SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of October 31, 2009, between Ecotality, Inc., a Nevada corporation (the
“Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.

     

    NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:

     

    ARTICLE
I.

    DEFINITIONS

     

    1.1           Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:

     

    “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

     

    “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.

     

    “Amendment” means an
amendment and restatement of Company’s articles of incorporation that effects
the Reverse Stock Split.

     

     “Board of Directors”
means the board of directors of the Company.

     

    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

     

    “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

     

    “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), (b) if there is no such price on such date,
then the closing bid price on the Trading Market on the date nearest preceding
such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
(c)  if the Common Stock is not then listed or quoted on a Trading Market
and if prices for the Common Stock are then reported in the “pink sheets”
published by Pink OTC Markets, Inc. (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 (d) if the shares of Common Stock
are not then publicly traded, the fair market value as of such date of a share
of Common Stock as determined by an independent appraiser selected in good faith
by the Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

     

     “Commission” means the
United States Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

     

    “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire 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.

     

    “Company Counsel(s)”
means Farella Braun + Martel LLP, with offices located at Russ Building, 235
Montgomery Street, San Francisco, CA 94104 and Gary A. Agron, Esq., 5445 DTC
Parkway, Suite 520, Englewood, CO 80111.

     

    “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

     

     “Effective Date” means
the earlier of the date that (a) all of the Registrable Securities (as defined
in the Registration Rights Agreement) have been registered for resale by the
holders thereof pursuant to a registration statement(s) declared effective by
the Commission and (b) all of the Registrable Securities have been sold pursuant
to Rule 144 or may be sold by the Holder pursuant to Rule 144 without the
requirement for the Company to be in compliance with the current public
information required under Rule 144 and without volume or manner-of-sale
restrictions.

     

     “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into 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 increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (c) securities issued, whether at the
closing or subsequent thereto, pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that any such issuance shall only be to a Person which is
either a direct or indirect equity owner of, or an entity that is, itself or
through its subsidiaries, an operating company in a business synergistic with
the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities, (d)
shares of Common Stock or options to employees, officers or directors of the
Company pursuant to the Amendment to Debentures and Warrants, Agreement and
Waiver, dated May 15, 2009, as amended prior to the date hereof and as in effect
on the date hereof (the “May 15 Option
Agreement”), provided that such agreement shall not have been amended
since the date of this Agreement, except as set forth in Section 2.3(b)(vii), to
increase the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (e) shares of Common Stock issued to Donald
Karner or Kevin Morrow pursuant to the Company’s September 2009 management
incentive grant, as in effect on the date hereof (the “Karner/Morrow
Agreement”), provided that such agreement shall not have been amended
since the date of this Agreement, except as set forth in Section 2.3(b)(vii), to
increase the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (f) securities issued pursuant to the
Preferred Stock Exchange Agreement (as defined herein) and (g) up to an amount
of Common Stock and warrants equal to the difference between $25,000,000 and the
aggregate Subscription Amounts hereunder, on the same terms and conditions and
prices as hereunder (as adjusted for forward and reverse stock splits, stock
dividends, recapitalizations and the like, including the Reverse Stock Split),
with investors executing definitive agreements for the purchase of such
securities and such transactions having closed on or before November 15, 2009.
Notwithstanding the foregoing, regardless of whether or not an issuance would
otherwise be included within clauses (a), (b) or (c) above, the term Exempt
Issuance shall not include (i) issuances of Common Stock or Common Stock
Equivalents done at an effective price of less than $0.12 or (ii) issuances of
Common Stock or Common Stock Equivalents done at a time when the average of the
VWAPs for the ten (10) consecutive Trading Days immediately preceding such
issuance is less than $0.12; provided, however, that
issuances of Common Stock or Common Stock Equivalents within clauses (d), (e) or
(f) shall be considered Exempt Issuances regardless of the effective price of
such issuances.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Existing Holders”
shall mean the Enable Growth Partners LP (“EGP”), Enable
Opportunity Partners LP (“EOP”), Pierce
Diversified Strategy Master Fund LLC, Ena (“Pierce”),
BridgePointe Master Fund Ltd and Shenzhen Goch Investment Ltd.

     

    “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(aa).

     

     “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

     

    “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

     

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

     

    “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

     

    “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

     

     “Per Share Purchase
Price” equals $0.12 ($7.20 after the filing of the Amendment), subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

     

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     

     “Preferred Stock”
shall mean the Company’s Series A Preferred Stock.

     

    “Preferred Stock Exchange
Agreement” shall mean the agreement, entered into on or about the date
hereof, between the Company and Existing Holders, whereby debentures and
warrants of the Company held by such Existing Holders are exchanged into shares
of the Preferred Stock.

     

     “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

     

    “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.2(b).

     

    “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.2(b).

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

     

    “Registration Rights
Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit A attached
hereto.

     

    “Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.

     

    “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

     

    “Reverse Stock Split”
means the 1 for 60 reverse stock split.

     

    “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

     

    “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities” means the
Shares, the Warrants and the Warrant Shares.

     

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

     

    “Shares” means the
shares of Common Stock issued to each Purchaser pursuant to this
Agreement.

     

    “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

     

    “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Shares and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

     

     “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Trading Day” means a
day on which the New York Stock Exchange is open for trading.

     

     “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

     

    “Transaction
Documents” means this Agreement, the Warrants, the Registration Rights
Agreement, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.

     

    “Transfer Agent” means
Corporate Stock Transfer, Inc., the current transfer agent of the Company, whose
mailing address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado
80209, and fax number is (303) 282-5800, and any successor transfer agent of the
Company.

     

    “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section
4.12(b).

     

     “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 Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:15 p.m. (New York City time)), (b)  if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then reported in the
“Pink Sheets” published by Pink OTC Markets, Inc. (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 (d) 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 Purchasers of a majority in interest of
the Shares then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

     

    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
or prior to the Closing as described in Section 2.2(a) below, which Warrants
shall be exercisable immediately and have a term of five years from the initial
date they can be exercised, in the form of Exhibit C attached
hereto.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

     

    “WS” means Weinstein
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York,
New York 10170-0002.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1           Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly,  agree to purchase, an aggregate cash Subscription
Amount of up to $25,000,000 of Shares and Warrants.  Each Purchaser
shall deliver to the Company, via wire transfer or a certified
check immediately available funds equal to its Subscription Amount, and the
Company shall deliver to each Purchaser its respective Shares and a Warrant, as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the conditions set forth in Sections
2.2 and 2.3, the Closing shall occur at the offices of WS or such other location
as the parties shall mutually agree.

     

    2.2           Deliveries.

     

    (a)           On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:

     

    (i)           this
Agreement duly executed by the Company;

     

    (ii)          a
legal opinion of Company Counsel, substantially in the form of Exhibit B attached
hereto;

     

    (iii)         a
copy of the irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser’s Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such Purchaser;

     

    (iv)        a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 100% of such Purchaser’s Shares, with an
exercise price equal to $0.15, subject to adjustment as described therein;
and

     

    (v)         the
Registration Rights Agreement duly executed by the Company.

     

    (b)           On
or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

     

    (i)           this
Agreement duly executed by such Purchaser;

     

    (ii)          such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and

     

    (iii)         the
Registration Rights Agreement duly executed by such Purchaser.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    2.3           Closing
Conditions.

     

    (a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

     

    (i)           the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein);

     

    (ii)          all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed;

     

    (iii)         no
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents;

     

    (iv)        the
aggregate value of the Securities to be purchased by the Purchasers at the
Closing shall be an amount at least equal to Fifteen Million ($15,000,000)
dollars;

     

    (v)         the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement; and

     

    (vi)        the
Company shall have filed the Amendment with the Secretary of State of the State
of Nevada and the Amendment shall have been accepted by the Secretary of State
of the State of Nevada, and all other regulatory filings required to be filed in
connection with the Amendment shall have been made.

     

    (b)           The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

     

    (i)           the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

     

    (ii)          all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

     

    (iii)         the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

     

    (iv)        there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof;

     

    (v)         no
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (vi)        written
evidence from the Company that the Company has commenced the regulatory process
with FINRA to effect the Reverse Stock Split;

     

    (vii)       written
evidence from the Company that (A) the May 15 Option Agreement and the
Karner/Morrow Agreement shall have been amended such that the form of option or
warrant issued and issuable thereunder shall not include price-based
anti-dilution protection of any kind or any maintenance of percentage ownership
“dilution blocker” provision and (B) as to any future EBITDA based issuances to
Jonathan Read pursuant to the May 15 Option Agreement, the calculations of any
such issuances shall be based on the number of shares of Common Stock
outstanding immediately prior to the date hereof and the date of the
transactions that are contemplated hereby (subject to adjustment only for
forward and reverse stock splits, stock dividends and recapitalizations);
and

     

    (viii)      from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1           Representations and
Warranties of the Company. Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties to each
Purchaser as of the date hereof and as of the Closing Date:

     

    (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b)           Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

     

    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the 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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (d)           No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions contemplated hereby and thereby do not and will not: (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not have or reasonably be expected to
result in a Material Adverse Effect.

     

    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the
filing with the Commission pursuant to the Registration
Rights  Agreement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Securities and the
listing of the Securities for trading thereon in the time and manner required
thereby, (iv) the filings required in order to give effect to the Amendment and
the Reverse Stock Split contemplated thereby, and (v) the filing of Form D with
the Commission and such filings as are required to be made under applicable
state securities laws (collectively, the “Required
Approvals”).

     

    (f)           Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Warrant Shares, when authorized
and issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock equal to
the number of Shares and Warrant Shares issuable pursuant to this Agreement and
the Warrants.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (g)           Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plans and pursuant to the conversion or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act.  Except as set forth on Schedule 3.1(g), no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.  Except as a result of the purchase and sale of
the Securities and except as set forth on Schedule 3.1 (g),
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents.  The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities.  Except as set forth on Schedule 3.1(g), no
further approval or authorization of any stockholder, the Board of Directors 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 knowledge of the Company, between or among any of the Company’s
stockholders.

     

    (h)          SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, 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 the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that would reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except as set forth on Schedule 3.1(i) or
pursuant to existing Company stock option plans.  The Company does not
have pending before the Commission any request for confidential treatment of
information.  Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3.1(i), no
event, liability or development has occurred or exists, with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.

     

    (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) would, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  To the knowledge of the Company, neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the
Company.  The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which would reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (l)           
Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as would not
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (m)          Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

    (n)           Title to
Assets.  Except as disclosed in the SEC Reports, the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (o)           Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have would have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (p)           Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
reasonable and customary in the businesses in which the Company and the
Subsidiaries are engaged, including, but not limited to, directors and officers
insurance coverage at least equal to the aggregate Subscription
Amount.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

     

    (q)           Transactions with
Affiliates, Employees and other Security Holders.  Except as
set forth in the SEC Reports or on Schedule 3.1(q), none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company or other security holders of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or other security holder or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee or
security holder has a substantial interest or is an officer, director, trustee
or partner, in each case in excess of $120,000 other than for: (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (r)           Sarbanes-Oxley; Internal
Accounting Controls.  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.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

    (s)           Certain
Fees.  Except for the fees in the amounts and to the recipients
set forth on Schedule
3.1(s), no brokerage or finder’s fees or commissions or any transaction
fees of any kind are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.

     

    (t)           Private Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required for
the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.

     

    (u)          Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act of 1940, as
amended.

     

    (v)          Registration
Rights.  Other than each of the Purchasers and as set forth in
Schedule
3.1(v), no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the
Company.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (w)          Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

     

    (x)           Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or would reasonably be likely to become
applicable to the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.

     

    (y)          Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information.   The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct 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 light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not 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 light
of the circumstances under which they were made and when made, not
misleading.  The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

     

    (z)           No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, 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 cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any such
securities under the Securities Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (aa)         Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb)        Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
Subsidiary.

     

    (cc)         No General
Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising.  The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (dd)        Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

     

    (ee)         Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedule.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2009.

     

    (ff)          No Disagreements with
Accountants and Lawyers.    Except as set forth in
Schedule
3.1(ff), to the knowledge of the Company, there are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which would reasonably be expected to affect the
Company’s ability to perform any of its obligations under any of the Transaction
Documents.

     

    (gg)        Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.


    
      
         


      

      
        19

        
          

        

      

      
         


      

    

    

      (hh)        Acknowledgment Regarding
Purchaser’s Trading Activity. Notwithstanding anything in this Agreement or elsewhere herein to the contrary
(except for Sections 3.2(f) and 4.14 hereof), 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 (y) 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 Warrant Shares deliverable
with respect to Securities are being determined, and (z) 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.

       

      (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.

       

      3.2          Representations and
Warranties of the Purchasers.  Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a specific
date therein):

       

      (a)           Organization;
Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate, or similar action on the part
of such Purchaser.  Each Transaction Document to which it is a party
has been duly executed by such Purchaser, and when delivered by such Purchaser
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it 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.


      
        
           


        

        
          20

          
            

          

        

        
           


        

      

       

      (b)           Own
Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws).  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its
business.

       

      (c)           Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on the Closing Date and each date
on which it exercises any Warrants, it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.  Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange
Act.

       

      (d)         
 Experience of
Such Purchaser.  Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.  Such Purchaser is able to bear
the economic risk of an investment in the Securities and, at the present time,
is able to afford a complete loss of such investment.

       

      (e)           General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (f)           Short Sales and
Confidentiality Prior To The Date Hereof.  Other than
consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).


      
        
           


        

        
          21

          
            

          

        

        
           


        

      

       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1           Transfer
Restrictions.

       

      (a)           The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and the Registration Rights
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.

       

      (b)           The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

       

      THIS
SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.


      
        
           


        

        
          22

          
            

          

        

        
           


        

      


      The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders (as defined in the Registration Rights Agreement)
thereunder.

       

      (c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Shares or Warrant Shares pursuant to Rule 144, or (iii) if such Shares or
Warrant Shares are eligible for sale under Rule 144, without the requirement for
the Company to be in compliance with the current public information required
under Rule 144 as to such Shares and Warrant Shares and without volume or
manner-of-sale restrictions, or, if the shares are eligible for sale under Rule
144 and the Company is then in compliance with the current public information
required under Rule 144, or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission).  The Company
shall cause its counsel to issue a legal opinion to the Transfer Agent promptly
after the Effective Date if required by the Transfer Agent to effect the removal
of the legend hereunder.  If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the resale of the Warrant Shares, or if such Shares or Warrant Shares may be
sold under Rule 144 and the Company is then in compliance with the current
public information required under Rule 144, or if the Shares or Warrant Shares
may be sold under Rule 144 without the requirement for the Company to be in
compliance with the current public information required under Rule 144 as to
such Shares or Warrant Shares or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Warrant Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing Shares or Warrant Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.  Certificates for Securities subject to legend
removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company System as directed by such Purchaser.


      
        
           


        

        
          23

          
            

          

        

        
           


        

      

      


      (d)           In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares or Warrant 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 4.1(c), $10 per Trading
Day (increasing to $20 per Trading Day 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. Nothing herein shall limit such
Purchaser’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 Purchaser 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.

       

      (e)           Each
Purchaser, severally and not jointly with the other Purchasers, agrees that such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities 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, and acknowledges that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance upon this
understanding.

       

      4.2           Furnishing of
Information;
Public Information.

       

      (a)           If
the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
Act on the date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act on or before the 60th
calendar day following the date hereof. Until the time that no Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.  As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act within the
requirements of the exemption provided by Rule 144.


      
        
           


        

        
          24

          
            

          

        

        
           


        

      


      (b)           At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Shares and Warrant Shares pursuant to Rule 144.  The
payments to which a Purchaser shall be entitled pursuant to this Section 4.2(b)
are referred to herein as “Public Information Failure
Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser 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.

       

      4.3           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 Securities
Act) that would be integrated with the offer or sale of the Securities to the
Purchasers in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.

       

      4.4           Securities Laws Disclosure;
Publicity.  The Company shall (a) by 8:30 a.m. (New York City
time) on the second Trading Day following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby and (b) by
8:30 a.m. (New York City time) on the second Trading Day following the date
hereof, issue a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby, and attaching the Transaction Documents as
exhibits thereto.  The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication.  Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except:
(a) as required by federal securities law in connection with (i) any
registration statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(b).


      
        
           


        

        
          25

          
            

          

        

        
           


        

      

       

      4.5           Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring
Person” under any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.

       

      4.6           Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.

       

      4.7           Use of
Proceeds.  Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents,
(c) the settlement of any outstanding litigation or (d) in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or in violation of the
sanction administered by the Office of Foreign Assets Control of the U.S.
Treasury Department.


      
        
           


        

        
          26

          
            

          

        

        
           


        

      


      4.8           Indemnification of
Purchasers.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction
Documents. 

       

      4.9           Reservation of Common
Stock. The Company shall have reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue Shares pursuant to this Agreement and Warrant Shares pursuant to any
exercise of the Warrants.

       

      4.10         Listing of Common
Stock. The Company hereby agrees to use commercially reasonable efforts
to maintain the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed, and as soon as reasonably practicable following
the Closing, the Company shall apply to list or quote all of the Shares and
Warrant Shares on such Trading Market and secure the listing of all of the
Shares and Warrant Shares on such Trading Market as soon as reasonably
practicable. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other
commercially reasonable actions to cause all of the Shares and Warrant Shares to
be listed or quoted on such other Trading Market as promptly as reasonably
practicable.  The Company will then take all commercially reasonable
actions to continue the listing or quotation and trading of its Common Stock on
a Trading Market and will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.

       

      4.11         [RESERVED]


      
        
           


        

        
          27

          
            

          

        

        
           


        

      


      4.12         Subsequent Equity
Sales.

       

      (a)           From
the date hereof until 45 days after the Effective Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the 45
day period set forth in this Section 4.12 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 Purchasers for the resale of the
Shares and Warrant Shares.

       

      (b)           From
the date hereof until the earlier of such time as (i) the Warrants are no longer
outstanding and (ii) the three (3) year anniversary of the date hereof, the
Company shall be prohibited from effecting or entering into an agreement to
effect Subsequent Financing involving a Variable Rate
Transaction.  “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price. Notwithstanding the foregoing, no past,
present or future issuances of securities under the Preferred Stock Exchange
Agreement shall be considered to be Variable Rate Transactions.

       

      (c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

       

      4.13         Equal Treatment of
Purchasers.  No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents.  For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended for
the Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

       

      4.14         Short Sales and
Confidentiality After The Date Hereof. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any
Short Sales during the period commencing at the Discussion Time and ending on
the 9 month anniversary of the date hereof.  Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules.  Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.


      
        
           


        

        
          28

          
            

          

        

        
           


        

      

       

      4.15         Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

       

      4.16         Capital
Changes.  Other than as contemplated by the Amendment for the
Reverse Stock Split, until the one year anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or reclassification
of the Common Stock without the prior written consent of the Purchasers holding
75% in interest of the Shares still held by the Purchasers.

       

      4.17         Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation
to issue the Shares and Warrant Shares pursuant to the Transaction Documents,
are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

       

      4.18         Filing of Listing
Application with NASDAQ.  As soon as reasonably practicable
after the date hereof, the Company shall use its best efforts to file an
application to be listed on NASDAQ and shall use its best efforts to have such
application accepted by NASDAQ as soon as possible thereafter.

       

      4.19         Reverse Stock Split.
No later than the 30th
calendar day following the date hereof, the Company shall have effected the
Reverse Stock Split, including but not limited to any filings required by FINRA,
and have provided to the Purchasers written evidence of the filing by the
Company of the Amendment with the Secretary of State of the State of Nevada and
that the acceptance of the Amendment by the Secretary of State of the State of
Nevada has occurred, together with written evidence of all other regulatory
filings required to be filed in connection with the Amendment, including but not
limited to any regulatory filings required by FINRA.


      
        
           


        

        
          29

          
            

          

        

        
           


        

      

       

      ARTICLE
V.

      MISCELLANEOUS

       

      5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before November 6, 2009;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

       

      5.2           Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Enable Capital Management, LLC (“Enable”) the
non-accountable sum of $40,000 for its legal fees and expenses, none of which
has been paid prior to the Closing.  The Company shall deliver to each
Purchaser, prior to the Closing, a completed and executed copy of the Closing
Statement attached hereto as Annex A. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.

       

      5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

       

      5.4           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

       

      5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers of at least 67% in
interest of the Shares still held by the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.


      
        
           


        

        
          30

          
            

          

        

        
           


        

      

       

      5.6           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

       

      5.7           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”

       

      5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.

       

      5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the 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 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.

       

      5.10         Survival.  The
representations and warranties shall survive the Closing and the delivery of the
Securities for the applicable statute of limitations.


      
        
           


        

        
          31

          
            

          

        

        
           


        

      

       

      5.11         Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

       

      5.12         Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

       

      5.13         Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that in the
case of a rescission of an exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded
exercise notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right).

       

      5.14         Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

       

      5.15         Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.


      
        
           


        

        
          32

          
            

          

        

        
           


        

      

       

      5.16         Payment Set
Aside.  To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

       

      5.17         Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers 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 Purchaser 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,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.  For reasons of
administrative convenience only, each Purchaser and its respective counsel have
chosen to communicate with the Company through WS.  WS does not
represent any of the Purchasers and only represents Enable. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by any of the Purchasers.

       

      5.18         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.

       

      5.19         Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.


      
        
           


        

        
          33

          
            

          

        

        
           


        

      


      5.20         Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each
and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.

       

      5.21         WAIVER OF
JURY TRIAL.  IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

       

      (Signature
Pages Follow)


      
        
           


        

        
          34

          
            

          

        

        
           


        

      


      IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.

      


      
        
          
            
              
                
                  
                    
                      
                        	
                                ECOTALITY,
      INC.

                              	 	
                                Address for Notice:

                              
	 	 	 	 
	
                                By:

                              	 
      	 	
                                Fax:

                              
	 
      	
                                Name:

                              	 	 
      
	 
      	
                                Title:

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

                              	 	 
      


                      

                    

                  

                

              

            

          

        

      

      


      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


      
        
           


        

        
          35

          
            

          

        

        
           


        

      


      [PURCHASER
SIGNATURE PAGES TO ETLY SECURITIES PURCHASE AGREEMENT]

      


      IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

       

      Name of
Purchaser: ________________________________________________________

       

      Signature of Authorized Signatory of
Purchaser: __________________________________

       

      Name of
Authorized Signatory:
____________________________________________________

       

      Title of
Authorized Signatory:
_____________________________________________________

       

      Email
Address of Authorized Signatory:
_____________________________________________

       

      Facsimile
Number of Authorized Signatory:
____________________________________________

       

      Address
for Notice of Purchaser:

      


      Address
for Delivery of Securities for Purchaser (if not same as address for
notice):

      


      Subscription
Amount: $_________________

      


      Shares:
_________________

      


      Warrant
Shares: __________________

      


      EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

      


      


      [SIGNATURE
PAGES CONTINUE]


      
        
           


        

        
          36

          
            

          

        

        
           


        

      


      Annex
A

      


      CLOSING
STATEMENT

      


      Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto, the
purchasers shall purchase up to $25,000,000 of Common Stock and Warrants from
Ecotality, Inc., a Nevada corporation (the “Company”).  All
funds will be wired into an account maintained by the Company.  All
funds will be disbursed in accordance with this Closing Statement.

      


      
        Disbursement Date:
November
___, 2009

         

          
            

          

        

      

      


      
        
          
            	
                    I.
      PURCHASE
      PRICE

                  	 
      	 
      
	 
      	 
      	 
      
	
                    Gross
      Proceeds to be Received

                  	 
      	
                    $

                  
	 
      	 
      	 
      
	
                    II.
      DISBURSEMENTS

                  	 
      	 
      
	 
      	 
      	 
      
	
                    Ecotality
      Inc.

                  	 
      	
                    $

                  
	
                    Weinstein
      Smith LLP

                  	 
      	
                    $

                  
	 
      	 
      	
                    $

                  
	 
      	 
      	
                    $

                  
	 
      	 
      	
                    $

                  
	 
      	 
      	 
      
	
                    Total
      Amount Disbursed:

                  	 
      	
                    $

                  


          

        

      

      


      WIRE
INSTRUCTIONS:

      


      To:
Ecotality Inc.

      Bank of
America

      3123
North Scottsdale Road

      Scottsdale
AZ 85251

      Ecotality,
Inc

      ABA#
026009593

      Account#
004659613789

      


      To:
Weinstein Smith

      
        	
                NAME:

              	
                WEINSTEIN
      SMITH LLP OPERATING ACCOUNT

              
	
                BANK:

              	
                SIGNATURE
      BANK

              
	 
      	
                565
      Fifth Avenue

              
	 
      	
                New
      York, NY  10017

              
	 
      	
                Contact:
      Timothy F. Collins – (646) 822-1940

              
	
                ACCOUNT:

              	
                1501119438

              
	
                ABA:

              	
                026013576

              
	
                SWIFT
      CODE:

              	
                SIGNUS33

              
	
                Reference:

              	
                Enable/ETLY

              


      


      
        
           


        

        
          37