xiii) [omitted]; 

                                   
(xiv) made charitable contributions or pledges in excess of $10,000; 

                                   (xv)
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance; 

                                   (xvi)
experienced any material problems with any employee or senior management in
connection with the terms and conditions of their employment; 

                                   (xvii)
effected any two or more events of the foregoing kind which in the aggregate
would be material to the Company or its Subsidiaries; or 

                                   (xviii)
entered into an agreement, written or otherwise, to take any of the foregoing
actions. 

                                   Except
as set forth in Schedule 3(h), neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so.

                       (i)
Absence of Litigation. Except as disclosed in
Schedule 3(i-1), to the best knowledge of the Company or any of its
Subsidiaries, 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 best 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. Schedule 3(i-2) contains a complete list and summary description of
any known pending or threatened proceeding against or affecting the Company or
any of its Subsidiaries, without regard to whether it, if adversely decided,
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, where it, if adversely decided, would have a Material Adverse Effect.


                       (j)
Patents, Copyrights, Etc. All of the Company’s material
patents, patent applications, Patents (as defined below), patent rights,
inventions, know-how, trade secrets, trademarks, trademark applications, service
marks, service names, trade names and copyrights ("Intellectual
Property") are set forth in Schedule 3(j-1) hereof. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all of the Intellectual property and the rights to receive proceeds from patent
licensing agreements, patent infringement litigation or 

18 




other litigation related to such intellectual property
(collectively, the “Intellectual Property Rights”). Any Liens,
encumbrances or licenses that have been granted against the Intellectual
Property are listed in Schedule 3(j-2). Except as set forth in
Schedule 3(J-2), to the best of the Company’s knowledge, none of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. Except as otherwise set forth on Schedule 3(j-2), the Company
owns all right and title to the Intellectual Property free and clear of any
Liens or encumbrances and has not granted any licenses or rights to use any of
the Patents to any third party. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all Intellectual Property
necessary to enable it to conduct its business as now operated, including but
not limited to the intellectual property set forth in Schedule 3(j-1)
hereof (and, except as otherwise set forth in Schedule 3(j-2) hereof, to
the best of the Company's knowledge, as presently contemplated to be operated in
the future), except for such licenses or rights the failure of which to own or
possess would not, individually or in the aggregate, have a Material Adverse
Effect; 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, except as
otherwise set forth in Schedule 3(j-2) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future),
except for actions or claims which, if adversely decided, would not have a
Material Adverse Effect; 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 Rights 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.

                       For
purposes hereof, "Patents" means all domestic and foreign letters patent,
design patents, utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary information,
technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including,
without limitation, all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how
and formulae described in Schedule 3(j-1) hereof), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof, in each case owned by the Company or an of its Subsidiaries.


                       (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 to the knowledge of the Company, has or is reasonably likely 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, or has knowledge of a
breach of any contract or agreement to which the Company or any of its
Subsidiaries is a party, either of which has or is reasonably likely to have a
Material Adverse Effect. 

19 




                       (l)
Tax Status. Except as set forth on Schedule
3(l), the Company and each of its Subsidiaries has timely 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. Except as set forth on
Schedule 3(l), none of the Company's tax returns is presently being
audited by any taxing authority. 

                       (m)
  Transactions With And Obligations To Affiliates. Other
  than the grant of stock options disclosed on Schedule 3(m), 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 customary
  employment contracts for ordinary course 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 best 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.
  Schedule 3(m) sets forth any loans, payables, payments, transactions,
  debt or equity securities, or similar agreements or obligations between the
  Company and any officers, directors, management or affiliates of the Company.


                       (n)
Acknowledgment Regarding Buyer’s Purchase of
Securities. The Company acknowledges and agrees that each Buyer
is acting solely in the capacity of arm's length purchaser, and severally, and
not jointly, with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that each 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 that any
statement made by each 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 such Buyer’s purchase
of the Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to each 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. 

                       (o)
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 of any security or solicited any offers to
buy any security under circumstances that would require 

20 




registration under the 1933 Act of the issuance of the
Securities to any Buyer. The issuance of the Securities to each Buyer will not
be integrated with any other issuance of the Company's securities (past, current
or future) for purposes of any stockholder approval provisions applicable to the
Company or its securities. 

                       (p)
No Brokers. The identity of any brokers, finders or
placement agents (each, a “Finder”) that are receiving compensation in
respect to this Offering, along with the amount of cash, warrants or other
consideration that compose any compensation to each such Finder, are disclosed
in Schedule 3(p) hereto. Other than as set forth on Schedule 3(p),
the Company has taken no action which would give rise to any claim by any person
for brokerage commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby. The Company shall indemnify
and hold harmless each of Buyer, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees. 

                       (q)
Conduct of Business; Regulatory 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"), except where the failure to so
possess any such Company Permits would not have a Material Adverse Effect, and
there is no action pending or, to the best 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. Neither the Company
nor any of its Active Subsidiaries is in violation of any term of or in default
under its respective Certificates or Articles of Incorporation or its Bylaws or
their organizational charter or bylaws, respectively. Since the beginning of the
most recent fiscal quarter that began more than two (2) years prior to the
Closing Date, 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. Neither the Company nor any such Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit. To the best of
the Company’s knowledge, neither the Company nor any of its Subsidiaries is in
violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market, except for possible violations which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
and has no knowledge of any facts or circumstances that would reasonably lead to
delisting or suspension of the Common Stock by its Principal Market in the
foreseeable future.

21 




                       (r)
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(r) 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. 

                       (s)
Foreign Corrupt Practices. Neither the Company, nor any
of its Subsidiaries, nor, to the knowledge of the Company, 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; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee. 

                       (t)
Solvency. The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below) and currently the Company has
no information that would lead it to reasonably conclude that the Company or any
subsidiary would not 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. Except as disclosed in Schedule
3(t), the Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and does not anticipate or know of
any basis upon which its auditors might issue a qualified opinion in respect of
its current fiscal year. For purposes of this Section 3(t), “Insolvent”
means (i) the present fair saleable value of the Company’s assets is less than
the amount required to pay the Company’s total Indebtedness, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) the Company
intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) the Company has unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted. 

                       (u)
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. 

                       (v)
No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
other than those incurred in the ordinary course of the Company's businesses
which have been disclosed in the Company’s public filings and which, 

22 




individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect other than as set forth in Schedule
3(v). 

                       (w)
No Disagreements With Accountants And Lawyers. There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company or any Subsidiary to arise, between the Company or any Subsidiary
and the accountants and lawyers formerly or presently employed by the Company or
any Subsidiary, including but not limited to disputes or conflicts over payment
owed to such accountants and lawyers.

                       
(x) Company Acknowledgment. The Company hereby
acknowledges that each Buyer may elect to hold its Debenture and the Warrants
for various periods of time, as permitted by the terms of the Transaction
Documents and the Company further acknowledges that Buyer has made no
representations or warranties, either written or oral, as to how long the
Securities will be held by such Buyer or regarding Buyer’s trading history or
investment strategies other than as provided in Section 2 of this Agreement.


                       (y)
Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the Buyers or their
agents or counsel with any information that constitutes material, nonpublic
information concerning the Company or its Subsidiaries other than the existence
of the transactions contemplated by this Agreement or the other Transaction
Documents. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company is true and correct in
all material respects and does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information 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, or that would be required to be disclosed by the Company or any
Subsidiary under applicable securities laws on a registration statement on Form
SB-2 or any other appropriate form filed with the SEC relating to an issuance
and sale by the Company of its Common Stock, but which has not been so
disclosed, in each case other than the transactions contemplated by this
Agreement and by the other Transaction Documents. 

                       (z)
Absence of Certain Company Control Person Actions or
Events. To the Company’s knowledge, during the past five (5)
years: 

                                   (i)
No petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, and no receiver, fiscal agent or similar officer was
appointed by a court 

23 




for the business or property of such Company Control Person (as
defined below), or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years before
the time of such filing; 

                                   (ii)
No Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); 

                                   (iii)
No Company Control Person has, to the Company’s knowledge, been the subject of
any order, judgment or decree, that was not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining him from, or otherwise limiting, the following activities: 

(A) acting, as an investment advisor,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker, any
other Person regulated by the Commodity Futures Trading Commission
(“CFTC”) or engaging in or continuing any conduct or practice in
connection with such activity; 

(B) engaging in any type of business
practice; or 

(C) engaging in any activity in
connection with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities laws or federal
commodities laws; 

                                   (iv)
No Company Control Person has been the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than sixty (60)
days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or 

                                   (v)
No Company Control Person was found by a court of competent jurisdiction in a
civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated. 

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


24 




                       (aa)
DTC Status. The Company's transfer agent is a
participant in and the Common Stock is eligible for transfer pursuant to the
Depository Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent is set forth on Schedule 3(aa) hereto. 

                       (bb)
Sarbanes-Oxley; Internal Accounting Controls. Except as
disclosed in Schedule 3(bb), the Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date. 

                       (cc)
Seniority. Except as set forth on Schedule
3(cc), as of the Closing Date, no indebtedness or other equity of the
Company is senior to or pari passu with the Debentures in right of payment,
whether with respect to interest or upon liquidation or dissolution, or
otherwise. 

                       (dd)
Registration Rights. Except as set forth on Schedule
3(dd) hereto, other than each of the Buyers, no Person has any right to
cause the Company to effect the registration under the 1933 Act of any
securities of the Company. 

                       (ee)
Off Balance Sheet Arrangements. There is no
transaction, arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its SEC Documents and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect. 

                       (ff)
  Indebtedness and Other Contracts. Except as disclosed
  in Schedule 3(ff), neither the Company nor any of its Subsidiaries (i)
  has any outstanding indebtedness in excess of $100,000 (as defined below), (ii)
  is a party to any contract, agreement or instrument, the violation of which,
  or default under which, by the other party(ies) to such contract, agreement
  or instrument would result in a Material Adverse Effect, (iii) is in violation
  of any term of or in default under any contract, agreement or instrument relating
  to any indebtedness which could result in Material Adverse Effect, or (iv) is
  a party to any contract, agreement or instrument relating to any Indebtedness,
  the performance of which to the knowledge of the Company, has or is expected
  to have a Material Adverse Effect. Schedule 3(ff) provides a detailed
  description of the material terms of any such outstanding Indebtedness.

                       (gg)
Conduct of Business. Neither the Company nor any of its
Active Subsidiaries is in violation of any term of or in default under its
Articles of Incorporation, Bylaws or their organizational charter or bylaws,
respectively. Except as disclosed in Schedule 3(gg), neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order to its knowledge, any statute, ordinance, rule or regulation applicable to
the Company or its Subsidiaries, and neither the Company nor any of its
Subsidiaries will conduct its business in violation of any of the foregoing,
except for possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market other than violations which could
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by 

25 




the Principal Market in the foreseeable future. Except as
disclosed on Schedule 3(gg) since at least January 1, 2007 , (i) the
Common Stock has been designated for quotation on the Principal Market, (ii)
trading in the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Common Stock from the Principal Market, and the Company has not received any
letters of inquiry from the SEC Division of Enforcement or state securities
regulators in the past 24 months related to any potential or alleged violation
of state or federal securities laws. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit. 

                       
(hh) Obligations to Issue Additional Securities. Except
as set forth in Schedule 3(hh), there are no outstanding debt or equity
securities, warrants or options, or Common Stock Equivalents, and all
contractual agreements of the Company, in each case, that contain any provisions
(“Triggering Provisions”) that could require the adjustment to conversion
or exercise prices of existing securities, or the issuance of additional
securities triggered as a result of the issuance of securities by the Company or
by the passage of time on or after the date of this Securities Purchase
Agreement. 

                       (ii)
Regulation M Compliance. The Company has not, and to
its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the securities of the Company
or (iii) paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of the Company, other than, in the case
of clauses (ii) and (iii), compensation paid to the Company’s placement agent in
connection with the placement of the Securities.

                       (jj)
Revenues; Burn Rate. The Company’s consolidated gross
revenues for the month of February, 2008, the month of March, 2008 and the month
of April 2008, respectively, were in the amounts set forth on Schedule 3(jj)
attached hereto. As will be reflected in the Company’s forthcoming 10-Q to be
filed for the fiscal quarter ended April 30, 2008, the Company represents that
its consolidated revenue (calculated in compliance with GAAP) and total
consolidated cash burn (defined as net earnings before income tax) for the three
(3) month period ended April 30, 2008 were $1,923,311 and $253,912,
respectively.

           
4. COVENANTS. Notwithstanding anything to the contrary
herein, with respect to the covenants in this sections applicable to the
Company: the Company’s obligations to follow such covenants shall continue until
such time as less than 20% of the principal amount of Debenture issued in the
Offering remain outstanding; and, any or all of such covenants may be waived by
the written consent of the Required Holders (as defined in the Debenture).


26 




                       (a)
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 each 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 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 , to the extent any such actions are required to
be taken on or prior to the Closing Date, shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date. 

                       (b)
Reporting Status. The Company's Common Stock is
registered under Section 12(b) or 12(g) of the 1934 Act. So long as any Buyer
beneficially owns any of the Securities, the Company shall timely file all SEC
Documents required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.

                       
(c) Use of Proceeds.

                                   
(i) Upon Closing, the Company shall instruct the Escrow Agent to pay the first
$1,246,945 of the Offering Proceeds (the “RBC Payoff Amount”)
directly to Royal Bank of Canada (“RBC”) to redeem all of the outstanding
principal and accrued interest on the Credit Facility dated December 7, 2006 in
the amount of $1,500,000 revolving demand, executed by the Company in favor of
RBC, provided that the Company shall instruct the Escrow Agent not to release
any funds to RBC until the Escrow Agent has received a duly executed UCC-3 and
lien release, whereby RBC releases any and all liens which it has on any assets
of the Company or its Subsidiaries (the “RBC Lien Release”).

                                   
(ii) After the above payment is made to RBC and the RBC Lien Release is
obtained, the Company shall instruct the Escrow Agent to pay to Burns &
Levinson LLP, out of the Offering Proceeds, all of its legal fees accrued
through Closing, including all past due legal fees billed or accrued and accrued
fees to the date of Closing, which payments shall be in an amount not to exceed
$75,000. This amount is not, however, a cap on fees; additional fees accrued in
excess of the $75,000 shall be paid by the Company in the ordinary course. 

                                   
(iii) To the extent that the outstanding amount not yet paid of the Lead
Investor’s fee is not withheld out of the Purchase Price for its Debenture, the
Company shall instruct the Escrow Agent to pay the outstanding amount of the
Lead Investor’s Fee to the Lead Investor at Closing. 

                                   
(iv) Upon Closing, the Company shall instruct the Escrow Agent to pay an amount
to finders for the Offering in an aggregate amount of eight percent (8%) of the
aggregate Purchase Price of all Debentures purchased in the Offering. 

                                   
(v) Upon Closing, the remainder of the Offering proceeds after payment of items
(i), (ii) and (iv) above (the “Net Amount”) shall become the property of
the Company, but shall remain in the Escrow Account to be distributed to the
Company in accordance with the 

27 




terms thereof (such funds as distributed pursuant to the Escrow
Agreement are referred to as the “Disbursed Proceeds”).

                                   
(vi) Within thirty (30) days of Closing, the Company shall hire one or more
firms (such number to be at the Company’s sole discretion), each of which shall
be reasonably acceptable to the Required Holders, for carrying out investor
relations/public relations services (collectively, “IR Services”), and
shall retain such at least one such firm for so long as any Debentures or
Warrants remain outstanding. The Company shall spend at least $100,000 of the
Disbursed Proceeds as payment to such firm(s) for carrying out investor IR
Services during each of the first two 12 month periods after the Closing
Date.

                                   
(vi) The Company shall use the remainder of the Disbursed Proceeds from the
Offering for working capital and general corporate purposes, provided that the
Company shall not use any of such proceeds: (i) to repay any of its corporate
debt or other Indebtedness, (ii) to redeem any Common Stock or Common Stock
Equivalents, (iii) to settle any outstanding litigation, or (iv) to repay any
debt or obligation to any officer, director or manager of the Company, including
but not limited to the Company’s president, chief executive officer, chief
financial officer and chief operations officer, and any of their affiliates or
family members (collectively, “Insiders”).

                       (d)
Securities Issuance Restrictions; Capital Raising Limitations; Right
of Participation. 

                                   (i)
Lock-Up of Issuance of Securities. Except for Exempt Issuances, or
issuances of securities by the Company to the Buyers as contemplated by the
Transaction Documents, during the period from the date hereof until the date
that is ninety (90) days following the Effective Date (the “Limitation
Period”), neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents (the “Equity Issuance Lock-Up”),
provided, however, the 90 day period set forth in this Section
4(d)(i) shall be extended for the number of Trading Days during such period in
which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) following the Effective Date, the Registration Statement is not effective
or the prospectus included in the Registration Statement may not be used by the
Buyers for the resale of the Underlying Shares. The Equity Issuance Lock-Up
shall not apply in respect of an Exempt Issuance. 

                                   
(ii) Capital Raising Limitations. During the period from the date hereof
until the date that is two (2) years following the Effective Date, so long as
any Debenture or Warrant remains outstanding, notwithstanding whether or not an
issuance of securities is an Exempt Issuance, the Company shall not issue or
sell, or agree to issue or sell Variable Equity Securities (as defined
below)(the “Variable Equity Securities Lock-Up”), without obtaining the
prior written approval of each of the Buyers, with the exception of any such
agreements or transactions that (x) exist as of the date hereof and (y) are not
amended or modified after the date hereof. For purposes hereof, the
following shall be collectively referred to herein as, the “Variable Equity
Securities”: (A) any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional shares
of Common Stock either (1) at any conversion, exercise or exchange rate or other
price that is based upon and/or 

28 




varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or equity security, or
(2) with a fixed conversion, exercise or exchange price that is subject to being
reset at some future date at any time after the initial issuance of such debt or
equity security due to a change in the market price of the Company’s Common
Stock since date of initial issuance, or (B) any amortizing convertible security
which amortizes prior to its maturity date, where the Company is required to or
has the option to (or the investor in such transaction has the option to require
the Company to) make such amortization payments in shares of Common Stock
(whether or not such payments in stock are subject to certain equity
conditions), or (C) any transaction involving a written agreement between the
Company and an investor or underwriter whereby the Company has the right to
“put” its securities to the investor or underwriter over an agreed period of
time and at an agreed price or price formula (each, an “Equity Line”
transaction) or (D) any common stock that is accompanied by a number of warrants
greater than the number of warrants greater than the number of shares of common
stock sold by the Company in such transaction, or (E) any note, debenture or
other debt obligation that is accompanied by shares of Common Stock for which
the additional consideration paid per share of Common Stock is less than 90% of
the Market Price at the time of closing. For purposes of the above, the
“Market Price” at time of closing shall mean the Market Price, as defined
in the Debentures. 

                       It
is expressly agreed and understood that the Variable Equity Securities Lock-Up
shall apply in respect of an Exempt Issuance and that no issuance of
Variable Equity Securities shall be an Exempt Issuance.

                                   
(iii) Additional Debenture; Dilutive Issuances. 

                       
For long as any Debentures remain outstanding, the Company shall not, in any
manner, enter into or affect any Dilutive Issuance (as defined in the
Debentures) if the effect of such Dilutive Issuance is to cause the Company to
be required to issue upon conversion of any Debenture without breaching the
Company's obligations under the rules or regulations of the Principal Market or
any applicable Eligible Market.

                                   
(iv) Buyers’ Right of Participation in Future Financings.

                                               (A)
From the date hereof and during the period that any amount of any Debenture is
outstanding, upon any financing by the Company or any of its subsidiaries (each,
a “Subsequent Financing”) of Common Stock or Common Stock Equivalents (as
defined in Section 1(a)), excluding any securities issued pursuant to the
Offering described in this Agreement, each Buyer shall have the right to
participate (the “Buyer’s Right of Participation”) in up to the Buyer’s
Participation Maximum (as defined below) of the Subsequent Financing, provided
that any securities issued to the Buyer hereunder, and any securities issuable
pursuant to the conversion or exercise of such securities, shall be subject to
the Beneficial Ownership Limitation.

                                               (B)
At least ten (10) days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Buyer a written notice of its intention to effect
a Subsequent Financing (an “Advance Notice of Financing”), which Advance
Notice of 

29 




Financing shall ask such Buyer if it wants to review the
details of such financing (such additional notice, a “Subsequent Financing
Notice”). Upon the request of a Buyer, and only upon a request by such
Buyer, for a Subsequent Financing Notice, the Company shall promptly, but no
later than one (1) Trading Day after such request, deliver a Subsequent
Financing Notice to such Buyer. The Subsequent Financing Notice shall describe
in reasonable detail the proposed terms of such Subsequent Financing, the amount
of proceeds intended to be raised thereunder, the Person with whom such
Subsequent Financing is proposed to be effected, and attached to which shall be
a term sheet or similar document relating thereto and complete, definitive legal
documentation (“Legal Documents”) for the proposed Subsequent
Financing.

                                               (C)
Any Buyer desiring to participate in such Subsequent Financing must provide
written notice (“Participation Notice”) to the Company by not later than
5:30 p.m. (New York City time) on the fifth (5th) Trading Day after such Buyer
has received the Advance Notice of Financing that the Buyer is willing to
participate in the Subsequent Financing, the amount of the Buyer’s
participation, and that the Buyer has such funds ready, willing, and available
for investment on the terms set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Buyer as of such fifth (5th) Trading Day, such
Buyer shall be deemed to have notified the Company that it does not elect to
participate. Buyer shall not be obligated to participate in a Subsequent
Offering after delivering a Participation Notice to the Company until after the
Buyer has reviewed and agreed to the final Legal Documents for such offering.


                                               (D)
If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day
after all of the requesting Buyers have received the Advance Notice of
Financing, notifications by the Buyers of their willingness to participate in
the Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice.

                                               (E)
If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of
the Buyers have received the Advance Notice of Financing, the Company receives
responses to a Subsequent Financing Notice from Buyers seeking to purchase more
than the aggregate amount of the Subsequent Financing, each such Buyer shall
have the right to purchase up to (the “Buyer’s Participation Maximum”)
(a) their Pro Rata Portion (as defined below) of the Subsequent Financing, plus
(b) a pro rata amount (based upon the relative amount of the participating
Buyers’ respective Pro Rata Portions) of the aggregate of the unused Pro Rata
Portions of the other Buyers. For purposes hereof, “Pro Rata Portion”
shall mean the ratio of (x) the Subscription Amount of Securities purchased on
the Closing Date by a Buyer participating under this Section 4(d)(iv) and (y)
the sum of the aggregate Subscription Amounts of Securities purchased on the
Closing Date by all Buyers participating under this Section 4(d)(iv). 

                                               (F)
For purposes of clarity, in the event that there is any amount of a Subsequent
Financing that is not requested to be purchased by a Buyer, then any other Buyer
shall have the right to purchase such remaining amount of the Subsequent
Financing. 

30 




                                               (G)
The Company must provide the Buyers with a second Subsequent Financing Notice,
and the Buyers will again have the right of participation set forth above in
this Section 4(d)(iv), if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice. 

                                               (H)
The Company and the Buyers agree that if any Buyer elects to participate in the
Subsequent Financing, (x) neither the agreement regarding the Subsequent
Financing (the "Subsequent Placement Agreement") with respect to such
Subsequent Financing nor any other transaction documents related thereto
(collectively, the "Subsequent Placement Documents") shall include any
term or provisions whereby any Buyer shall be required to agree to any
restrictions in trading as to any securities of the Company owned by such Buyer
prior to such Subsequent Financing, and (y) the Buyers shall be entitled to the
same registration rights provided to other investors in the Subsequent
Placement. 

                                   (v)
Most Favored Nation (MFN) Securities Exchange Provision. From the date
hereof until the date when such Buyer holds less than 20% in principal amount of
Debentures originally purchased by such Buyer hereunder, if the Company effects
a Subsequent Financing, each Buyer may elect, in its sole discretion, to
exchange (an “MFN Exchange”) all or some of the Debentures then held by
such Buyer for any securities or units issued in a Subsequent Financing on a
$1.00 for $1.00 basis based on the outstanding principal amount of such
Debentures, along with any accrued but unpaid interest, liquidated damages and
other amounts owing thereon, and the effective price at which such securities
were sold in such Subsequent Financing; PROVIDED, HOWEVER, that
this Section 4(d)(v) shall not apply with respect to (a) an Exempt Issuance or
(b) a firm commitment underwritten public offering of Common Stock with a
reputable national underwriter. The Company shall provide each Buyer with notice
of any such Subsequent Financing in the manner set forth in Section 4(d)(iv).
Following such an exchange, the Holder shall retain all of its unconverted
Warrants and shall receive any warrants, options or other ancillary securities
that normally accompany the securities being purchased and sold in the
Subsequent Financing.

                                   (vi)
Injunctive Relief. The remedies provided in this Agreement shall be
cumulative and in addition to all other remedies available under this Agreement
and any of the other Transaction Documents at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the Holder's right to pursue actual and consequential damages
for any failure by the Company to comply with the terms of this Agreement or any
of the Transaction Documents. The Company acknowledges that a breach by it of
its obligations under this Agreement or the other Transaction Documents,
including but not limited to a breach of its obligations under this Subsection
4(d) hereof, will cause irreparable harm to each 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
Agreement or the other Transaction Documents, including but not limited to a
breach of its obligations under this Subsection 4(d) hereof, will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement or the other Transaction Documents, that each Buyer
shall be entitled, in addition to all other available 

31 




remedies in law or in equity, to an injunction or injunctions
to prevent or cure any breaches of the provisions of this Agreement or the other
Transaction Documents, including but not limited to a breach of its obligations
under this Subsection 4(d) hereof, and to enforce specifically the terms and
provisions of this Agreement and the other Transaction Documents, including but
not limited to its obligations under this Subsection 4(d), without the necessity
of showing economic loss and without any bond or other security being required.
Specifically, the Buyer shall be entitled to injunctive relief to cause the
court to rescind any financing or financings or other transactions between the
Company and a third party that are in violation of this Subsection 4(d). 

                       
(e) Authorization And Reservation of Shares.

                                   (i)
Authorization and Reservation Requirements. The Company represents that
it has at least 100,000,000 authorized shares of Common Stock and
covenants that it will initially reserve (the “Initial Share
Reservation”) from its authorized and unissued Common Stock a number of
shares of Common Stock equal to at least 150% of the Original Principal Amount
of the Debentures, divided by the Conversion Price in effect on the date of the
Initial Share Reservation, free from preemptive rights, to provide for the
issuance of Common Stock upon the conversion of the Debentures and shall
initially reserve an additional number of shares equal to 125% of the Warrant
Amount, free from preemptive rights, to provide for the issuance of Common Stock
upon the exercise of the Warrants (the “Initial Share Reservation
Requirement”). The Company further covenants that, beginning on the date
hereof, and continuing throughout the period that any Debentures or Warrants
remain outstanding, the Company shall at all times have authorized, and reserved
(together with the Initial Share Reservation Requirement, collectively referred
to as the “Ongoing Share Reservation Requirement”) for the purpose of
issuance, a sufficient number of shares of Common Stock to provide for the full
conversion or exercise of the outstanding portion of the Debentures and Warrants
and issuance of the Conversion Shares and Warrant Shares in connection therewith
(based on the Conversion Price (as defined in the Debentures) in effect from
time to time and the Exercise Price of the Warrants (as defined in the Warrants)
in effect from time to time). The Company shall not reduce the number of shares
of Common Stock reserved for issuance upon conversion of or otherwise pursuant
to the Debentures and exercise of or otherwise pursuant to the Warrants without
the consent of the Buyers. The Company shall at all times maintain the number of
shares of Common Stock so reserved for issuance at no less than 150% of the
number that is then actually issuable upon full conversion of the Debentures
(based on the Conversion Price (as defined in the Debentures) in effect from
time to time) and 125% of the number that is then actually issuable upon full
exercise of the Warrants (based on the Exercise Price of the Warrants in effect
from time to time)(without regard to any limitations on the number of shares
issuable upon the Conversion of the Debentures or the Exercise of the
Warrants).

                                   (ii)
Stockholder Approval. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below 100% of the number of Conversion
Shares issued and issuable upon conversion of or otherwise pursuant to the
Debentures (based on the Conversion Price (as defined in the Debentures) in
effect from time to time) and Warrant Shares issued or issuable upon exercise of
or otherwise pursuant to the Warrants (based on the Exercise Price of the
Warrants in effect from time to time), together with the Payment Shares and any
other shares of Common Stock issued or issuable pursuant to the 

32 




terms of the Transaction Documents, the Company will promptly
take all corporate action necessary to authorize and reserve a sufficient number
of shares, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the Company's obligations
under this Section 4(e), in the case of an insufficient number of authorized
shares, and using its best efforts to obtain stockholder approval of an increase
in such authorized number of shares. 

                       
(f) Acknowledgment Regarding Purchasers’ Trading
Activity. Notwithstanding anything in this Agreement or elsewhere
herein to the contrary, it is understood and acknowledged by the Company that
(i) none of the Purchasers has been asked to agree by the Company, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term, (ii) past or
future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities,
(iii) any Purchaser, and counter-parties in “derivative” transactions to which
any such Purchaser is a party, directly or indirectly, may presently have a
“short” position in the Common Stock, and (iv) each Purchaser shall not be
deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (a) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Underlying Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted. The Company acknowledges that
such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents. 

                       (g)
Listing. Subject to the terms of the Registration
Rights Agreement, the Company shall use its best efforts to promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable upon conversion of or otherwise pursuant to
the Debentures and all Warrant Shares from time to time issuable upon exercise
of or otherwise pursuant to the Warrants. The Company will use its best efforts
to obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on an Eligible Market (whichever
Eligible Market is at the time the principal trading exchange or market for the
Common Stock is referred to herein as the "Principal Market"), 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 Buyer copies of any notices it receives from the Principal
Market 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. 

33 




                       (h)
Corporate Existence. So long as a Buyer beneficially
owns any portion of the Debentures or Warrants, the Company shall maintain its
corporate existence in good standing and remain a “Reporting Issuer”
(defined as a Company which files periodic reports under the 1934 Act). 

                       (i)
No Integration. The Company shall not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the 1933 Act) that would be integrated with the
offer or sale of the Securities to the Buyers in a manner that would require the
registration under the 1933 Act of the sale of the Securities to the Buyers or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market, except where such
integration (i) will not adversely affect the private offering exemption from
registration for this Offering or change the deemed date of Closing of this
Offering, (ii) will not cause the Rule 144 holding period for any of the
Securities issued or issuable to the Buyers to be delayed or extended, (iii)
will not limit or reduce the number of shares that can be registered for resale
in the Registration Statement under applicable securities laws, and (iv) will
not otherwise adversely affect the Buyers or the Securities issuable hereunder.


                       
(j) Limitation on Sale or Disposition of Intellectual
Property. So long as any portion of the Debentures remain
outstanding, so long as the Company shall have any obligation under the
Debentures or so long as any of the Warrants remain outstanding, the Corporation
shall not sell, convey, dispose of, spin off or assign any or all of its
Intellectual Property (including but not limited to the Intellectual Property
set forth in Schedules 3(j)(1) and (2) hereof), or any of the
Intellectual Property Rights, in each case without Buyer’s written consent,
provided that the Company may, without the Buyer’s written consent, enter into
one or more licensing agreements with respect to its Intellectual Property so
long as such licensing agreements exceed $5 million per calendar year and so
long as such agreements are not with any affiliate (as such term is defined in
Rule 501(b) of Regulation D) of the Company or with any relative of, or entity
controlled by, or any entity 10% or more of which is owned by, any officer,
director, employee or former employee of the Company, provided, further, that
the Company shall not be subject to the restrictions of this Section 4(j) if the
cash consideration received by the Company in exchange for such Intellectual
Property Rights exceeds $50 million.

                       (k)
Limitation On Rate of Issuance of Shares. The parties
agree that, if by virtue of this AGREEMENT, or by virtue of any other agreement
between the parties, Holder becomes entitled to receive from the Company a
number of shares of Common Stock of the Company (collectively, “Issuable
Securities”), such that the sum of (1) the number of shares of Common Stock
of the Company beneficially owned by Holder and any applicable affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debenture, the unexercised Warrants
or the unexercised or unconverted portion of any other security of Holder
subject to a limitation on conversion or exercise analogous to the limitations
contained herein)(collectively, the “Beneficially Owned Shares”) and (2)
the number Issuable Securities described above, 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 4.99% (the “Maximum
Percentage”) of the outstanding shares of Common Stock (the “Beneficial
Ownership Limitation”), then the 

34 




Company, following the receipt of written instructions from the
Holder as to the number of shares of Common Stock that can be so issued, shall
immediately deliver to Holder the number of shares of Common Stock of the
Company, that can be issued without exceeding the Beneficial Ownership
Limitation, and the Company shall not issue shares of Common Stock to the Buyer
in excess of the Beneficial Ownership Limitation. 

           For
purposes of the proviso to the immediately preceding sentence, (i) beneficial
ownership shall be determined by the Holder in accordance with Section 13(d) of
the 1934 Act and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso to the immediately preceding sentence, and PROVIDED
THAT the Beneficial Ownership Limitation shall be conclusively satisfied if the
applicable notice from Holder includes a signed representation by the Holder
that the issuance of the shares in such notice will not violate the Beneficial
Ownership Limitation, and the Company shall not be entitled to require
additional documentation of such satisfaction.

           The
parties agree that, in the event that the Company receives any tender offer or
any offer to enter into a merger with another entity whereby the Company shall
not be the surviving entity (an “Offer”), or in the event the Company is
issuing Default Shares (as defined in the Debenture) to the Buyer, then “4.99%”
shall be automatically revised immediately after such offer to read “9.99%” each
place it occurs in the first two paragraphs of this Section 4(n) above.
Notwithstanding the above, Holder shall retain the option to either exercise or
not exercise its option(s) to acquire Common Stock pursuant to the terms hereof
after an Offer. In addition, the Beneficial Ownership Limitation provisions of
this Section 4(k) may be waived by such Holder, at the election of such Holder,
upon not less than sixty-one (61) days’ prior notice to the Company, to change
the Beneficial Ownership Limitation to any other percentage not less than 4.99%
and not in excess of 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of the Debenture held by the Holder or upon exercise of a
Warrant held by the Holder, as applicable, and the provisions of this Section
4(k) shall continue to apply, provided that, if an Event of Default occurs under
the Debenture (or the Warrant, as applicable), thereafter the Beneficial
Ownership Limitation provisions of this section may be waived by such Holder, at
the election of such Holder, upon not less than sixty-one (61) days’ prior
notice to the Company, to change the Maximum Percentage to any other percentage
not less than 4.99% (and not limited to 9.99%) of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Debenture held by the Holder and
the provisions of this section shall continue to apply. The limitations on
conversion set forth in this subsection are referred to as the “Beneficial
Ownership Limitation.” Upon such a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% Beneficial Ownership Limitation to such
9.99% limitation, the Beneficial Ownership Limitation may not be further waived
by such Holder.

           The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(k) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. 

35 




           Maximum
Exercise of Rights. In the event the Buyer notifies the Company in writing
that the exercise of the rights described herein or in the Warrants, or the
issuance of Payment Shares or other shares of Common Stock issuable to the
Holder under the terms of the Transaction Documents (collectively, “Issuable
Shares”) would result in the issuance of an amount of Common Stock of the
Company that would exceed the maximum amount that may be issued to a Buyer
calculated in the manner described in this Section 4(j) of this Agreement, then
the issuance of such additional shares of Common Stock of the Company to such
Buyer will be deferred in whole or in part until such time as such Buyer is able
to beneficially own such Common Stock without exceeding the maximum amount set
forth calculated in the manner described in herein. The determination of when
such Common Stock may be issued shall be made by each Buyer as to only such
Buyer.

                       (l)
  Equal Treatment of Buyers. The terms of Securities
  issued to Buyers per the terms of this Agreement and the Transaction Documents
  shall be identical in all material respects. In addition, neither the Company
  nor any of its affiliates shall, directly or indirectly, pay or cause to be
  paid any consideration (immediate or contingent), whether by way of interest,
  fee, payment for the redemption, conversion of the Debentures or exercise of
  the Warrants, or otherwise, to any Buyer or holder of Securities, for or as
  an inducement to, or in connection with the solicitation of, any consent, waiver
  or amendment. of any terms or provisions of the Transaction Documents, unless
  such consideration is required to be paid to all Buyers or holders of Securities
  bound by such consent, waiver or amendment. The Company shall not, directly
  or indirectly, redeem any Securities unless such offer of redemption is made
  pro rata to all Buyers or holders of Securities, as the case may be, on identical
  terms. For clarification purposes, this provision constitutes a separate right
  granted by the Company to each Buyer of Securities and negotiated separately
  by each Buyer, is intended for the Company to treat the Buyers as a class, and
  shall not in any way be construed as the Buyers acting in concert or as a group
  with respect to the purchase, disposition or voting of Securities or otherwise.


                       (m)
Legal And Due Diligence Fees. The Company shall pay to
BridgePointe Master Fund Ltd. (the “Lead Investor”) a non-accountable
cash fee of $40,000 ($20,000 of which has been paid and the other $20,000
of which shall be paid at closing)(collectively, the “Lead Investor’s
Fee”) as reimbursement for legal services rendered by its attorneys in
connection with this Agreement and the purchase and sale of the Debentures and
Warrants and as reimbursement for due diligence expenses. The Lead Investor may
withhold such amount out of the Purchase Price for its Debenture.

                      (n)
Limited Standstill. The Company will deliver to the
Buyers on or before the Closing Date and enforce the provisions of irrevocable
standstill agreements ("Limited Standstill Agreements") in the form
annexed hereto as Exhibit G with the Insiders and other shareholders that
are identified on Schedule 4(n) hereto (collectively, the “Designated
Insiders”), subject to the exemption listed on Schedule 4(n) for 500,000
shares of Common Stock held by Sass Peress and 500,000 shares of Common Stock
held by Joel Cohen. 

                       (o)
Non-Public Information. The Company covenants and
agrees that from and after the date hereof, neither it nor any other Person
acting on its behalf will knowingly provide 

36 




any Buyer or its agents or counsel with any information that
constitutes material non-public information, unless prior thereto such Buyer
shall have executed a written agreement (a “Non-Public Information
Agreement”) regarding the confidentiality and use of such information. The
Company understands and confirms that each Buyer shall be relying on the
foregoing representations in effecting transactions in securities of the
Company. In the event that the Company, or any of its Subsidiaries, or any of
its or their respective officers, directors, employees and agents, provides any
Buyer or its agents or counsel with any information that constitutes material
non-public information without obtaining a Non-Public Information Agreement from
the Buyer, in addition to any other remedy provided herein or in the Transaction
Documents, the Company shall publicly disclose any material, non-public
information in a Form 8-K within five (5) Business Days of the date that it
discloses such information to the Buyer. In the event that the Company discloses
any material, non-public information to the Buyer without an accompanying
Non-Public Information Agreement and fails to publicly file a Form 8-K in
accordance with the above, a Buyer, upon three (3) Business Days advance written
notice to the Company, shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material,
nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents, for any such disclosure. The Company understands and confirms that
each Buyer shall be relying on the foregoing representations in effecting
transactions in securities of the Company. 

                       
(p) Inactive Subsidiaries. For so long as any of the
Debentures remain outstanding, the Company shall not transfer any assets to any
Inactive Subsidiary, and will not activate any Inactive Subsidiary without the
advance written permission of the Lead Investor.. 

                       (q)
Transactions With Affiliates. Each existing Affiliate
Transaction (as defined below) of the Company and or any Subsidiary is set forth
on Schedule 4(q). So long as any Debenture or Warrant is outstanding, the
Company shall not, and shall cause each of its Subsidiaries not to, enter into,
amend, modify or supplement, or permit any Subsidiary to enter into, amend,
modify or supplement any Affiliate Transaction (as defined below) in each case
in excess of $50,000, other than the existing Affiliate Transactions set forth
on Schedule 4(q) (for any new Affiliate Transaction the value of which exceeds
$50,000 and for any such existing Affiliate Transaction, the value of such
amendment, modification or supplement which exceeds $50,000). For purposes
hereof, “Affiliate Transaction” shall mean any agreement, transaction,
commitment, or arrangement, 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 best knowledge of
the Company, any entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee or partner, with any
of its or any Subsidiary’s officers, directors, employees, persons who were
officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) of any thereof, or with any individual related
by blood, marriage, or adoption to any such individual or with any entity in
which any such entity or individual owns a five percent (5%) or more beneficial
interest (each a “Related Party”), except for (i) customary employment
arrangements and benefit programs on reasonable 

37 




terms and (ii) reimbursement for expenses incurred on behalf of
the Company, in each case without the permission of the Required Holders.
“Affiliate” for purposes hereof means, with respect to any person or
entity, another person or entity that, directly or indirectly, (i) has a ten
percent (10%) or more equity interest in that person or entity, (ii) has ten
percent (10%) or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. “Control” or “Controls” for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity. 

                       (r)
Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(e) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(e) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor. 

           
5.       SECURITY;
SENIOR DEBT. The Debentures are secured by the Security Agreement
and the Patent Security Agreement of the same date. Except as otherwise set
forth on Schedule 5 annexed hereto, the Company hereby represents that
the Holder has a senior lien on the Collateral (as defined in the Security
Agreement), and agrees not to grant any liens on the Collateral, except for
Permitted Liens. From the Original Issue Date (as defined in the Debentures) of
the Debentures through the date that all of the Debentures have been paid in
full or converted in full, will not issue nor permit any Subsidiary to issue any
securities or incur any indebtedness that is senior to or pari passu with the
Debentures and, before entering into any future debt with a third party or
permitting any Subsidiary to enter into any future debt with a third party
(unless the issuance of such debt is otherwise prohibited under the terms of the
Transaction Documents), the Company shall first obtain a subordination
agreement, satisfactory to Buyer, from the proposed debt holder. The Company
agrees to take all necessary actions to assist the Holder in perfecting the
Holder’s lien on each piece of Collateral within fifteen (15) days of the date
hereof, including but not limiting to signing and delivering the appropriate
forms.

                       The
Company hereby represents that, to its knowledge except as otherwise set forth
on Schedule 5 annexed hereto, there are no liens or encumbrances on the
Intellectual Property (as defined in Section 3(j)) or the Collateral. The
Company agrees that from the Original Issue Date of the Debentures through the
date that all of the Debentures have been paid in full or converted in full (the
“Covered Period”), the Company shall not enter into, create, incur,
assume or suffer to exist any mortgage, lien, pledge, charge, security interest
or other encumbrance (collectively, “Liens”) upon or in the Intellectual
Property or the Collateral owned by the Company or any of its Subsidiaries and
shall not assign or transfer any interest in the 

38 




Patents owned by the Company or any of its Subsidiaries. In the
event that the Company attempts to place any Lien or Liens on the Intellectual
Property or the Collateral or attempts to assign or transfer any interest in the
Intellectual Property or the Collateral during the Covered Period, the Buyer
shall have the right to apply for an injunction in any state or federal courts
sitting in the City of New York, borough of Manhattan to prevent such Lien or
transfer. Before entering into any future debt with a third party, the Company
shall first obtain a subordination agreement, satisfactory to Buyer, from the
proposed debt holder. 

           
6.      
LEGENDS.

                       (a)
The Conversion Shares and the Warrant Shares, together with any other shares of
Common Stock that are issued or issuable pursuant to the Transaction Documents
shall be referred to herein as the “Issued Common Shares.” Certificates
evidencing the Issued Common Shares shall not contain any legend restricting the
transfer thereof (including the legend set forth in Section 3(e) of the
Debentures): (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the 1933 Act,
or (ii) following any sale of such Issued Common Shares pursuant to Rule 144, or
(iii) if such Issued Common Shares are eligible for sale under Rule 144, or (iv)
if such legend is not required under applicable requirements of the 1933 Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission)(collectively, the “Unrestricted Conditions”). The Company
shall cause its counsel to issue a legal opinion to the Company’s transfer agent
promptly after the Effective Date if required by the Company’s transfer agent to
effect the issuance of Issued Common Shares without a restrictive legend or
removal of the legend hereunder. If the Unrestricted Conditions are met at the
time of issuance of Issued Common Shares, then such Issued Common Shares shall
be issued free of all legends. The Company agrees that following the Effective
Date or at such time as the Unrestricted Conditions are met or such legend is
otherwise no longer required under this Section 6(a), it will, no later than
three (3) Trading Days following the delivery by a Buyer to the Company or the
Company’s transfer agent of a certificate representing Issued Common Shares, as
applicable, issued with a restrictive legend (such third Trading Day, the
“Legend Removal Date”), deliver, or cause the Transfer Agent to deliver
at the Company’s expense, to such Buyer a certificate representing such shares
that is free from all restrictive and other legends.

                       (b)
In addition to such Buyer’s other available remedies, the Company shall pay to a
Buyer, in cash, as partial liquidated damages and not as a penalty, for each
$1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date
such Securities are submitted to the Transfer Agent) delivered for removal of
the restrictive legend and subject to Section 6(a), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages have
begun to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend (the “Legend Removal Failure
Liquidated Damages”). Nothing herein shall limit such Buyer’s right to
pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such
Buyer shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief. 

39 




                       (c)
Each Buyer, severally and not jointly with the other Buyers, agrees that the
removal of the restrictive legend from certificates representing Securities as
set forth in this Section 6 is predicated upon the Company’s reliance that each
Buyer will sell any Securities pursuant to either the registration requirements
of the 1933 Act, including any applicable prospectus delivery requirements, or
an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of
distribution set forth therein.

           7.      
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Debentures and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion: 

                       (a)
The Buyer shall have executed each of the Transaction Documents which requires
Buyer’s signature, and delivered the same to the Company or its designated
escrow agent. 

                       (b)
The Buyer shall have delivered the applicable Purchase Price in accordance with
Section 1(b) above to the Company or the Escrow Agent. 

                       (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 applicable Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such 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. 

           
8.       CONDITIONS TO
BUYER'S OBLIGATION TO PURCHASE. The obligation of each Buyer
hereunder to purchase the Debenture and Warrants at each Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion: 

                       (a)
The Company shall have executed this Agreement, the Security Documents and the
Registration Rights Agreement, and delivered the same to the Buyer. 

                       (b)
The Company shall have delivered to such Buyer the duly executed Debenture and
Warrants in accordance with Section 1 above. 

40 




                       (c)
The representations and warranties of the Company contained in this Agreement,
as modified by the Exhibits and Schedules hereto, 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, which representations and warranties shall be true and
correct as of such 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 (the “Officer’s Certificate”), executed by
the President and Chief Executive Officer of the Company, dated as of the
applicable Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such 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. 

                       (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. 

                       (e)
Trading in the Common Stock on the Principal Market shall not have been
suspended by the SEC or the Nasdaq and, within two (2) Business Days of the
Closing, the Company will make application to the Principal Market, if legally
required by Nasdaq, to have the Conversion Shares and the Warrant Shares
authorized for quotation. 

                       (f)
The Buyer shall have received a Closing Legal Opinion as further described in
Section 1(b)(v)(C) hereof. 

                       (g)
The Buyer shall have received a Closing Certificate described in Section
1(b)(v)(B) above, dated as of the Closing Date. 

                       (h)
  In accordance with the terms of the Security Documents, the Company shall have
  delivered to the Buyer (i) the Security Agreement signed by the Company and
  each of its subsidiaries, (ii) the Subsidiary Guarantee, duly executed by each
  of the Company’s Active Subsidiaries, (iii) certificates representing the
  Active Subsidiaries' shares of capital stock, along with duly executed blank
  stock powers, (iv) appropriate financing statements on Form UCC-1 to be duly
  filed in such office or offices as may be necessary or, in the opinion of the
  Collateral Agent, desirable to perfect the security interests purported to be
  created by each Security Document and (v) the Patent Security Agreement, duly
  executed by the Company. 

                       (i)
Prior to the Closing, the Company shall have delivered or caused to be delivered
to each Buyer (A) certified copies of UCC search results, listing all effective
financing statements which name as debtor the Company or any of its Subsidiaries
filed in the prior five (5) years to perfect an interest in any assets thereof,
together with copies of such financing statements, none of which, except as
otherwise agreed in writing by the Buyers, shall cover any 

41 




of the Collateral (as defined in the Security Documents) and
the results of searches for any tax lien and judgment lien filed against such
Person or its property, which results, except as otherwise agreed to in writing
by the Buyers shall not show any such Liens (as defined in the Security
Documents); and (B) a perfection certificate, duly completed and executed by the
Company and each of its Subsidiaries, in form and substance satisfactory to the
Buyers. 

                       (j)
The Company shall have received funds from Buyers representing their respective
Purchase Prices in an aggregate amount equal to at least the Minimum Offering
Amount and not exceeding the Maximum Offering Amount. 

                       (k)
The Company shall have received the RBC Lien Release and a duly executed UCC-3
releasing any associated security interest. 

                       (l)
No Material Adverse Changes have occurred since the date that the Buyer executed
this Agreement. 

                       (m)
Sass Peress, CEO of the Company, shall have executed a letter to the Buyers, in
the form of the letter attached hereto a Exhibit H, stating that he shall
vote his shares in favor of any amendment to the Company’s Certificate of
Incorporation or other governing documents necessary to ensure the Company’s
compliance with its obligations under Section 4(e) of the Purchase Agreement
(the “Voting Letter Agreement”). 

           
9.       GOVERNING
LAW; MISCELLANEOUS. 

                       (a)
Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding 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. If either party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then the prevailing 

42 




party in such action or proceeding shall be reimbursed by the
other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such action or
proceeding. THE PARTIES HEREBY WAIVE ALL RIGHTS TO, AND AGREES NOT TO
REQUEST, A TRIAL BY JURY FOR ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR BY ANY OF THE TRANSACTION DOCUMENTS.

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

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

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

                       (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 supersede all
previous communication, representation, or Agreements whether oral or written,
between the parties with respect to the matters covered herein. Except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. The Agreement may not be orally modified. Only a modification in
writing, signed by authorized representatives of the Required Holders will be
enforceable. The parties waive the right to rely on any oral representations
made by the other party, whether in the past or in the future, regarding the
subject matter of the Agreement, the instruments referenced herein or any other
dealings between the parties related to investments or potential investments
into the Company or any securities transactions or potential securities
transactions with the Company. 

                       (f)
Independent Nature of Buyers’ Obligations And Rights.
The obligations of each Buyer under any Transaction Document are several and
not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other Buyer
under any Transaction Document. Nothing contained herein or in any Transaction
Document, and no action taken by any Buyer pursuant thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Buyer shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, 

43 




and it shall not be necessary for any other Buyer to be joined
as an additional party in any proceeding for such purpose. Each Buyer has been
represented by its own separate legal counsel in its review and negotiation of
the Transaction Documents. 

                       (g)
Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five (5) days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be: 

If to the Company, to: 

Attn: Sass Peress, CEO, President &
Chairman 
ICP Solar Technologies, Inc. 
7075 Place Robert - Joncas

Montreal, H4M272 
Telephone: 514-270-5770 
Fax: (514) 270-3677 

With Copy to: 

Andrew J. Merken, Esq. 
Burns &
Levinson LLP 
125 Summer Street 
Boston, Ma. 02110 
Telephone:
617-345-3740 
Fax: 617-345-3299

If to a Buyer: To the address set forth
immediately below such Buyer's name on the signature pages hereto. 

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

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

                       (i)
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. 

44 




                       (j)
Survival. The representations and warranties of the
parties hereto contained in this Agreement shall survive the closing hereunder
for the maximum period permitted by applicable law notwithstanding any due
diligence investigation conducted by or on behalf of the Buyer.

                       (k)
Indemnification. The Company (the “Indemnifying
Party”) agrees to indemnify and hold harmless each Buyer and all its
respective officers, directors, employees, investors, agents, members and
managers (the “Indemnified Party”) for any loss or damage, including
without limitation, the fees, costs, and disbursements of legal counsel, arising
as a result of or related to any breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement or the Registration
Rights Agreement, including advancement of expenses as they are incurred with
respect to claims by third parties. 

                       Promptly
after receipt of notice of the commencement of any action against an Indemnified
Party, such Indemnified Party shall notify the Indemnifying Party in writing of
the commencement thereof and the basis hereunder upon which a claim for
indemnification is asserted, but the failure to do so shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent the
Indemnifying Party is materially prejudiced by such failure. In the event of the
commencement of any such action, the Indemnifying Party shall be entitled to
participate therein and to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party, and, after notice from the Indemnifying
Party to the Indemnified Party of its election so to assume the defense thereof,
the Indemnifying Party shall not be liable to the Indemnified Party hereunder
for any legal expenses (including attorneys' fees, costs and disbursements)
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, PROVIDED, HOWEVER, that, if the defendants in any such action
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the Indemnifying Party or if the interests of the Indemnified Party
reasonably may be deemed to conflict with the interests of the Indemnifying
Party, the Indemnified Party shall have the right to select one separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
Indemnifying Party as incurred.

                       As
to cases in which the Indemnifying Party has assumed and is providing the
defense for the Indemnified Party, the control of such defense shall be vested
in the Indemnifying Party; provided that the consent of the Indemnified Party
shall be required prior to any settlement of such case or action, which consent
shall not be unreasonably withheld. As to any action, the party which is
controlling such action shall provide to the other party reasonable information
(including reasonable advance notice of all proceedings and depositions in
respect thereto) regarding the conduct of the action and the right to attend all
proceedings and depositions in respect thereto through its agents and attorneys,
and the right to discuss the action with counsel for the party controlling such
action.

45 




                       (l)
Publicity. The Company and the Buyer shall have the
right to review a reasonable period of time before issuance of any press
releases, filings with the SEC, FINRA or any stock exchange or interdealer
quotation system, 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
public filings with respect to such transactions as is required by applicable
law and regulations (although whenever possible 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). The Company agrees that it will not disclose, and will not include in
any public announcement, the name of the Buyers without the consent of the
Buyers unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. 

                       (m)
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, the Transaction Documents,
and the consummation of the transactions contemplated hereby and thereby. 

                       (n)
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. 

                       (o)
Liquidated Damages. The Company’s obligations to pay
any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate
until all unpaid partial liquidated damages and other amounts have been paid
notwithstanding the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable shall have been
canceled. 

                       (p)
Remedies. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to 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 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 Buyer
shall be entitled, in addition to all other available remedies in law or in
equity, to seek an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required. 

           
10.       NUMBER OF SHARES
AND PURCHASE PRICE. Buyer subscribes for a Debenture in the
Original Principal Amount set forth opposite each Buyer’s name on the Schedule
of Buyers attached hereto (which is equal to the subscription amount
(“Subscription Amount”) set forth on such Buyer’s signature page below,
divided by 0.90), against payment by wire transfer in the amount of the
Subscription Amount (less any offset of expenses as permitted hereunder). 

46 




           
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below. 

[INTENTIONALLY LEFT BLANK] 

47 




     IN WITNESS WHEREOF, the undersigned
Buyer does represent and certify under penalty of perjury that the foregoing
statements are true and correct and that Buyer by the following signature(s)
executed this Agreement. 

Dated this 13th day of June, 2008. 

 

	 	 	 
	Your Signature 	 	PRINT EXACT NAME IN WHICH YOU WANT 
	  	 	THE SECURITIES TO BE REGISTERED



Buyer’s Subscription Amount: $__________________. 

Principal Amount of Debentures Subscribed for:
$________________________. 
(Subscription Amount divided by 0.90) 

Buyer’s Entity Type and Residency: ______________________.

	  	 	DELIVERY INSTRUCTIONS: 
	Name: Please Print 	 	Please type or print address where your
      security is to be delivered 
	 	 	 
	  	 	ATTN.:___________________________________________ 
	Title/Representative Capacity (if applicable) 	 	  
	 	 	 
	Name of Company You Represent (if applicable) 	 	Street Address 
	 	 	 
	Place of Execution of this Agreement 	 	           
             City, State or Province, Country, Offshore
      Postal Code 



__________________________________________________
Phone
Number (For Federal Express) and Fax Number (re: Notice) 

THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF
$_______________________ (“SUBSCRIPTION AMOUNT”) ON THE
13th DAY OF JUNE, 2008. 

ICP Solar Technologies, Inc.



By:________________________________
Print
Name:______________________________
Title:_______________________________


48 




SCHEDULE OF BUYERS OF ICP SOLAR
  TECHNOLOGIES, INC. CONVERTIBLE DEBENTURE


	Buyer 

	Subscription Amount 

	Aggregate 
Principal of
      
Debenture 	Initial Number of 
Warrants
      (Series A, Series B and 
Series C, Respectively) 
	BridgePointe Master 
Fund Ltd., a Cayman 
Islands
      Exempted 
Company 	$1,500,000 


	$1,666,667 


	Series A 3,333,333 shares 
Series B
      3,333,333 shares 
Series C 3,333,333 shares 

	Gemini Master Fund, 
Ltd., a 
Cayman Islands
      
company 	$500,000 


	$555,556 


	Series A 1,111,111 shares 
Series B
      1,111,111 shares 
Series C 1,111,111 shares 

	Platinum Long Term 
Growth VI, LLC 
	$1,000,000 

	$1,111,111 

	Series A 2,222,222 shares 
Series B
      2,222,222 shares 
Series C 2,222,222 shares 



* = After accounting for the 10% Original Issue Discount. 

49