f8k0210ex10vii_envision.htm


    Exhibit
10.7

     

    SECURITIES
PURCHASE AGREEMENT

    
       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of November 12, 2008 between Envision Solar International, Inc., a California
corporation (the “Company”), and Gemini
Master Fund, Ltd. (including its successors and assigns, the “Purchaser”).

       

      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 (“Securities Act”), and
Regulation D promulgated thereunder, the Company desires to issue and sell to
the Purchaser, and the Purchaser 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 the Purchaser agree as
follows:

       

       

      ARTICLE
I.

      DEFINITIONS

       

      1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Note (as defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:

       

      “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.

       

      “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 Note pursuant to Section
2.1.

       

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

       

      “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of such other Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will
be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.

       

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

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

       

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

       

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

       

      “Indebtedness” of any
Person means (a) all indebtedness for borrowed money, (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services, except for trade payables entered into in the ordinary course of
business, (c) all obligations in respect of letters of credit, surety bonds,
bankers acceptances or similar instruments (including without limitation all
reimbursement or payment obligations with respect thereto), (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including without
limitation obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even if the rights and remedies of the seller
or bank under such agreement in the event of default are limited to repossession
or sale of such property), (f) all monetary obligations under any leasing or
similar arrangement which is classified as a “capital lease” under GAAP, and (g)
all Contingent Obligations in respect of Indebtedness of others of the kinds
referred to in clauses (a) through (f) above.

       

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

       

      “IP Security
Agreement” means the Intellectual Property Security Agreement(s), dated
on or about the date hereof, by the Company and certain Subsidiaries in favor of
the Purchaser, in the form of Exhibit C attached
hereto, securing the obligations of the Company under the Note and other
Transaction Documents.

       

      “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).

       

      “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.15.

       

       

      
        
           

        

        
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      “Note” means the
Secured Bridge Note issued by the Company to the Purchaser hereunder, in the
form of Exhibit
A attached hereto and having an original Principal Amount of
$591,770.83.

       

      “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.

       

      “Principal Amount”
shall mean $591,770.83.

       

      “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.

       

      “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.2.

       

      “Reverse Merger
Transaction” means a transaction in which the Company directly or
indirectly (a) merges or consolidates with, or in one or a series of related
transaction sells all or substantially all of its and its Subsidiaries’ assets
to, an entity that is required, or whose parent is a corporation that is
required, to file reports pursuant to Section 13 or 15(d) under the Exchange Act
(a “Public
Company”) that is required or permitted to be accounted for by the Public
Company as a “reverse acquisition” under GAAP, and (b) at or about the time of
such transaction described in clause (a), the Company and/or such Public Company
sells securities in a capital raising transaction (“Reverse Merger
Financing”).

       

      “Securities” shall
have the meaning set forth in 3.2(c).

       

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

       

      “Security Agreement”
means the Security Agreement, dated on or about the date hereof, by the Company
in favor of the Purchaser, in the form of Exhibit B attached
hereto, securing the obligations of the Company and its Subsidiaries under the
Note and other Transaction Documents.

       

      “Security Documents”
means any and all security agreements, pledge agreements, hypothecation
agreements, collateral assignments, mortgages, deeds of trust, control
agreements and similar such agreements, executed and delivered by the Company,
any of its Subsidiaries and/or any third party in favor of the Purchaser
pursuant to the Transaction Documents which secures the Company’s and its
Subsidiaries obligations under the Transaction Documents, and other documents
executed, delivered and/or filed by the Company, any of its Subsidiaries, any
third party and/or the Purchaser as permitted or required under any of the
foregoing, including without limitation the Security Agreement and the IP
Security Agreement.

       

       

      
        
           

        

        
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      “Subscription Amount”
means $500,000 in United States dollars and in immediately available funds,
which is the aggregate amount to be paid for the Note purchased hereunder by the
Purchaser.

       

      “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.  In Section 3.1
hereof, references to the Company shall refer to the Company together with its
Subsidiaries, as applicable.

       

      “Subsidiary Guarantee”
means the Subsidiary Guarantee, in the form attached hereto as Exhibit D, executed
by each Subsidiary in favor of the Purchaser, guaranteeing the Company’s
obligations under the Note.

       

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

       

       

      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 Purchaser agrees to
purchase, the Note in the principal amount of $591,770.83 for a purchase price
equal to the Subscription Amount.  The Purchaser shall deliver to the
Company, via wire transfer, immediately available funds equal to the
Subscription Amount and the Company shall deliver the Note to the Purchaser, and
the Company and the 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
Peter J. Weisman, P.C. located at 767 Third Avenue, 6th Floor, New York, New
York 10017, or such other location as the parties shall mutually
agree.

       

      2.2 Deliveries.

       

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

       

      (i) this
Agreement duly executed by the Company;

       

      (ii) legal
opinions of counsel to the Company, in substantially the form and substance
attached hereto as Exhibit E;

       

      (iii) the Note
registered in the name of the Purchaser;

       

      (iv) the
Security Documents, including without limitation the Security Agreement and the
IP Security Agreement(s) reasonably requested by the Purchaser, duly executed by
the Company and each Subsidiary; and

       

       

      
        
           

        

        
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      (v) the
Subsidiary Guarantee, duly executed by each Subsidiary of the
Company.

       

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

       

      (i) 
this
Agreement duly executed by the Purchaser;

       

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

       

      (iii) the
Security Documents to which the Purchaser is a party and required by law to be
signed by such Party in order to be binding.

       

      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 when made and on the Closing Date of the
representations and warranties of the Purchaser contained herein;

       

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

       

      (iii) the
delivery by the Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

       

      (b) The
respective obligations of the Purchaser 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;

       

      (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; and

       

       

      
        
           

        

        
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      (v) from the
date hereof 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, on any national securities exchange or 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 the Purchaser, makes it impracticable
or inadvisable to purchase the Note at the Closing.

       

       

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1 Representations and
Warranties of the Company.  Except as set forth under the
corresponding section of the disclosure schedules delivered to the Purchaser
concurrently herewith (“Disclosure
Schedules”) which Disclosure Schedules shall be deemed a part hereof, the
Company hereby makes the following representations and warranties to the
Purchaser:

       

      (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  Except as otherwise set forth on such schedule, 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.  All Subsidiaries which are
designated as “inactive” on such schedule do not have any material assets and do
not engage in any operations and shall remain as such unless the Company first
notifies the Purchaser and executes and delivers any further Security Documents
reasonably requested by the Purchaser.

       

      (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, could 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 and any Subsidiary’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.  The Company has
furnished to the Purchaser true and correct copies of the Company’s articles of
incorporation and by-laws, as each is currently in effect.

       

       

      
        
           

        

        
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      (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.  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.

       

      (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 (other than Liens in favor of the Purchaser), 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) 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 could 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
the filing of Form D with the U.S. Securities and Exchange Commission and such
filings as are required to be made under applicable state securities
laws.

       

       

      
        
           

        

        
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      (f) Issuance of the
Note.  The Note is 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.

       

      (g) Capitalization.  The
capitalization of the Company is 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.  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 capital stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of capital
stock.  The issuance and sale of the Notes will not obligate the
Company to issue shares of capital stock or other securities to any Person
(other than the Purchaser) 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.  No further approval
or authorization of any stockholder, the Board of Directors or others is
required for the issuance and sale of the Notes.  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) Financial
Statements.  The financial statements of the Company provided
to the Purchaser 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 the 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 to
normal, immaterial, year-end audit adjustments.

       

      (i) Material
Changes.  Except as set forth on Schedule 3.1(i),
since December 31, 2007 (i) there has been no event, occurrence or development
that has had or that could 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, (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
pursuant to existing Company stock option plans.

       

       

      
        
           

        

        
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      (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 (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect.  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
breach of fiduciary duty.

       

      (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 could 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, to the knowledge of the Company, 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 could 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 could not
have or reasonably be expected to result in a Material Adverse
Effect.

       

       

      
        
           

        

        
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      (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 currently contemplated, except where the failure to
possess such permits could 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.  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, as the case may be, in each case
free and clear of all Liens, except for Liens as do not materially affect the
value of such property and 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.

       

      (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 necessary or
material for use in connection with their respective businesses as currently
contemplated and which the failure to so have could 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, to the knowledge of the Company, 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 could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company has duly and
properly filed or caused to be filed with the United States Patent and Trademark
Office (the “PTO”) and applicable
foreign and international patent authorities all patent applications owned by
the Company (the “Company Patent
Applications”). To the knowledge of the Company, the Company has complied
with the PTO’s duty of candor and disclosure for the Company Patent Applications
and has made no material misrepresentation in the Company Patent
Applications.  The Company is not aware of any information material to
a determination of patentability regarding the Company Patent Applications not
called to the attention of the PTO or similar foreign authority.  The
Company is not aware of any information not called to the attention of the PTO
or similar foreign authority that would preclude the grant of a patent for the
Company Patent Applications.  The Company has no knowledge of any
information that would preclude the Company from having clear title to the
Company Patent Applications.

       

       

      
        
           

        

        
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      (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 prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged.  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.

       

      (q) Transactions with Affiliates
and Employees.  None of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees 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, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $25,000
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.

       

      (r) Internal Accounting
Controls.  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.

       

      (s) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Note, 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.

       

      (t) Disclosure.  All
written disclosure furnished by or on behalf of the Company to the Purchaser
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.

       

       

      
        
           

        

        
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      (u) 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 Note 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.

       

      (v) Indebtedness.  Schedule 3.1(v) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company and its Subsidiaries, or for which the Company and its
Subsidiaries have commitments, in excess of $25,000.

       

      (w) 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, each of 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 (unless and only to the extent that the Company and
each of its Subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid taxes), and the Company has no knowledge
of a tax deficiency which has been asserted or threatened against the Company or
any Subsidiary (except those being contested in good faith).

       

      (x) 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.

       

      (y) No Integrated Offering or
Sale.  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 the sale of the Note to the Purchaser to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, nor will the Company or
any of its Subsidiaries take any action or steps that would cause the sale of
the Note to be integrated with other offerings.

       

       

      
        
           

        

        
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      (z) 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.

       

      (aa) Seniority.  As
of the Closing Date, no Indebtedness or other claim against the Company is
senior to the Note in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).

       

      (bb) Acknowledgment Regarding the
Purchaser’s Purchase of the Note.  The Company acknowledges and
agrees that the Purchaser 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 the Purchaser is not
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 the 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
Purchaser’s purchase of the Note.  The Company further represents to
the 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.

       

      (cc) Accounts
Receivable.  All notes and accounts receivable of the Company and
its Subsidiaries are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts or an aging of accounts and notes
receivable, in each case provided to the Purchaser, as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of the Company and its Subsidiaries.

       

      3.2  Representations and
Warranties of the Purchaser.  The Purchaser hereby represents
and warrants as of the date hereof and as of the Closing Date to the Company as
follows:

       

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      (a) Organization;
Authority.  The 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 the
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
the Purchaser.  Each Transaction Document to which it is a party has
been duly executed by the Purchaser, and when delivered by the Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of the 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.

       

      (b) Approvals and
Consents. No action, approval, consent or authorization, including, but
not limited to, any action, approval, consent or authorization by any
governmental or quasi-governmental agency, commission, board, bureau, or
instrumentality is necessary or required as to such Purchaser in order to
constitute this Agreement as a valid, binding and enforceable obligation of such
Purchaser in accordance with its terms.

       

      (c) Own Account. The
Purchaser understands that the Note and Common Shares (as defined below)
(collectively, “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. The Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.

       

      (d) Purchaser Status. At
the time the Purchaser was offered the Securities, it was, and at the date
hereof it is: (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. The
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

       

      (e) Experience of the
Purchaser. The 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. The 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.

       

      (f) General Solicitation.
The 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.

       

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      (g) Available
Information.  The Purchaser (i) has been provided an
opportunity for a reasonable time prior to the date hereof to obtain additional
information concerning the purchase of the Note (the “Offering”), the
Company and all other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense; (ii) has
been given the opportunity for a reasonable time prior to the date hereof to ask
questions of, and receive answers from, the Company or its representatives
concerning the terms and conditions of the Offering and other matters pertaining
to an investment in the Securities, or that which was otherwise provided in
order for them to evaluate the merits and risks of a purchase of the Securities
to the extent the Company possesses such information or can acquire it without
unreasonable effort or expense; and (iii) has determined that the Securities are
a suitable investment for such Purchaser.

       

       

      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 the Securities
other than pursuant to an effective registration statement or Rule 144, (i) the
Company may, if reasonable, 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, (ii) as a condition of such transfer, such transferee shall agree in
writing to be bound by the terms of this Agreement and shall make in writing the
representations and warranties contained in Section 3.2 (c), (d), (e) and (f) of
this Agreement, and (iii) any such transfer made which does not comply with this
sentence shall be null and void.

       

      (b) The
Purchaser agrees to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the certificates for Common Shares 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.

       

       

      
        
           

        

        
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      (c) The
Purchaser agrees that it will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.

       

      (d) Any
legend on any certificates for Securities shall be promptly removed following a
sale made in accordance with the plan of distribution of a registration
statement covering the resale of such Securities being declared effective and
compliance with the prospectus delivery requirements or following a sale made in
compliance with Rule 144.

       

      4.2 Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Note 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 capital stock, (c) the
settlement of any outstanding litigation, or (d) making any investments in
securities or otherwise purchasing any equity or debt securities, including
without limitation purchasing any corporate, governmental, municipal or
auction-rate bonds or other debts instruments (whether at auction, in the open
market or otherwise), any commercial or chattel paper, or any certificates of
deposit, or investing in any money market or mutual funds.

       

      4.3 Indemnification of the
Purchaser.   Subject to the provisions of this Section
4.3, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (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 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 the Purchaser in any capacity, or
any of them or their respective Affiliates, by any stockholder of the Company
with respect to any of the transactions contemplated by the Transaction
Documents (except to the extent such action is based upon a breach of the
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings the Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the 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, the 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

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

         

         

        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 (A) for any settlement by such Purchaser Party effected without
the Company’s prior written consent, which shall not be unreasonably withheld or
delayed, or (B) 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 the Purchaser Party
in this Agreement or in the other Transaction Documents.

      

       

      4.4 Security.  The
Company’s and any Subsidiaries’ obligations under the Note and other Transaction
Documents shall be secured by all the assets of the Company and its
Subsidiaries.  As of the Closing, the Purchaser shall be granted a
security interest in all the assets of the Company, including without limitation
all of the Intellectual Property Rights and the Company’s ownership interests in
the Subsidiaries, and in the assets of such Subsidiaries, to be memorialized in
the Security Documents. The Company shall execute such other agreements,
documents and financing statements reasonably requested by the Purchaser, which
will be filed at the Company’s expense with the applicable jurisdictions and
authorities.  The Company shall also execute all such documents
reasonably necessary in the opinion of the Purchaser to memorialize and further
protect the security interests described herein. The Purchaser may appoint a
collateral agent to represent it in connection with the security interest being
granted to the Purchaser.

       

      4.5 Additional
Guarantors.   The Company shall cause each of its
Subsidiaries formed or acquired on or after the date hereof to execute and
deliver to the Purchaser a Subsidiary Guarantee and a Security Agreement in
conformity with those executed and delivered at Closing.

       

      4.6 Operation of
Business. So long as the Note remains outstanding, the Company (together
with its Subsidiaries) shall:

       

      (a) Insurance.  Maintain
in full force and effect insurance reasonably believed by the Company to be
adequate coverage (a) on all assets and activities, covering property loss or
damage and loss of income by fire or other hazards or casualty, and (b) against
all liabilities, claims and risks for which it is customary for companies
similarly situated to the Company to insure, including without limitation
applicable product liability insurance, required workmen’s compensation
insurance, and other insurance covering injury or damage to persons or
property.  The Company shall promptly furnish or cause to be furnished
evidence of such insurance to the Purchaser upon request, in form and substance
reasonably satisfactory to the Purchaser.

       

      (b) Information on Adverse
Changes.  Promptly inform the Purchaser of (i) all material
adverse changes in the Company’s financial condition, (ii) all litigation and
claims and threatened litigation and claims against the Company or its
Subsidiaries, and (iii) any event, occurrence or other matter which has had or
could be reasonably expected to result in a Materially Adverse Effect or would
have a material adverse effect on the Collateral (as defined in the Security
Agreement).

       

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      (c) Books and
Records.   Maintain its books and records in accordance
with GAAP applied on a consistent basis and permit the Purchaser to examine and
audit such books and records at reasonable times upon reasonable
notice.

       

      (d) Financial
Statements.  Furnish the Purchaser with, as soon as available,
but no later than 45 days following the end of each fiscal quarter, the
Company’s consolidated balance sheet, income statement, cash flow statement,
accounts receivable aging report, and current sales orders, prepared in
accordance with GAAP applied on a consistent basis.

       

      (e) Operations.  Substantially
maintain its present executive and management personnel, and conduct its
business affairs in a reasonable and prudent manner and in compliance with all
applicable foreign, federal, state and municipal laws, ordinances, rules and
regulations with respect to its properties, charters, businesses and operations
except where any such non-compliance would not reasonably be expected to result
in a Material Adverse Effect. Without the prior written consent of the
Purchaser, the Company shall not (i) engage in any business activities
substantially different than those in which the Company is presently engaged,
(ii) cease operations, liquidate, merge or consolidate with any other entity
(excluding a Reverse Merger Transaction), (iii) pay any dividends on or purchase
outstanding shares of capital stock or equity of the Company or its
Subsidiaries, or (iv) sell, transfer or dispose of (A) all or substantially all
of the Company’s assets on a consolidated basis or (B) any of the Company’s or
its Subsidiaries’ material assets.

       

      (f) Assets.  Upon
request of the Purchaser, furnish the Purchaser with detailed information
concerning each account receivable of the Company and its Subsidiaries, the
status of each patent, patent pending and other intellectual property, and the
status and terms of each letter of intent or contemplated letter of intent with
respect to potential solar installations, designs and/or construction by the
Company or its Subsidiaries.

       

      4.7 Reverse Merger
Transaction.  The Purchaser shall have the right to participate
for up to $571,759.26 in any Reverse Merger Financing on the same terms and
conditions as all other investors in such Reverse Merger Financing in accordance
with terms of this Section 4.7.

       

      (a) At least
10 Business Days prior to the closing of the Reverse Merger Financing, the
Company shall deliver to the Purchaser a written notice of its intention to
effect a Reverse Merger Financing (“RM Notice”), which RM
Notice shall describe in detail the proposed terms of such Reverse Merger
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Reverse Merger Financing is proposed
to be effected, including all parties contemplated to participate therein in any
capacity, and shall include a term sheet or similar document relating thereto as
an attachment and any available drafts of contemplated transaction
documentation.

       

      (b) If the
Purchaser desires to participate in the Reverse Merger Financing, the Purchaser
shall provide written notice to the Company on or prior to the closing of the
Reverse Merger Financing specifying its election to participate in the Reverse
Merger Financing and the amount of the Purchaser’s participation.  The
Purchaser’s participation shall be on the same terms and conditions as all other
investors in such Reverse Merger Financing (subject to the exchange right set
forth in subsection (d) below).

       

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      (c) If the
contemplated terms of any Reverse Merger Financing change in any material
respect from those set forth in the RM Notice, the Company may not complete the
Reverse Merger Financing unless and until it first provides to the Purchaser
another RM Notice containing the currently contemplated terms of the Reverse
Merger Financing (and offering the Purchaser the right to participate as set
forth herein) at least 10 Business Days prior to the closing of such revised
Reverse Merger Financing.

       

      (d) If the
Purchaser elects to participate in the Reverse Merger Financing, the Purchaser
shall have the right to pay for the securities purchased in the Reverse Merger
Financing, and receive an effective 10% discount on the purchase price therefor,
by exchanging its Note in the principal amount of $591,770.83 in lieu of cash
for securities issued in the Reverse Merger Financing having a purchase price of
$571,759.26.  For clarification (i)  upon such exchange the
Holder shall surrender the Note to the Company (or Public Company) and the
$591,770.83 principal amount thereunder (consisting of 115% of sum of the
$500,000 Subscription Amount plus capitalized interest thereon at 7% per annum
for 5 months) shall be deemed paid in full, and (ii) the $571,759.26 purchase
price in the Reverse Merger Financing represents a 10% discount to the Purchaser
based on the assumption that the Note without such agreed 15% premium would have
a value of $514,583.33 (consisting of the $500,000 Subscription Amount plus
capitalized interest thereon at 7% per annum for 5 months).  If the
Purchaser elects to exchange its Note in part, the Note shall be applied against
the purchase price of such securities in the Reverse Merger Financing equal to
the applicable pro rata portion of $571,759.26 in accordance with the terms
hereof.

       

      4.8 Stock
Issuance.  As additional consideration for the Purchaser
purchasing the Note hereunder and making the loans evidenced thereby, upon or
promptly following consummation of a Reverse Merger Transaction, the Company
shall cause the Public Company to issue such number of shares of common stock
(“Common
Shares”) of the Public Company to the Purchaser such that following the
Reverse Merger Transaction, the Purchaser shall own 0.3125% of the fully-diluted
number of outstanding shares of common stock of the Public Company (assuming
conversion and exercise of all outstanding options, warrants and convertible
securities).  All Common Shares issued pursuant to this paragraph
shall be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Public Company.

       

       

      ARTICLE
V.

      MISCELLANEOUS

       

      5.1 Termination. 
This Agreement may be terminated by the Purchaser by written notice to the
Company if the Closing has not been consummated on or before November 17, 2008;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party.

       

       

      
        
           

        

        
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      5.2 Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Gemini Strategies, LLC and/or Gemini Master Fund Ltd. (collectively, “Gemini”) the
non-accountable sum of $7,500 for its legal fees and
expenses.  Accordingly, in lieu of the foregoing payment, the
aggregate amount that Gemini is to pay for the Note at the Closing shall be
reduced by $7,500.  In addition, the Company shall reimburse Gemini
and the Purchaser for estimated UCC searches and filing fees and fees and
expenses of any local or third party patent and trademark counsel engaged by the
Purchaser in connection with the security interests granted to the Purchaser,
which will be payable on the Closing Date out of funds otherwise deliverable by
Gemini for its Subscription Amount hereunder.  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.  In the event the Closing does not occur for any reason,
the Company shall pay Gemini the non-accountable sum of $5,000 for its legal
fees and expenses plus reimbursement of out-of-pocket amounts for UCC liens
searches, provided that such amount shall affect the Purchaser’s right to sue
for damages caused by any breach by the Company.

       

      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 to be provided by under
the Transaction Documents shall be in writing and delivered personally, by
facsimile, by email, or sent by a nationally recognized overnight courier
service, at the address, facsimile number or email address specified on the
signature pages hereto for such purpose.  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, or by email  at the email address set forth on the signature
pages attached hereto, prior to 5:30 p.m. (New York City time) on a Business
Day, (b) the next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile or email as set forth above on a day
that is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the third Business Day following the date of mailing, if sent
by regular mail, or (d) the Business Day following the date on which such notice
or communication is deposited with a nationally recognized overnight courier
service.  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 Purchaser, 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.

       

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      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 the Purchaser (other
than by merger).  The Purchaser may assign any or all of its rights
under this Agreement to any Person to whom the Purchaser assigns or transfers
the Note, provided that such transferee agrees in writing to be bound, with
respect to the Note, by the provisions of the Transaction Documents that apply
to the “Purchaser.”

       

      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 4.3.

       

      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
Note for the applicable statue of limitations.

       

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

       

      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” or other document image
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” or other document image
format data file 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 Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchaser 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 agrees 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.

       

      5.14 Payment Set Aside. To
the extent that the Company makes a payment or payments to the Purchaser
pursuant to any Transaction Document or the 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.

       

      5.15 Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by the Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,


       

      
        
           

        

        
          22

          
            

          

        

        
           

        

         

         

        without
limiting the foregoing, in no event shall any rate of interest or default
interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate.  It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law.  If under any circumstances whatsoever, interest in
excess of the Maximum Rate is paid by the Company to the Purchaser with respect
to indebtedness evidenced by the Transaction Documents, such excess shall be
applied by the Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at the Purchaser’s election.

      

       

      5.16 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.

       

      5.17 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.

       

      5.18 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
Page Follows)

       

       

       

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

       

      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.

       

      
        	
                 

                ENVISION
      SOLAR INTERNATIONAL, INC. 

                 

                 

              	 
      
	
                By:   
      /s/ Robert Noble         
      

                Name:  Robert
      Noble

                Title:    CEO

                 

              	 
      
	
                Address for Notice:

                4225
      Executive Square, Suite 1000

                San
      Diego, CA 92037

              	
                with
      a copy to:

                Haynes
      and Boone, LLP

                1221
      Avenue of the Americas, 26th
      Floor

                New
      York, New York 10020

              
	
                Fax:
      ___________________

                Email:
      _________________

                Attn:
      Robert Noble

              	
                Attention:
      Harvey J. Kesner, Esq.

                Fax:
      (212) 918-8989

                Email:
      harvey.kesner@haynesboone.com

              
	 
      	 
      


      

      


      GEMINI
MASTER FUND, LTD.

      By:           GEMINI
STRATEGIES, LLC, as investment manager

       

      By:  
/s/ Steven
Winters________________________________

      Name:         Steven
Winters

      Title:           President

      


      
        
          	
                  Address for Notice:

                	 
      
	
                  c/o
      Gemini Strategies, LLC

                  135
      Liverpool Drive, Suite C

                	
                  with copy
      to

                  Peter
      J. Weisman, P.C.

                
	
                  Cardiff,
      CA  92007 

                	
                  767
      Third Avenue, 6th
      Floor

                
	
                  Attn:  Steven
      Winters

                	
                  New
      York, NY  10017

                
	
                  Fax:
      (858) 509-8808

                	
                  Fax:
      (212) 676-5665

                
	
                  Email:  steve@geministrategies.com

                	
                  Email:  pweisman@pweisman.com

                


        

      

       

      Subscription
Amount:    $500,000.00

      Principal
Amount:           $591,770.83

      


      
24