EXHIBIT 2.02
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------x

In re:
                                            Chapter 11
OCEAN POWER CORPORATION,                    Case No. 02-15989 (REG)

                  Debtor.
-----------------------------x

                        DISCLOSURE STATEMENT TO ACCOMPANY
                         PLAN OF REORGANIZATION PURSUANT
                     TO SECTION 1125 OF THE BANKRUPTCY CODE
                     --------------------------------------

            THIS IS NOT A  SOLICITATION  OF ACCEPTANCE OR REJECTION OF THE PLAN.
ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE  STATEMENT HAS
BEEN  APPROVED BY THE  BANKRUPTCY  COURT.  THIS  DISCLOSURE  STATEMENT  IS BEING
SUBMITTED FOR APPROVAL BUT HAS NOT BEEN APPROVED BY THE COURT.

            PLEASE READ THIS  DISCLOSURE  STATEMENT  CAREFULLY.  THIS DISCLOSURE
STATEMENT  CONTAINS  INFORMATION  THAT MAY BEAR UPON YOUR  DECISION TO ACCEPT OR
REJECT  THE  PLAN OF  REORGANIZATION  WHICH IS  ENCLOSED  WITH  THIS  DISCLOSURE
STATEMENT.  THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS BELIEVE
THAT  ACCEPTANCE  OF THE PLAN OF  REORGANIZATION  IS IN THE BEST INTEREST OF THE
DEBTOR AND ITS CREDITORS.

            Ocean   Power   Corporation   (the   "Debtor"),   the   debtor   and
debtor-in-possession  herein, and the Official Committee of Unsecured  Creditors
of the Debtor,  respectfully  jointly  submit  this  disclosure  statement  (the
"Disclosure  Statement")  pursuant  to Section  1125 of the  Bankruptcy  Code to
accompany  their plan of  reorganization  dated  January __, 2008 (the  "Plan"),
which has been filed with the United  States  Bankruptcy  Court for the Southern
District of New York.  Capitalized terms contained in this Disclosure Statement,
which are not otherwise  defined herein,  will have the meaning ascribed to such
terms in the Plan.

                                       I.
                     Description of the Disclosure Statement
                     ---------------------------------------

            The purpose of this Disclosure Statement is to provide creditors and
equity holders of the Debtor with adequate information to enable them to make an
informed judgment concerning the Plan (attached hereto as Exhibit "A"). The Plan
is the document that contains the exclusive and final statement of the rights of
the Debtor, its creditors, equity holders and other interested parties, and sets
forth what (if  anything)  each of those  groups will  receive and how they will
receive it. It is strongly  recommended  that the Plan be read in its  entirety.
The  Disclosure  Statement is not a

<PAGE>

substitute  for reading the Plan in full,  as the  Disclosure  Statement  simply
describes the Plan, and provides  information  about the Debtor and the Case. If
the  Bankruptcy  Court  confirms the Plan, it will become binding on the Debtor,
all creditors, equity holders and other interested parties.

            You are also urged to read the contents of the Disclosure  Statement
in order to determine  what rights you may have to vote on or object to the Plan
and  before  making  any  decision  on any such  course  of  action.  Particular
attention  should  be  directed  to the  provisions  of the  Plan  affecting  or
impairing your rights as they existed before the  institution of this bankruptcy
proceeding. Please note, however, that this Disclosure Statement cannot tell you
everything about your rights. For instance, this Disclosure Statement cannot and
does not provide a complete  description of the financial  status of the Debtor,
all of the applicable  provisions of the Bankruptcy  Code, or other matters that
may be deemed  significant  by creditors and other parties in interest.  You are
also  encouraged to consult with your lawyers and/or  advisors as you review and
consider  the  Disclosure  Statement  and the Plan to enable you to obtain  more
specific   advice  on  how  the  Plan  will   affect   you.  If  there  are  any
inconsistencies  between  the  Plan  and  the  Disclosure  Statement,  the  Plan
provisions will govern.

            NO  REPRESENTATIONS   EXCEPT  THOSE  CONTAINED  IN  THIS  DISCLOSURE
STATEMENT  SHOULD  BE  RELIED  UPON BY YOU IN  EVALUATING  THE  PLAN.  ANY  SUCH
ADDITIONAL  REPRESENTATIONS  SHOULD BE REPORTED TO COUNSEL FOR THE DEBTOR OR THE
COMMITTEE, WHO IN TURN WILL PROVIDE SUCH INFORMATION TO THE BANKRUPTCY COURT FOR
SUCH  ACTION AS THE  BANKRUPTCY  COURT  MAY DEEM  APPROPRIATE.  THE  INFORMATION
CONTAINED HEREIN, INCLUDING,  WITHOUT LIMITATION, ALL FINANCIAL INFORMATION, HAS
NOT BEEN SUBJECT TO AUDIT.  THE DEBTOR AND THE  COMMITTEE  ARE UNABLE TO WARRANT
AND  REPRESENT  THE ACCURACY OF THE  INFORMATION  CONTAINED  IN THIS  DISCLOSURE
STATEMENT,  ALTHOUGH GREAT EFFORT HAS BEEN MADE TO ENSURE ITS ACCURACY. IF THERE
ARE INCONSISTENCIES BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT,  THE PLAN IS
CONTROLLING.

            Creditors and equity  holders whose Claims or Interests are impaired
have the right to vote to accept or reject the Plan. Generally speaking, a Claim
or Interest is impaired if the Plan alters the legal,  contractual  or equitable
rights of the holder of the Claim or Interest.  A Class of creditors accepts the
Plan when  creditors  holding  two-thirds  in amount of such class and more than
one-half in number of the Claims in such class who actually  cast their  ballots
votes to accept the Plan. A Class of Interests  accepts the Plan when  Interests
holding  two-thirds in amount of such class who actually cast their ballots vote
to accept the Plan.

In this Case,  the Plan contains three (3) Classes of Claims and two (2) Classes
of Interests.  The Plan impairs all holders of Claims and Interests,  except for
Class 1 and  Class 2  Claims,  in that it  alters  the  legal,  contractual  and
equitable rights of the holders of Claims and Interests.  The Plan provides that
holders of Class 3 Claims and Class 4 and 5 Interests  are  impaired in that the
Plan alters the legal,  contractual and equitable  rights of the holders of such
Claims and Interests. Class 1 and Class 2 Claims are not impaired under the Plan
and are conclusively presumed to have accepted the Plan under Section 1126(f) of
the Bankruptcy  Code.  Class 5 is impaired and is

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conclusively  presumed to have rejected the Plan under 11 U.S.C. Section 1126(g)
of the Bankruptcy  Code.  Accordingly,  votes on the Plan will be solicited from
Class 3 Claims and Class 4 Interests only.

            IN THE OPINION OF THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS,  THE  TREATMENT OF  CREDITORS  AND  INTEREST  HOLDERS  UNDER THE PLAN
CONTEMPLATES  A GREATER  RECOVERY THAN THAT WHICH IS LIKELY TO BE ACHIEVED UNDER
ANY OTHER  ALTERNATIVE FOR THE  REORGANIZATION OF THE DEBTOR, OR THE LIQUIDATION
OF THE DEBTOR UNDER CHAPTER 7 OF THE BANKRUPTCY  CODE.  ACCORDINGLY,  THE DEBTOR
BELIEVES THAT  CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTOR'S
CREDITORS AND INTEREST HOLDERS AND RECOMMENDS THAT YOU VOTE TO ACCEPT THE PLAN.

            The following materials are included with this Disclosure Statement:

            1.    A copy of the Plan;

            2.    A copy of an order  approving the  Disclosure  Statement  (the
                  "Disclosure  Statement Order"),  which states: (a) the date by
                  which  objections to  confirmation  of the Plan must be served
                  and filed, (b) the date of the hearing in the Bankruptcy Court
                  to consider  confirmation  of the Plan, and (c) other relevant
                  information; and

            3.    A Ballot  for  holders of Claims in Class 3 Claims and Class 4
                  Interests in under the Plan.

            This  Disclosure  Statement was approved by the Bankruptcy  Court by
the  Disclosure  Statement  Order on January __,  2008 after  notice and hearing
pursuant to Section 1125 of the Bankruptcy Code. The Bankruptcy Court found that
the information  contained herein is of the kind, and is sufficiently  detailed,
to  enable a  hypothetical,  reasonable  investor  typical  of the  class  being
solicited  to make an  informed  judgment  concerning  the  Plan.  HOWEVER,  THE
BANKRUPTCY COURT HAS NOT CONFIRMED THE PLAN, NOR IS THIS DISCLOSURE STATEMENT OR
THE DISCLOSURE STATEMENT ORDER TO BE CONSTRUED AS APPROVAL OR ENDORSEMENT OF THE
PLAN BY THE BANKRUPTCY COURT.

            As stated in the Disclosure  Statement  Order,  the Bankruptcy Court
has scheduled a hearing to consider  Confirmation of the Plan for _____ __, 2008
at __:__ _.m.  Holders of Claims and Interests and other parties in interest may
attend this hearing.  Objections to confirmation of the Plan, if any, must be in
writing and filed with the Bankruptcy Court and served,  so as to be received no
later than __:__ _.m. on ______ __, 2008, upon all of the following parties:

                             Halperin Battaglia Raicht, LLP
                             Counsel to the Debtor
                             555 Madison Avenue - 9th Floor
                             New York, New York 10022
                             Attn:   Alan D. Halperin, Esq.
                                     Robert D. Raicht, Esq.

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                             Arent Fox LLP
                             Counsel to the Official Committee
                             of Unsecured Creditors of the Debtor
                             1675 Broadway
                             New York, New York  10019-5820
                             Attn:    Schuyler G. Carroll, Esq.
                                      Andrew I. Silfen, Esq.

                             Office of the United States Trustee
                             33 Whitehall Street
                             New York, New York 10004
                             Attn:    Greg Zipes, Esq.

            The  following  is a  description  of the  assets,  liabilities  and
affairs of the Debtor,  a description  and analysis of the Plan, and an analysis
of alternatives to the Plan.

Representations / Limitations.
------------------------------

            NO PERSON IS AUTHORIZED BY THE DEBTOR IN CONNECTION WITH THE PLAN OR
THE  SOLICITATION  OF  VOTES  THEREON  TO GIVE  ANY  INFORMATION  OR TO MAKE ANY
REPRESENTATION  OTHER THAN AS CONTAINED  IN THIS  DISCLOSURE  STATEMENT  AND THE
EXHIBITS ANNEXED HERETO OR INCORPORATED BY REFERENCE OR REFERRED TO HEREIN,  AND
IF GIVEN OR MADE, SUCH INFORMATION OR  REPRESENTATION  MAY NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE DEBTOR.

            NO REPRESENTATIONS  CONCERNING THE DEBTOR OR THE PLAN ARE AUTHORIZED
OTHER THAN AS SET FORTH HEREIN.  ANY  REPRESENTATIONS  OR  INDUCEMENTS TO SECURE
YOUR ACCEPTANCE OF THE PLAN OTHER THAN AS CONTAINED  HEREIN SHOULD NOT BE RELIED
UPON BY YOU.

            THE INFORMATION  CONTAINED HEREIN HAS BEEN PREPARED BY THE DEBTOR IN
GOOD FAITH, BASED UPON UNAUDITED  INFORMATION  AVAILABLE TO THE DEBTOR AS OF THE
DATE  HEREOF.  ALTHOUGH THE DEBTOR HAS USED ITS BEST EFFORTS TO ENSURE THAT SUCH
INFORMATION  IS ACCURATE THE  INFORMATION  CONTAINED  HEREIN IS  UNAUDITED.  THE
DEBTOR BELIEVES THAT THIS DISCLOSURE STATEMENT COMPLIES WITH THE REQUIREMENTS OF
THE BANKRUPTCY CODE.

            THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF
THE DATE HEREOF,  UNLESS ANOTHER TIME IS SPECIFIED HEREIN,  AND DELIVERY OF THIS
DISCLOSURE  STATEMENT  SHALL NOT CREATE ANY  IMPLICATION  THAT THERE HAS BEEN NO
CHANGE IN THE FACTS SET FORTH HEREIN SINCE THE DATE OF THIS DISCLOSURE STATEMENT
AND

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<PAGE>

THE DATE THE MATERIALS  RELIED UPON IN PREPARATION OF THIS DISCLOSURE  STATEMENT
WERE COMPILED.

            THE DISCLOSURE  STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER
THAN TO DETERMINE HOW TO VOTE ON THE PLAN,  AND NOTHING  CONTAINED  HEREIN SHALL
CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY,  OR BE ADMISSIBLE
IN ANY  PROCEEDING  INVOLVING  THE  DEBTOR  OR ANY  OTHER  PARTY,  OR BE  DEEMED
CONCLUSIVE  ADVICE ON THE TAX OR OTHER  LEGAL  EFFECTS OF THE PLAN ON HOLDERS OF
CLAIMS AGAINST OR AN INTEREST IN THE DEBTOR.

            THE DESCRIPTION OF THE PLAN CONTAINED IN THIS  DISCLOSURE  STATEMENT
IS INTENDED AS A SUMMARY  ONLY AND IS  QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE PLAN  ITSELF.  EACH  CREDITOR  AND INTEREST  HOLDER IS  ENCOURAGED  TO READ,
CONSIDER AND CAREFULLY ANALYZE THE TERMS AND PROVISIONS OF THE PLAN.

            THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS BELIEVE
THAT THIS DISCLOSURE  STATEMENT CONTAINS INFORMATION OF A KIND AND IN SUFFICIENT
DETAIL TO ENABLE A HYPOTHETICAL REASONABLE INVESTOR TYPICAL OF HOLDERS OF CLAIMS
OF RELEVANT CLASSES TO MAKE AN INFORMED JUDGMENT  CONCERNING WHETHER TO VOTE FOR
OR AGAINST THE PLAN.  THE  BANKRUPTCY  COURT HAS NOT  VERIFIED  THE  ACCURACY OR
COMPLETENESS OF THE INFORMATION CONTAINED HEREIN.

            FAILURE BY A CREDITOR OR INTEREST  HOLDER TO TIMELY CAST A BALLOT OR
FILE AN OBJECTION TO  CONFIRMATION  OF THE PLAN IN ACCORDANCE  WITH THE TERMS OF
THE PLAN AND THE BANKRUPTCY  CODE,  SHALL  CONSTITUTE AN AGREEMENT BY SILENCE TO
ACCEPT THE TERMS CONTAINED IN THE PLAN.

            THIS  DISCLOSURE  STATEMENT  AND THE  PLAN  AT  ARTICLE  9 ET.  SEQ.
PROVIDES FOR  INJUNCTIVE  RELIEF AS TO, AMONG OTHERS,  THE DEBTOR AND ANY ENTITY
INTO WHICH THE DEBTOR  MERGES OR WHICH  MERGES  INTO THE DEBTOR.  THE  PERMANENT
INJUNCTIONS  SET FORTH IN THE PLAN WILL APPLY TO  HOLDERS OF ANY CLAIM,  LIEN OR
DEBT,   WHETHER   SECURED  OR  UNSECURED,   PRIORITY  TAX  (FEDERAL  OR  STATE),
NON-PRIORITY  UNSECURED  CLAIM OR ANY  INTEREST  IN THE  DEBTOR.  CREDITORS  AND
INTEREST HOLDERS WILL BE BOUND BY THESE INJUNCTIVE  PROVISIONS  UNLESS OBJECTING
CREDITORS  TIMELY FILE  OBJECTIONS IN ACCORDANCE  WITH THE  PROVISIONS SET FORTH
HEREIN AND APPEAR AT THE CONFIRMATION HEARING, TO PROSECUTE ANY OBJECTION.

            THIS DISCLOSURE  STATEMENT HAS BEEN NEITHER APPROVED NOR DISAPPROVED
BY THE  SECURITIES  AND EXCHANGE  COMMISSION.  THE

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COMMISSION HAS SIMILARLY NOT REVIEWED THE ACCURACY OF THIS DISCLOSURE STATEMENT.

                                       II.
                                   Background
                                   ----------

The Debtor's Organization and Business
--------------------------------------

            The Debtor was originally  incorporated  in the State of Delaware on
July 21,  1999.  Thereafter,  it merged  with and into PTC Group,  Inc, an Idaho
corporation  (which had prior to the  merger  changed  its name to "Ocean  Power
Corporation")  and a registrant  with the United States  Securities and Exchange
Commission   (the  "SEC").   The  merger  allowed  for  a  change  of  state  of
incorporation from Idaho to Delaware.  The Debtor's $0.01 par value common stock
has traded on the NASDAQ OTC Bulletin Board under the ticker symbol "PWREQ." The
Debtor has operated under this name and corporate structure since that time.

            The  Debtor is the  successor  to a  development  stage  company  to
develop and manufacture  modular  seawater  desalination  and power plants.  Its
operations were financed primarily by raising capital through private placements
of its stock and/or loans from third  parties.  The proceeds  from the financing
were used to develop the Debtor's  technologies,  pursue  acquisitions  and make
strategic alliances and pay operating costs.

Events Leading to the Commencement of the Case
----------------------------------------------

            The Debtor's  financial  problems are the result of a confluence  of
events,  including a general  contraction  of available  financing  from capital
markets and the bankruptcy in Norway of Sigma Elektroteknisk, AS, a wholly owned
subsidiary. In the year prior to the Petition Date (i.e., December 1, 2002), the
Debtor  endeavored  to stem  severe  cash flow  shortages  through,  among other
things, workforce and overhead reductions, and the consolidation of its business
operations.  Due to  persistent  cash flow  shortages,  the Debtor was forced to
terminate  substantially  all of its employees prior to the  commencement of the
Chapter 11 Case.

            Prior to the Petition Date,  the Debtor  obtained loans from Michael
D.  Lockwood   ("Lockwood")   individually   and/or  through  Algonquin  Capital
Management,  LLC  ("Algonquin"),  an entity owned and/or controlled by Lockwood.
The loans  were  evidenced  by a series of  promissory  notes  aggregating  $3.7
million,  which were secured by first priority liens on substantially all of the
assets of the Debtor.  Lockwood  assigned  all of his rights  under the notes to
Algonquin prior to the commencement of the Case.

            As its business  prospects  continued to deteriorate and the capital
markets  dried up for it,  the Debtor  found  itself  facing a severe  liquidity
crisis  and it fell into  default  under the notes  due  Algonquin.  The  Debtor
pursued  various  avenues to enable  the  business  to  continue  in  operation,
including  solicitation of strategic  investments in the company and/or the sale
of all or a portion  of its assets and  business.  Unfortunately,  none of those
efforts  came to  fruition  and the  Debtor  did not  have the  ability  to cure
defaults under the notes to Algonquin, much less satisfy them.

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<PAGE>

            By the fall of 2002,  the Debtor was without  sufficient  capital to
continue  to operate  and had been  unable to  identify  sources  of  additional
financing. The Debtor's management determined to seek limited additional funding
from  Algonquin  to enable it to file for  Chapter  11 and  effect a sale of its
assets  under  Section  363 of the  Bankruptcy  Code.  Facing  the  prospect  of
foreclosure,  the  Debtor  negotiated  the  terms of a  Section  363  sale  with
Algonquin  that would  enable the  Debtor to test the market and  determine  the
realizable   value  of  the   assets.   The  Debtor   also   obtained  a  modest
debtor-in-possession  financing facility from Algonquin to enable it to continue
to operate on a going concern  basis  pending the  conclusion of the Section 363
sale process.

            Having  negotiated  a financing  facility  and the terms of an asset
sale  process,  the Debtor  filed the  instant  Chapter  11 Case to protect  and
preserve its intellectual  property and maximize asset values for the benefit of
its creditors and equity holders.

                                      III.
                               The Chapter 11 Case
                               -------------------

Filing the Case
---------------

            The Debtor filed a petition for  reorganization  under Chapter 11 of
the Bankruptcy Code on December 1, 2002 (the "Petition  Date") and was continued
in  the  management  and  operation  of  its  businesses  and  properties  as  a
debtor-in-possession  pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
No trustee or examiner  was  appointed in this Case.  On December 16, 2002,  the
United  States  Trustee  appointed  a  committee  of  unsecured  creditors  (the
"Committee") in this Case,  which retained the law firm of Arent Fox LLC, as its
counsel.

First Day Orders
----------------

            Simultaneously  with the commencement of the Case, the Debtor sought
approval of typical  applications to facilitate the company's smooth  transition
into  Chapter 11. The  applications  included  requests  for entry of orders (a)
authorizing the Debtor to retain Halperin  Battaglia Raicht,  LLP, as bankruptcy
counsel for the Debtor,  (b) authorizing the Debtor's  continued use of existing
business forms and records and authorizing maintenance of certain bank accounts,
and (c) extending the Debtor's time to file schedules.  As part of its first day
motions,   the   Debtor   also   filed   motions   (i)   for   approval   of   a
debtor-in-possession  financing  facility and (ii) to sell  substantially all of
its assets to Algonquin (or its designee),  free and clear of liens,  claims and
encumbrances, subject to higher and better offers.

The DIP Facility
----------------

            As of the Petition  Date, the Debtor had no  unencumbered  assets or
credit available to fund its business operation,  and required additional monies
to fund operations during the pendency of the Case. Without funding,  the Debtor
would not have been able to operate its businesses pending  consideration of the
sale.

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<PAGE>

            Simultaneously  with the  commencement  of the Chapter 11 Case,  the
Debtor moved for authority to enter into a certain credit  agreement and related
agreements (the "DIP Loan Agreement")  with Algonquin (the "DIP Lender"),  under
which the DIP Lender  agreed to (a)  authorize  immediate  use, in the  ordinary
course of its business, of any and all income and receivables and all other cash
equivalents  constituting  Algonquin's  cash  collateral  within the  meaning of
Section 363(a) of the Bankruptcy Code ("Cash Collateral") and (b) advance to the
Debtor up to an  aggregate  principal  amount of  $216,819  for the  payment  of
expenses,  all in accordance with the Budget (the "DIP Facility").  The DIP Loan
Agreement  provided  for the accrual of interest on all  advances at the rate of
fifteen (15%) percent per annum.  The DIP Facility  granted the DIP Lender first
priority,  priming  liens in all of the  Debtor's  assets,  and a  superpriority
claim. Moreover, as security for all post-petition obligations to the DIP Lender
under the DIP Loan  Agreement,  the DIP  Lender  was  granted  a first  priority
priming security interest in and lien on all assets, but subject and subordinate
to a carve-out for certain  professional  fees and other  administrative  costs.
Finally,  the Debtor proposed to grant  Algonquin,  (as  pre-petition  lender) a
replacement lien in its assets as adequate  protection against the diminution of
value of any collateral as a result of the Debtor use of Cash Collateral  during
the pendency of the Case.

            The DIP Facility  would  terminate at the earlier of (a) the closing
of the asset sale, (ii) date of termination of the asset purchase  agreement for
any reason,  (iii) the  withdrawal  by the Debtor of the sale  motion,  and (iv)
February 28, 2003.  Simultaneously  with the Petition  Date,  the Debtor filed a
motion seeking  approval of the DIP Facility on an emergency,  interim and final
basis.

            By order dated December 5, 2002, the Bankruptcy Court authorized the
Debtor to obtain  debtor-in-possession  financing,  on an emergency  and interim
basis, pending a final hearing on the application. After notice and hearing, the
Bankruptcy  Court approved the entire $216,819 DIP Facility on a final basis, by
order dated  December 20, 2002.  The advances  under the DIP Facility were used,
among other things,  to fund  operations  and other costs pending the Asset Sale
(as discussed below)

The Asset Sale
--------------

            Simultaneously  with the Petition Date, the Debtor filed a motion to
approve the sale of  substantially  all of its assets pursuant to Section 363(b)
of the Bankruptcy Code (the "Asset Sale"). The Asset Sale contemplated a sale of
the Debtor's  business assets to Algonquin and Hibernia  Capital  Management LLC
(collectively, the "Purchaser") for the sum of $2 million, subject to higher and
better  offers.  As of the Petition  Date,  the  Purchaser  held a secured claim
against  the  Debtor  in an  amount in  excess  of $3.7  million.  As such,  the
Purchaser  reserved the right to satisfy the  purchase  price by way of a credit
bid pursuant to Section 363(k) of the Bankruptcy Code.

A hearing to consider  approval of the Asset Sale was  scheduled for January 15,
2003 (the "Sale Hearing"). The Purchaser was the only offeror at the Asset Sale.
Prior  to the  Sale  Hearing,  the  Committee  filed a  series  of  motions  and
objections. Among them were (a) an objection to the Asset Sale; (b) requests for
discovery of the Debtor (and certain of its  professionals)  and Purchaser  (and
certain of their  principals,  agents and  professionals),  consisting of, among
other things,  document requests,  interrogatories and deposition notices; (c) a
motion to surcharge  Purchaser's  collateral  pursuant to Section  506(c) of the
Bankruptcy  Code;  (d) a motion to terminate the

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Debtor's  exclusive  periods to file and solicit  acceptances  to a plan;  (e) a
motion to vacate the final order  approving a DIP Facility;  and (f) a complaint
seeking,  among other  things,  to avoid the  Purchaser's  liens and the related
adversary proceeding (collectively, the "Committee Objections").

            Ultimately,  the Committee  Objections were resolved and the Debtor,
the  Committee and the  Purchaser  agreed to the terms of a settlement  proposal
(the "Settlement")  that would provide certain  additional  consideration to the
estate for the Asset Sale and permit the  transaction  to be  consummated.  This
Court approved the sale  transaction,  incorporating the terms of the Settlement
therein. The transaction was approved by an Order dated February 6, 2003.

Liquidation of Water Assets
---------------------------

            The Settlement  provided,  among other things, that a portion of the
assets  transferred  to  Purchaser  upon  closing  of the  Asset  Sale  would be
reconveyed to the Debtor for the benefit of the estate.  These reconveyed assets
consisted  of a  60%  interest  in  certain  water-related  assets  and  related
technologies held by the Debtor (the "Water Assets"). The remaining 40% interest
in the Water  Assets  would be  retained  by  Purchaser's  designee,  Power Play
Energy,  LLC ("Power Play").  In an attempt to monetize the estate's interest in
the Water Assets, the Committee  negotiated a sale of the Water Assets. The sale
of the Water  Assets  was  designed  to  provide a cash  stream to the  Debtor's
estate.

            With the Debtor's  assent and  permission,  the  Committee and Oases
Desalination Ltd. ("Oases") entered into an asset purchase agreement pursuant to
which the Water  Assets  were sold to Oases in exchange  for Oases'  covenant to
commercialize  the assets and make  certain  royalty  payments.  Power Play also
agreed to transfer its  interests  in the Water  Assets.  The Oases  transaction
failed to close for a  significant  period of time  because  of Oases'  repeated
payment defaults.

            In or about October 2005,  Oases,  ReEnergy Group plc  ("ReEnergy"),
and  the  estate,  as  represented  by the  Committee,  entered  into a  consent
agreement pursuant to which Oases would sell its interest in the Water Assets to
ReEnergy for a cash payment to the estate of $750,000.  By order dated  November
16,  2005,  the sale to ReEnergy  was  approved  and the  transaction  closed in
December 2005. Upon closing of the transaction,  a portion of these proceeds was
used to pay certain post-petition expenses and other administrative costs of the
estate.

DIP Lender's Motion to Compel Payment of
Monies Due Pursuant to Debtor-in-Possession Loan
------------------------------------------------

            As outlined above,  following the  commencement of the Case, the DIP
Lender made the DIP Facility  available to the Debtor to fund operations pending
the Asset Sale.  The DIP Loan  Agreement  and the order  approving  it (the "DIP
Order") had various common bankruptcy protections including, without limitation,
the granting of liens and a super-priority claim.

            Some time after the ReEnergy  sale closed,  and the estate  received
the $750,000  payment,  the DIP Lender filed a motion with the Bankruptcy  Court
for an order liquidating its

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<PAGE>

superpriority  administrative  expense  claim  pursuant  to the  DIP  Order  and
directing immediate payment thereof. The Committee filed pleadings in opposition
to this motion,  and the parties argued the matter to the Bankruptcy  Court. The
Debtor did not take a position on this matter as the dispute hinged on the terms
of the  Settlement  negotiated  between  the  Committee  and the DIP Lender with
respect to the Water Assets  during the Asset Sale.  The Debtor was not involved
in those negotiations between the Committee and Algonquin.

            By decision  dated March 26,  2007,  the  Bankruptcy  Court  granted
Algonquin's  motion for summary  determining that (a) the estate was required to
make  repayment  under the DIP Loan and (b)  Algonquin  was required to fund the
carve-out  in favor of the  Committee  under the DIP  Order.  Following  further
negotiations between Algonquin and the Committee,  by consent order dated August
6, 2007 (the "Consent Order"), the estate's obligations under the DIP Order were
settled  for the sum of  $380,000.  Following  entry of the Consent  Order,  the
Committee paid $380,000 to Algonquin in satisfaction of the estate's obligations
under the DIP Loan Agreement.

Bar Date
--------

            The Debtor and the Committee  requested  that the  Bankruptcy  Court
establish a date in this Case as the last date to file proofs of claim, in order
to fix the universe of claims  against the Estate.  By order dated  February 14,
2006,  the Bankruptcy  Court  established  March 31, 2006 at 5:00 p.m.  (Eastern
Time) (the "Bar  Date") as the last day for the  assertion  of (a)  Claims  that
arose prior to the Petition  Date;  and (b) Claims that arose after the Petition
Date through and including January 31, 2006 (except for administrative claims of
the Professional Persons retained in the Case).

                                       IV.
                             Description of the Plan
                             -----------------------

            The Plan is a mechanism for the  reorganization  of the Debtor as an
ongoing  corporate  entity and the  distribution of cash and equity available to
the Estate's creditors and interestholders.  The Plan provides for the treatment
of all  classes of Claims and  Interests,  and  distributions  to holders of all
Allowed Claims and Interests  will come  primarily  from the remaining  proceeds
from the sale of the Water Assets and a $500,000 cash contribution from the Plan
Sponsor.  In addition,  certain  claimants  and  interestholders  will receive a
Distribution of New Common Stock under the Plan.

            The  Plan  is  organized  into  Articles.  Article  I  contains  the
definitions and rules of  interpretation  of terms used in the Plan.  Article II
provides  for the  treatment of Claims that need not be  classified  pursuant to
Section  1123(a)(1) of the  Bankruptcy  Code:  Claims under the DIP Facility (if
any),  Administrative Claims,  Priority Tax Claims and fees of the U.S. Trustee.
Article  III  designates  the  classes  of  Claims  and  Interests  that must be
classified pursuant to Section 1123(a)(1) of the Bankruptcy Code, and Article IV
specifies  the  treatment  of such  Classes of Claims and  Interests.  Article V
describes the means by which the provisions of the Plan will be implemented  and
the  mechanism  by which  distributions  will be made to  Claimants.  Article VI
describes  the rights,  powers and duties of the Creditor  Trustee,  who will be
responsible for making the  Distributions of Available Cash and New Common Stock
under the Plan.  Article VII describes the procedures for resolving and treating
Disputed Claims and Interests. Article VIII provides for the disposition of

                                       10

<PAGE>

Executory  Contract  under the Plan.  Article IX provides for a discharge and an
injunction against taking certain further actions against the Debtor.  Article X
contains  miscellaneous  provisions  regarding  the Plan.  Finally,  Article  XI
provides for the Bankruptcy  Court's retention of jurisdiction over the Case for
specified purposes.

Definitions
-----------

            The  definitions in Article I are of two types:  (a) terms of art in
bankruptcy practice, and (b) shorthand labels or references to a name or concept
that would  otherwise  take longer to express.  With  respect to the first type,
every  effort  has  been  made  to  make  such  definitions  correspond  to  the
definitions  used in the  Bankruptcy  Code,  the  Bankruptcy  Rules  or  general
bankruptcy practice. Definitions such as "Claim" and "Interests" are examples of
definitions in the first  category.  The definition of "Debtor" is an example of
definitions in the latter category.

Treatment of the Claims Under the DIP Facility,
Administrative Claims, Priority Tax Claims and Fees of the U.S. Trustee
-----------------------------------------------------------------------

            Article II provides for payment of remaining  sums due under the DIP
Facility,  Administrative  Claims,  Priority  Tax  Claims  and  fees of the U.S.
Trustee, which are not required to be classified under Section 1123(a)(1) of the
Bankruptcy Code.

            The obligations under the DIP Facility have been fully satisfied. As
noted above, by Consent Order, the estate's obligations under the DIP Order were
settled  for the sum of  $380,000.  Following  entry of the Consent  Order,  the
Committee paid $380,000 to Algonquin in satisfaction of the estate's obligations
under the DIP Loan Agreement.

            Holders of  Allowed  Administrative  Claims  will be paid in full in
Cash on the later of the  Effective  Date or  pursuant  to the terms of  payment
applicable to such  Administrative  Claim, or as otherwise agreed to between the
Debtor  and  the  respective  Claimant,  or  ordered  by the  Bankruptcy  Court.
Administrative  Claims  are the costs and  expenses  incurred  during  the Case.
Because the Debtor was at all times a development stage company, it did not have
any substantial operations and the Asset Sale occurred little over 60 days after
the Petition  Date. The Debtor's  business  ceased all together in February 2003
and has had no operations  since that time.(1) It is believed that no such costs
exist  other  than  fees  of  Professional  Persons  retained  in the  Case  and
non-operating  costs associated with the administration of the Case. The payment
of  Professional  Fees can only be made after the  Bankruptcy  Court has allowed
such fees upon application of each respective Professional Person.

            The Professional  Persons consist of (a) Halperin  Battaglia Raicht,
LLP,  bankruptcy  counsel to the  Debtor,  (b) Arent Fox LLP,  as counsel to the
Committee,  (c) Sadis & Goldberg,  as securities counsel to the Debtor, (d) HJ &
Associates, LLP, as accountants to the Debtor, and (e) Pritchett, Siler & Hardy,
P.C., as auditors to the Debtor. It is estimated that Professional  Fees, net

----------
(1)  There  are  no  asserted   Administrative  Claims  other  than  claims  for
Professional Fees. Although certain parties in interest filed proofs of claim in
response to the Bar Date asserting  Administrative status, the Debtor sought and
obtained orders of the Bankruptcy Court reclassifying or expunging such asserted
claims.

                                       11

<PAGE>

of pre-petition  retainers,  will aggregate  approximately $488,687 for services
rendered in the administration of the Case.

            Priority Tax Claims  consist of Claims for  franchise  and corporate
taxes owed to certain federal,  state and local taxing units, there are asserted
taxes claims owing to various taxing  authorities in the  approximate  amount of
$106,845. Under the Plan, Allowed Priority Tax Claims will be paid in Cash in an
amount  equal to such Allowed  Priority Tax Claim on the later of the  Effective
Date and the date such Priority Tax Claim becomes an Allowed Claim.

There are also fees payable to the United States  Trustee  pursuant to 28 U.S.C.
Section 1930(a)(6),  (the "UST Fees"), which are also a non-classified  category
of Claim.  The Debtor will pay all outstanding  amounts due to the United States
Trustee  upon  confirmation  and  through  the  Effective  Date,  and  after the
Effective Date, the Creditor  Trustee will pay the UST Fees until the entry of a
final decree in this Case.

Classification and Treatment of Claims and Interests
----------------------------------------------------

            Article III of the Plan divides all Claims  against,  and  Interests
in,  the  Debtor  into  Classes  and  Article  IV of the Plan  provides  for the
treatment of such Classes of Claims and Interests. The Classes consist of Claims
and Interests,  rather than creditors or  shareholders,  because one creditor or
shareholder  may hold more than one kind of Claim or Interest,  and Section 1122
of the  Bankruptcy  Code  requires that certain kinds of Claims and Interests be
given certain treatment. The classification and the treatment of the Classes and
Interests is summarized herein as follows:

            The Class 1 Claims consist of the Secured Claim, which is unimpaired
under the Plan.  On the Effective  Date,  the Secured Claim will be satisfied in
full by the  surrender of the  pre-petition  collateral,  if any,  securing such
Claim to the holders thereof. To the extent the value of the collateral securing
such Secured Claim is less than the Allowed Amount,  any such deficiency will be
entitled to treatment as a Class 3 Claim under the Plan.  All of the  collateral
securing the Class 1 Claim was sold or otherwise  transferred pursuant to orders
of the Bankruptcy Court and, thus, there is no remaining collateral securing the
Class 1 Claim.

            Prior to the Petition Date, the Debtor's  operations were funded by,
among  other  things,  loans and  advances  made by  Lockwood  and/or  Algonquin
evidenced by a promissory  note dated March 5, 2001 in the  principal  amount of
$2,500,000,  a promissory note dated September 19, 2001 in the principal  amount
of $500,000,  a promissory note dated August 16, 2002 in the principal amount of
$20,000,  a  promissory  note dated August 23, 2002 in the  principal  amount of
$15,000,  a  promissory  note dated August 29, 2002 in the  principal  amount of
$15,000,  a promissory note dated  September 5, 2002 in the principal  amount of
$10,000,  a promissory  note dated November 11, 2002 in the principal  amount of
$25,000,  a promissory  note dated November 18, 2002 in the principal  amount of
$10,000,  a promissory  note dated November 26, 2002 in the principal  amount of
$25,000 and a promissory  noted dated November 26, 2002 in the principal  amount
of $10,000 (held by Algonquin by assignment  from Hibernia  Capital  Management,
LLC ("Hibernia")) (collectively, the "Algonquin Notes"). In addition, the Debtor
obtained  funding from a loan made by Hibernia  evidenced  by a promissory  note
dated March 5, 2001 in the principal amount of $500,000 (the "Hibernia Note" and
together with the Algonquin Notes, collectively, the "Notes").

                                       12

<PAGE>

            As security for the obligations under the Notes, the Debtor executed
a Security  Agreement dated May 30, 2002 (the "Security  Agreement")  granting a
first priority lien and security  interest in substantially  all of the Debtor's
assets, including (a) the capital stock of any subsidiary of the Debtor, and (b)
all personal property, real property, accounts receivable, inventory, equipment,
machinery,  fixtures,  contractual  rights,  intellectual  property  (including,
without limitation,  trademarks,  copyrights,  patents and patent applications),
all  moneys,  securities,   investment  property,  financial  assets  and  other
property,  rights to cash  settlements,  all books and  records  relating to the
collateral, of the Debtor, in each instance, wherever located and whether now or
hereafter  existing and whether now owned or hereafter  acquired,  of every kind
and  description,   tangible  or  intangible  (collectively,  the  "Pre-Petition
Collateral").  The  Notes  and  the  Security  Agreement  will  be  referred  to
hereinafter, collectively, as the "Pre-Petition Agreements").

            The  Debtor  asserts  that the  claim  due  under  the  Pre-Petition
Agreements  (the  "Pre-Petition  Indebtedness")  aggregated  $3,737,516.08,   to
Algonquin and $607,470.15, to Hibernia, for a total of $4,344,986.23,  as of the
Petition  Date,  repayment  of which was  secured  by liens on the  Pre-Petition
Collateral  granted  under the  Security  Agreement.  At the Sale Hearing on the
Asset Sale, Algonquin and Hibernia,  as Purchaser,  credit bid $2 million of its
claims under the Pre-Petition Agreements to acquire the Debtor's assets pursuant
to an asset purchase agreement. The Bankruptcy Court approved the asset purchase
agreement  between the Debtor and Purchaser on February 6, 2003,  subject to the
terms of the Settlement (previously discussed herein).

            As a result of its $2  million  credit  bid at the Asset  Sale,  the
Pre-Petition   Indebtedness   due  to   Algonquin/Hibernia   was  reduced  on  a
dollar-for-dollar  basis.  Because  all of the  Debtor's  assets  were  sold  in
connection  with  the  Asset  Sale,  there  are no  assets  and/or  Pre-Petition
Collateral  securing the  remaining  claims under the  Pre-Petition  Agreements.
Thus,  the value of the  Class 1 Claim is zero.  Under the  Consent  Order,  the
Debtor and the Committee,  on the one hand,  and Algonquin and Hibernia,  on the
other,  agreed that the  remaining  claims of Algonquin  and  Hibernia  would be
treated  as  allowed  general  unsecured  nonpriority  claims  in the  amount of
$1,658,822.55 and $605,844.35, respectively. Such claims are to be treated under
Class 3 (Unsecured Claims) under the Plan.

            Class 2 consists of all Priority Claims,  which are unimpaired under
the Plan.  Priority  Claims consist of wage or wage related claims  described in
Section 507(a)(3) and (a)(4) of the Bankruptcy Code, which are afforded priority
only to the extent of $4,650 (the statutory priority afforded such claims at the
time the Case was filed) for each holder of such a Claim. Class 2 Claims will be
paid 100% of the Allowed Amount of such Claims,  without interest,  on the later
of the Effective Date or on the date such Claims becomes Allowed.  To the extent
any wage or wage-related claim exceeds $4,650,  such excess will be treated as a
Class 3 Claim.  Based upon the results of the Bar Date,  Scheduled  and asserted
Priority Claims aggregated  $695,151.77 as of the Petition Date. The substantial
portion of the asserted Priority Claims were overstated and/or misclassified and
the  Debtor  objected  to certain  overstated  and  misclassified  claims in the
Debtor's First Omnibus  Objection to Claims,  dated October 4, 2007. On November
7, 2007 the Bankruptcy  Court entered an order  reducing,  reclassifying  and/or
expunging  certain of the Class 2 Priority  Claims,  which reduced the aggregate
Class 2 Priority Claims to $54,177.40.  The Debtor and/or Creditor  Trustee,  as
appropriate, will reserve the right to

                                       13

<PAGE>

assert objections to such claims on all available  grounds.  It is believed that
allowed Class 2 Claims total $23,250.00

            Class 3 consists of Unsecured  Claims,  which are impaired under the
Plan.  As soon  as  practicable  following  the  Effective  Date,  each  Allowed
Unsecured Claim will be satisfied, settled, discharged and released, in full, by
Pro Rata  Distributions  of (a)  Available  Cash,  after  payment of all Allowed
Administrative  Claims,  Priority Tax Claims and Class 2 Claims and  appropriate
reserves for Disputed Claims are  established  for the foregoing;  and (b) 6% of
the New Common Stock to be issued under the Plan,  on the  Effective  Date or as
soon as practical  thereafter or on the date such Claim becomes Allowed.  In the
event the Plan is  confirmed  under  Section  1129(b)  of the  Bankruptcy  Code,
holders of  Unsecured  Claims will receive only 4% of the New Common Stock to be
issued under the Plan. Any Unsecured Claim that does not become an Allowed Claim
will not receive any Distribution of Available Cash,  Unsecured Claim New Common
Stock or any other Asset and will be deemed  satisfied,  settled and released in
full. Based upon the results of the Bar Date,  Scheduled and asserted  Unsecured
Claims aggregate  $19,780,186.40  as of the Petition Date. It is believed that a
portion of the asserted Unsecured Claims are overstated and/or misclassified and
the Debtor and/or Creditor  Trustee,  as appropriate,  will assert objections to
such claims on all  available  grounds.  While it is  contemplates  that Allowed
Unsecured Claims will receive a Pro Rata share of the 6% of the New Common Stock
(provided  the Plan is confirmed on a  consensual  basis) under the Plan,  it is
unclear whether there will be any Available Cash for  Distribution to holders of
Class 3 Claims.

            Class 4 consists of  Interests,  which are impaired  under the Plan.
Class 4 Interests  includes all of the currently  outstanding stock interests in
the Debtor.  The Debtor has 274 shareholders  that own or hold 56,182,746 of the
issued and  outstanding  shares.  Holders of  Interests  will receive a Pro Rata
share of 1% of the New Common Stock to be issued under the Plan. However, in the
event the Plan is  confirmed  under  Section  1129(b)  of the  Bankruptcy  Code,
holders of Interests will receive no  Distribution of New Common Stock under the
Plan.  All existing  Interest will be deemed  canceled and  extinguished  on the
Effective Date pursuant to the Plan.

            Class 5 consists  of all Options and  Warrants,  which are  impaired
under the Plan.  Class 5 includes all options and warrants to purchase  stock of
the Debtor.  Holders of Options and Warrants will receive no Distributions under
the Plan.  Class 5 Options and Warrants will be deemed canceled and extinguished
on the  Effective  Date  pursuant  to the Plan.  Holders of Class 5 Options  and
Warrants are presumed to have rejected the Plan  pursuant to Section  1126(g) of
the Bankruptcy Code.

Implementation of the Plan
--------------------------

            The Plan contemplates that the primary source for Cash Distributions
will be the  Initial  Investment  (i.e.,  $500,000)  to be  provided by the Plan
Sponsor in  exchange  for no less than 93% of the New Common  Stock to be issued
under the Plan.(2) The Plan Sponsor has no connection

----------
(2) As of the hereof,  Debtor's  counsel is holding a $100,000  deposit from the
Plan  Funder.  Within 10 days  prior to the  hearing on  confirmation,  the Plan
Funder will transfer an  additional  $400,000 to Debtor's  counsel,  for a total
Initial  Investment of $500,000.  The $500,000  will be fully  refundable in the
event the Plan is not  confirmed by the  Bankruptcy  Court;  provided,  however,
$50,000  of the  escrowed  funds  may be used  to fund  the  costs  of the  plan
confirmation  process

                                       14

<PAGE>

or other relationship with any of the Debtor's existing management and is not an
"insider" as that term is defined in the Section 101(31) of the Bankruptcy Code.
In  addition,  the Retained  Assets  include Cash of the Debtor in the amount of
approximately $247,000, which will be available for Distribution under the Plan.
Such Cash  represents the remaining  proceeds from the sale of the Water Assets,
less payment of certain post-petition  claims,  including the payment to the DIP
Lender pursuant to the Consent Order.  Finally, the Plan provides that 7% of the
New  Common  Stock will be  distributed  6% each to  Unsecured  Claims and 1% to
Interests, provided, however, that in the event that holders of Unsecured Claims
vote as a class to reject the Plan,  the  Debtor  may seek to  confirm  the Plan
under the cram-down  provisions  of Section  1129(b) of the  Bankruptcy  Code in
which Case,  if confirmed,  holders of Unsecured  Claims would receive 4% of the
New Common Stock and Interests would receive no Distribution of New Common Stock
under the Plan.

            The Initial  Investment  by the Plan Sponsor will be used (a) to pay
costs and expenses  associated with the Case, (b) to pay Allowed  Administrative
Claims and  Priority Tax Claims,  (c) to fund Cash portion of the  Distributions
under  the  Plan  and (d) to fund the  administration  of the Case and  complete
implementation of the Plan by the Creditor Trustee.

The Creditor Trustee
--------------------

            The Plan contemplates that the  post-confirmation  administration of
the Case will be undertaken by the Creditor  Trustee.  Prior to the Confirmation
Date,  the  Committee,  after  consultation  with the  Debtor,  will  select the
Creditor Trustee, who will undertake and perform the rights,  powers, duties and
responsibilities  of the Creditor Trustee sent out herein.  The Creditor Trustee
will serve as "the  representative  of the  estate" as  contemplated  by Section
1123(b)(3)(B) of the Bankruptcy  Code, and will, in addition,  have those powers
and duties set forth in Sections 323, 704(1), 704(2), 704(5), 704(9), 1106(a)(6)
and 1106(a)(7) of the Bankruptcy Code.

            The powers,  rights,  and  responsibilities  of the Creditor Trustee
will include the authority and responsibility to: (a) receive,  manage,  invest,
supervise,  and protect the  Retained  Assets,  the Initial  Investment  and the
Available Cash; (b) calculate and implement distributions of the Available Cash,
Unsecured Claim New Common Stock and the  Interestholder  New Common Stock;  (c)
prosecute,  compromise, and settle all Rights of Action and objections to Claims
and Interests;  and (d) pay Professional  Fees of professionals  retained in the
Case and Allowed  pursuant to any order of the  Bankruptcy  Court,  whether such
Professional  Fees  were  incurred  before  or after  the  Effective  Date.  The
Available Cash will, as of the Effective  Date, be transferred by the Debtor and
the Plan Sponsor to the Creditor Trustee.

            The Creditor  Trustee will be authorized  and empowered to object to
Claims and to pursue and  prosecute,  to settle (on five days' notice to parties
who have requested notice in this Case), or to decline to pursue such objections
or  Rights  of  Action.  The  Creditor  Trust  will be  substituted  as the real
party-in-interest in any such action or objection commenced by the Debtor or the
Committee  whether or not commenced  prior to the Effective  Date.  The Creditor
Trustee may

--------------------------------------------------------------------------------
(fees and expenses of counsel, audit fees, taxes and SEC filing expenses) in the
event  that the  estate  does not have  sufficient  funds to  conclude  the plan
confirmation  process and the Debtor believes,  in good faith,  that use of such
pre-confirmation advance will be sufficient to conclude the process.

                                       15

<PAGE>

pursue or decline to pursue such  objections to Claims or Rights of Action.  The
Creditor Trustee may settle,  release, sell, decline to pursue, assign, transfer
or compromise such  objections to Claims or Rights of Action without  Bankruptcy
Court approval.

            The Reorganized  Debtor will authorize and issue the Unsecured Claim
New Common Stock and the  Interestholder New Common Stock in accordance with the
terms of the Plan. The Transfer Agent shall make  distributions of the Unsecured
Claim New Common  Stock and the  Interestholder  New Common  Stock on account of
Allowed Claims and Interests  within five (5) Business Days of receiving  notice
by the  Creditor  Trustee.  The Creditor  Trustee will effect all  Distributions
under the Plan (with the  exception  of all duties  and  obligations  related to
making  distributions of Unsecured Claim New Common Stock and the Interestholder
New Common Stock, which is the exclusive  responsibility of the Transfer Agent),
and may utilize the assistance of outside parties to effect  Distributions under
this Plan to the extent  he/she  deems it to be necessary or desirable to do so.
The Distributions  and other treatment  afforded holders of Claims and Interests
under this Plan will be the only payments  received by the holders of Claims and
Interests  against the Debtor.  The Creditor Trustee (a) will be exculpated from
any liability for any errors or omissions  made in  discharging  his/her  duties
hereunder,  including the making of  Distributions  under this Plan,  except for
errors or  omissions  arising  from  his/her  own gross  negligence  or  willful
misconduct;  and (b) may resign its  position on 30 days  notice.  The  Creditor
Trustee will select a successor to fulfill  his/her  responsibilities  under the
Plan.  The Creditor  Trustee,  if required by the United  States  Trustee and if
practicable, shall be bonded for the funds held in the Escrow Account. Such bond
will be cancelable on 30 days notice to the United States  Trustee and all costs
and expenses related to the bond shall be reimbursed to the Creditor Trustee.

            The  Creditor  Trustee  will  be  compensated  as set  forth  in the
Creditor Trustee Agreement and will not be required to file a fee application to
receive  compensation.  Subject  to  the  provisions  of  the  Creditor  Trustee
Agreement,  the  Creditor  Trustee  will be  entitled  to hire and  engage  such
professionals  and/or  consultants  as the Creditor  Trustee deems  necessary to
assist in carrying  out the duties of the Creditor  Trustee with the  reasonable
fees and expenses of such  professionals  and/or consultants to be paid from the
Available Cash in the Escrow Account.  Pursuant to the terms of the Plan and the
Creditor Trustee Agreement, the Creditor Trustee may pay from the Escrow Account
all  reasonable  fees and expenses  incurred in  connection  with the duties and
actions  of the  Creditor  Trustee,  including,  but not  limited  to,  fees and
expenses to pay insurance,  any bond,  taxes and other  expenses  arising in the
ordinary course of the business maintaining,  liquidating,  disposing of and the
distribution  of the Available Cash  compensation to the Creditor  Trustee.  The
Creditor  Trustee  may  pay  all  such  reasonable  fees  and  expenses  without
Bankruptcy Court approval.  Any disputes  concerning the  administration  of the
Escrow  Account or  implementation  of the  distribution  of  Available  Cash as
provided in this Plan may be brought before the Bankruptcy Court for resolution.

            Upon  entry  of the  final  decree  in this  Case  and as  otherwise
provided in the Creditor Trust Agreement, the Creditor Trust shall be terminated
and dissolved without further action by the Creditor Trustee. In connection with
the  above-described  assets, any and all rights,  claims,  defenses,  causes of
action,   objections  or  Rights  of  Action,  any  attorney-client  or  similar
privilege,  work-product  privilege,  or other communications  (written or oral)
transferred to the Creditor  Trust shall vest with the Creditor  Trustee and its
representatives.

                                       16

<PAGE>

            The  Creditor  Trust shall be  established  for the sole  purpose of
liquidating and  distributing  assets,  in accordance  with Treasury  Regulation
Section 301.7701-4(d), with no objective to continue or engage in the conduct of
a trade or business.

            For federal  income tax  purposes,  all parties  including,  without
limitation,  the Debtor,  the Reorganized  Debtor,  the Creditor Trustee and the
holders of Allowed Class 3 Claims who are  beneficiaries  of the Creditor Trust,
shall treat the transfer of assets to the Creditor Trust, in accordance with the
terms of the Plan and the Creditor Trust Agreement, as a transfer to the holders
of Allowed  Class 3 Claims in full  satisfaction  of such Claims,  followed by a
transfer by such holders to the Creditor  Trust,  and the  beneficiaries  of the
Creditor Trust shall be treated as the grantors and owners thereof.

            The  beneficial  interests  in  the  Creditor  Trust  shall  not  be
certificated  and are not  transferable  (except as  otherwise  provided  in the
Creditor Trust Agreement).

Plan Distributions and Claim Reconciliation
-------------------------------------------

            All known  assets of the Estate  will be  transferred  to the Escrow
Accounts  to be  maintained  by  the  Creditor  Trustee.  All  Distributions  of
Available  Cash to  Claimants  pursuant to this Plan will be paid from funds and
assets  transferred by the Debtor,  and  contributed by the Plan Sponsor,  to be
held by the Creditor  Trustee.  The Creditor Trustee will make all Distributions
of Available Cash  (estimated at  approximately  $747,000) in respect of Allowed
Administrative Claims,  Priority Tax Claims, and Class 2 and 3 Claims under, and
in  accordance  with,  the Plan.  All  Distributions  of New Common Stock to the
holders of Class 3 Claims and Class 4  Interests,  will be made by the  Transfer
Agent, and will be overseen by the Creditor  Trustee.  Prior to the confirmation
hearing,  the Plan Sponsor will deliver the Initial Investment (i.e.,  $500,000)
to Debtor's  counsel to be held pending the  Effective  Date.  On the  Effective
Date,  the  Initial  Investment  will be released  from  escrow by the  Debtor's
counsel and transferred to the Creditor  Trustee for  distribution to holders of
Allowed Claims in accordance with this Plan. In addition,  the Plan Sponsor will
deliver to the Creditor  Trustee  evidence of the reservation by the Reorganized
Debtor of New Common  Stock in an amount  sufficient  to make the  Distributions
under the Plan.  The  Reorganized  Debtor,  in  consultation  with the  Creditor
Trustee,  will make (or cause to be made) one or more  Distributions  of the New
Common  Stock,  and will make a final  Distribution  of the New Common  Stock in
accordance  with the Plan as soon as practical  following the  conclusion of the
claim  reconciliation  process.  The Distributions and other treatment  afforded
holders of Claims and Interests  under this Plan will be the only  Distributions
received by the holders of Claims against, and Interests in, the Debtor. As soon
as practical  following the Effective  Date,  the Creditor  Trustee will prepare
Distribution  schedules with respect to (a) Unsecured  Claim New Common Stock to
be  received  by holders  of Class 3 Claims,  and to (b) each Class of Claims to
receive  Available Cash under the Plan. The Creditor Trustee will have the right
to  conclusively  rely on the records of the Transfer  Agent with respect to the
holders of Interests.

            The Creditor Trustee will have the right,  within the first 180 days
following the Effective Date, or during such additional time requested for cause
shown and  authorized  by Final Order,  to object to any and all Claims.  Unless
otherwise ordered by the Bankruptcy  Court, or

                                       17

<PAGE>

agreed  to by  written  stipulation  approved  by a Final  Order,  or until  the
objection thereto is withdrawn,  the Creditor Trustee may litigate the merits of
each  Disputed  Claim until  determined  by Final Order.  Any Claim for which no
objection has been filed within the above-referenced time fixed therefor will be
deemed an Allowed  Claim.  The  Creditor  Trustee and the holder of any Disputed
Claim may enter into a written  settlement  agreement to compromise  such Claim,
which agreement will become  effective upon entry of a Final Order approving the
terms thereof.  Any Claim filed after the  Confirmation  Date, other than Claims
for  Professional  Fees,  fees payable to the U.S.  Trustee or rejection  damage
claims that were not  required to be filed prior to the  Confirmation  Date,  is
deemed  disallowed  and expunged  without any action on the part of the Creditor
Trustee,  unless  the  post-Confirmation  Date  filing  of such  Claim  has been
authorized  by Final Order and the filing is in compliance  with such order.  In
the event of a post-Confirmation Date filing that is duly authorized and timely,
the  Creditor  Trustee  will have until (a) the date set in the Final  Order for
objecting to such Claim,  (b) the later of 180 days following the Effective Date
or 45 days  following the filing of the Claim,  or (c) such later date as may be
requested  for cause  shown and  authorized  by Final  Order,  to object to such
Claim.

            To  the  extent   applicable,   the   Creditor   Trustee  in  making
Distributions  under the Plan will comply with all tax withholding and reporting
requirements  imposed  on it by any  governmental  unit,  and all  Distributions
pursuant  to the  Plan  will  be  subject  to  such  withholding  and  reporting
requirements.  The Creditor Trustee may withhold the entire  Distribution due to
any holder of an Allowed  Claim until such time as such  holder  provides to the
Creditor  Trustee  the  necessary  information  to comply  with any  withholding
requirements  of any  governmental  unit.  Any property so withheld will then be
paid by the Creditor Trustee to the appropriate  authority.  If the holder of an
Allowed  Claim  fails to  provide  the  Creditor  Trustee  with any  information
necessary to comply with any withholding  requirement of any  governmental  unit
within sixty days after the date of first  notification by the Creditor  Trustee
to the holder of the need for such information,  then the holder's  Distribution
will be treated as an Unclaimed  Distribution (see below).  The Creditor Trustee
may be required to  identify,  by tax  identification  number,  each holder of a
Claim that  receives a  Distribution  pursuant  to the Plan.  To ensure that the
Creditor  Trustee  has a tax  identification  number for each holder of a Claim,
Claimants  will  be  sent a Form  W-9  (or  may  download  one at  www.irs.com).
Claimants must return the completed and signed Form W-9 to the Creditor  Trustee
at the following address, postage pre-paid:

                   Creditor Trustee of Ocean Power Corporation
                                c/o its Attorneys
                                  Arent Fox LLP
                                  1675 Broadway
                               New York, NY 10019
               Attn: Tax Identification - Ocean Power Corporation

If a Claimant  does not return the completed  Form W-9 to the Creditor  Trustee,
the Creditor Trustee is allowed to retain  Distributions to Allowed Claims until
the  appropriate  tax  identification  information is provided.  If the Creditor
Trustee requests a tax identification  number from a Claimant,  and the Claimant
does not respond by providing  it, the Claimant will lose the right to receive a
Distribution pursuant to the Plan.

                                       18

<PAGE>

            Notwithstanding  any other  provision of the Plan, the  Confirmation
Order or the  Creditor  Trustee  Agreement,  the  Creditor  Trustee will have no
obligation to make a  Distribution  on account of an Allowed Claim to a specific
holder of an Allowed  Claim if the amount to be  distributed  to that holder (a)
does not  constitute  a final  Distribution  to such holder and (b) is less than
$1,000.  Any  undistributed  amount  will be held  over to the  next  subsequent
Distribution Date and, if the amount to be distributed to the holder would never
exceed  $50,  such holder will be excluded  from  receiving a  Distribution.  In
addition,  the Creditor Trustee reserves the right to request  subsequent relief
from the Bankruptcy Court to exclude holders from the final  Distribution  under
the  Plan  to the  extent  that  the  amounts  otherwise  distributable  to such
Claimants  in  connection  with such final  Distribution  would be de minimis or
create undue administrative expense.

            Unclaimed Distributions  (including  Distributions of Available Cash
made by checks which fail to be negotiated  and/or  Distributions  of New Common
Stock  which are  returned  as  undeliverable  to the  Transfer  Agent)  will be
retained by the Creditor Trustee (or Transfer Agent, as appropriate) and held in
trust for the beneficial holders of Allowed Claims or Interests, as the case may
be, entitled  thereto for a period of 90 days after the  Distribution  Date. Any
Distribution  remaining  unclaimed 90 days after the  Distribution  Date will be
canceled (by a stop payment  order or  otherwise),  the Claim(s) or  Interest(s)
relating to such  Distributions(s) will be deemed forfeited and expunged and the
holder of such Claim or Interest will be removed from the Distribution  schedule
or Transfer Agent's records and will receive no further Distributions under this
Plan. Any and all canceled  Distributions  will be  redistributed  in accordance
with Article IV of the Plan.

The Plan Sponsor
----------------

            Trinad Capital Master Fund, Ltd. ("Trinad" or the "Plan Sponsor") is
a micro-cap activist hedge fund with approximately $157 million under management
as of June 30, 2007. As part of its activist  strategy,  Trinad looks to acquire
90% or more of the  outstanding  shares of publicly  traded  companies  that are
emerging in "clean" form from bankruptcy proceedings.  Trinad typically looks to
engineer a reverse  merger  transaction  whereby an operating  company is merged
into the shell company as an efficient and effective  methodology for taking the
company  public.  Trinad may seek to raise  capital prior to or at the time such
merger is effected.

            Examples of Trinad's  utilization  of this  strategy  most  recently
include the merger of New Motion Inc.  (operating company) with MPLC Inc. (shell
company) (ticker:  NWMO). Trinad purchased 93% of the outstanding shares of MPLC
in late 2006 and consummated the reverse merger  transaction  with New Motion in
early 2007 while  simultaneously  raising in excess of $20 million. In addition,
Trinad  successfully  completed a reverse merger of Starvox  (operating)  and US
Wireless  Data (shell USWI) in the first quarter of 2007 and raised in excess of
$20 million  prior to the  merger.  Trinad  currently  controls  Mediavest  Inc.
(MVSI),  a shell  company that has raised in excess of $8 million and is engaged
in  merger  discussions  with  various  media/entertainment  companies  and also
successfully merged Amalgamated Technologies,  Inc. into ProLink Holdings (PLKH)
in December of 2005.

            The Plan Sponsor has identified the Debtor as an attractive  vehicle
for a merger  transaction.  On the Effective  Date,  Trinad will receive no less
than 93% of the New Common Stock in

                                       19

<PAGE>

consideration of the Estate's receipt of the Initial  Investment.  Following the
Effective Date, Trinad will merge an existing  non-public  company (as discussed
below) in the Reorganized Debtor and use its interest in the New Common Stock to
raise  additional  capital for the Reorganized  Debtor's  business (as discussed
below).  Pending the merger with NorthStar (as defined and discussed below) or a
suitable  alternative merger candidate,  the Plan Sponsor (or its designee) will
be prohibited from selling or otherwise transferring any of the New Common Stock
it  receives  under  the Plan for a period of ninety  (90)  days  following  the
occurrence  of  all of the  following  events:  (a) a  transaction  between  the
Reorganized Debtor and a merger partner has been consummated,  (b) a Form 8K has
been filed by the Reorganized Debtor with the SEC setting forth the terms of the
merger,  acquisition  or  other  transaction,  with  disclosures  to be  made on
substantially  the  same  terms  as  would be  required  by an  entity  filing a
registration  statement  with the SEC, and (c) audited  financials of the merger
partner have been filed with the SEC.

            Following the Effective Date,  pursuant to the Plan, the Reorganized
Debtor will have no debt  obligations,  will hold the assets of merged  business
entity,  and may have an available net operating  loss to offset future  taxable
income.  Trinad has the financial wherewithal and intent to fund the Reorganized
Debtor's financial needs to the extent necessary.

Post-Confirmation Merger Transaction
------------------------------------

            The Plan Sponsor is currently in negotiations with NorthStar Systems
International,   Inc.  ("NorthStar"),  a  non-public  company,  as  a  potential
candidate for a merger with the Reorganized Debtor following the Effective Date.
Subject to successful  conclusion of  negotiations  between Trinad and NorthStar
and the results of certain due diligence  currently being  undertaken,  the Plan
Sponsor will cause the Reorganized Debtor to merge with NorthStar.

            NorthStar is a leading  provider of wealth  management  software for
financial  services   institutions.   Founded  by  its  CEO,  Robert  Zangrillo,
NorthStar's  growing list of clients includes  Blackrock,  Charles Schwab,  Legg
Mason,  and  Wachovia.   NorthStar  products,  delivered  either  on-premise  or
on-demand,  empower  thousands of  financial  advisors and their teams with full
lifecycle advisory  capabilities to acquire,  implement and manage client assets
and liabilities in a holistic and compliant  manner.  NorthStar is headquartered
in San Francisco and has an office on Wall Street in New York.

            Headed by Mr. Zangrillo, and its president,  Collin Cohen, NorthStar
has  assembled an  exceptional  management  team with over 175 years of combined
management   experience  in  the  enterprise  software  and  financial  services
industries. The management team has a proven track record of building successful
startup companies as well as leading Fortune 500 companies.

            Robert  Zangrillo,  the  Chairman  and Chief  Executive  Officer  of
NorthStar,  is a veteran in the financial services and software industries,  and
his  talents  for  building  teams  dedicated  to  delivering  leading  industry
solutions are widely known. Prior to founding NorthStar, Robert was the Founder,
Chairman  and  CEO  of  InterWorld,  a  leading  enterprise  eCommerce  software
application  provider.  Robert was one of the early visionaries to recognize the
enormous  potential  of Internet  commerce  and how it would  transform  the way
business  is  conducted  in the new  global  economy.  As a result,  he has been
recognized for his leadership in the industry and has received numerous personal
and technology  awards,  such as 1998 Ernst &

                                       20

<PAGE>

Young  Entrepreneur Of The Year (R) and Crain's Top 40 under 40 Award.  Prior to
InterWorld,  Robert was the Managing  Director of the Cisneros Family Office. In
addition,  he was an  associate  at  Donaldson,  Lufkin &  Jenrette,  Investment
Banking Division. Robert is a member of the Council on Foreign Relations,  where
he serves on the Committee on Finance and Budget.  Robert  received his MBA from
Stanford  University  Graduate  School of Business and his BA from University of
Vermont.

            Collin Cohen,  the President of NorthStar,  has over twenty years of
business and technology  experience.  Prior to joining NorthStar in 2004, Collin
served as Executive Vice  President at Advent  Software,  the industry  standard
provider of investment  management software for the financial services industry.
While  helping  lead Advent from $50  million to $170  million  over five years,
Collin managed various  functional  areas and  subsidiaries of the company,  was
involved in acquiring and integrating  several  companies,  and led the creation
and launch of Advent Trusted Network, a service designed to aggregate investment
account  information.  Prior to Advent,  Collin was a  principal  in the private
equity  industry and a manager at Bain and Company in San  Francisco and Boston.
Collin  has a BA from  Stanford  University  and an MBA  from  Harvard  Business
School.

            NorthStar delivers  state-of-the-art  application and infrastructure
software  that  drive  user  adoption  and  assist  firms  in  effectively   and
efficiently  managing  client  relationships  throughout  the wealth  management
lifecycle.  Delivered on-premise or on-demand, the company's products are unique
in that they are modular.  Each can be deployed  independently  to  complement a
firm's existing  systems or in conjunction with other products to solve a firm's
specific wealth management technology challenges. They include:

Wealth Management Software:
--------------------------

            Delivered  on-premise  or  on-demand,  NorthStar  Wealth  Management
Software  streamlines and extends a wealth management team's ability to acquire,
implement,  and manage  client wealth in a compliant  manner,  based on industry
best  practices.  Each of  these  wealth  management  software  products  can be
deployed  independently to complement an existing platform,  or implemented as a
complete,   integrated  advisor  desktop  to  empower  full-lifecycle   advisory
capabilities.

Asset Management Software:
-------------------------

            Delivered  on-premise or  on-demand,  NorthStar's  Asset  Management
Software solves sales  logistical,  distribution,  product  personalization  and
customization challenges throughout the asset management process. These products
streamline and extend a team's ability to sell  sophisticated  asset  management
products to individuals or into third-party distribution channels. Each of these
products can be deployed  independently  to complement  an existing  platform or
implemented as a complete asset management workstation.

                                       21

<PAGE>

Infrastructure Software:
-----------------------

            NorthStar   packages  two  business   services  -  NorthStar  Client
Hierarchy  and  NorthStar  Enterprise  Product  Hub - to meet the needs of firms
looking to improve their holistic wealth management  capabilities through a more
robust  and  organized  infrastructure.  Each  subsystem  can be  deployed  on a
stand-alone  basis, or they can be deployed  together to completely  orchestrate
how a firm manages product and client information and controls access throughout
the  wealth  management  process.  Published  APIs allow a firm to build its own
capabilities and functionality on top of the subsystems.

            NorthStar Wealth Management Technology uses a Java-based, multi-tier
service-oriented  architecture  and is designed to leverage and extend the value
of a firm's existing  applications and systems.  NorthStar technology supports a
wide variety of flexible deployment options.

User Interface Tier:
-------------------

            NorthStar  delivers five  modules:  Sales and  Proposals,  Planning,
Product  Catalog  and  Research,   Portfolio   Construction  and  Client  Wealth
Management.  Each  module is 100% Web  browser-based  with rich user  experience
capabilities. These modules can be delivered together or separately,  on-premise
or on-demand.  These standards-based modules are ideal for a firm's IT staff and
system  integrators  to configure  and  customize to meet a firm's unique wealth
management needs.

Business Tier:
-------------

            NorthStar consolidates a firm's front- and mid-office by providing a
common  platform  based on business,  application,  data and platform  services.
Business  services  integrate  key product  and client  data into the  NorthStar
Wealth  Management and Asset Management  Solutions,  eliminating  duplication of
data, and business APIs enable professional services and third parties to extend
the out-of-the-box solutions. Business rules are applied at the business not the
data tier, providing  applications,  rules, logic and workflow independence from
where and how the data is stored and retrieved.  Application  services integrate
key tools, analytics and calculators.  Data services facilitate data integration
with existing  systems.  Platform  services  provide a foundation for enterprise
applications including integration, security and entitlements,  workflow, alerts
and proposal generation.  Together these services promote shared data, logic and
processes enabling NorthStar to become a truly integrated advisory desktop.

Data Tier:
---------

            The  NorthStar  logical data model  supports  both live  integration
directly to the system of record and replication into the NorthStar database for
any portion of the data model. Other systems require the entire data model to be
consolidated  into their own database,  requiring  expensive and  time-consuming
replication of data into their database.  With NorthStar's  flexible integration
approach,  data redundancy and data  replication  can be eliminated.  If data is
replicated  into  the  NorthStar  database,  NorthStar  supports  bi-directional
synchronization   of  the   replicated   data  via   synchronous,   asynchronous
(message-based), and/or high volume batch mode.

                                       22

<PAGE>

Post-Confirmation Management of the Reorganized Debtor
------------------------------------------------------

            After the  Effective  Date,  it is expected that Robert S. Ellin and
Jay A. Wolf will be the members of the  Reorganized  Debtor's board of directors
pending  consummation  of a merger  transaction.  Robert Ellin will serve as the
Reorganized  Debtor's  Chief  Executive  Officer,  Jay  Wolf  will  serve as the
Reorganized Debtor's Chief Operating Officer, and Charles C. Bentz will serve as
the Reorganized Debtor's Chief Financial Officer.

            Mr.  Ellin  has  nearly  20  years  of  investment   and  turnaround
experience.  Prior to founding  Trinad  Capital,  Mr.  Ellin was the Founder and
President of Atlantis Equities Inc., a private  investment  company.  Founded in
1990, Atlantis actively managed an investment  portfolio of small capitalization
public  companies,  as well as select  private  company  investments.  Mr. Ellin
played  an  active  role  in  Atlantis   investee   companies   including  board
representation,  management  selection,  corporate  finance  and other  advisory
services.   Through  Atlantis  and  related  companies,  Mr.  Ellin  spearheaded
investments  into  ThQ,  Inc.   (OTC:THQI),   Grand  Toys  (OTC:GRIN),   Forward
Industries,  Inc. (OTC:FORD) and completed a leveraged buyout of S&S Industries,
Inc. where he also served as President  from 1996 to 1998.  Mr. Ellin  currently
sits on the board of Command  Security  Corporation  (CMMD),  MPLC,  Inc (MPNC),
Prolink Holdings Corporation (PLKH) and Mediavest, Inc (MVSI). Prior to founding
Atlantis Equities,  Mr. Ellin worked in Institutional Sales at LF Rothschild and
was the Manager of Retail Operations at Lombard Securities. Mr. Ellin received a
Bachelor of Arts from Pace University.

            Mr. Wolf is a partner and co-founder of Trinad  Capital.  Mr. Wolf's
investment  experience  includes:  senior and subordinated  debt, private equity
(including  leveraged  transactions),  mergers & acquisitions  and public equity
investments.  Prior to joining Trinad Capital,  Mr. Wolf served as the Executive
Vice President of Corporate Development for Wolf Group Integrated Communications
Ltd. where he was responsible for the company's  acquisition  program.  Prior to
that, he worked at Canadian  Corporate Funding,  Ltd., a Toronto-based  merchant
bank in the senior debt department and subsequently for Trillium Growth Capital,
the firm's venture  capital fund. Mr. Wolf currently sits on the board of Shells
Seafood Restaurants (SHILL),  Prolink Holdings Corp. (PLKH), Optio Software, Inc
(OPTO),  Mediavest,  Inc. (MVSI), MPLC, Inc (MPNC) and US Wireless Inc. Mr. Wolf
received a Bachelor of Arts from Dalhousie University.

            Mr. Bentz has 20 years of accounting and  administrative  experience
in the asset management industry and is a Certified Public Accountant.  Prior to
joining  Trinad,  Mr. Bentz was a Vice  President and the Controller of Fletcher
Asset Management;  Vice President,  Controller and Head of Fund Administration &
Compliance of the Reserve Funds; Vice President and Head of Fund  Administration
for Blackrock Inc.;  Vice President and Controller of HHF Acquisition  Corp. and
Associate Vice President of Mutual Fund  Management.  Mr. Bentz began his career
at Deloitte & Touche, and holds a BS in Accounting from Villanova University.

            Upon the  conclusion  of the merger  with  NorthStar  (or such other
entity), it is anticipated that Messrs.  Ellin, Wolf and Bentz will resign their
officerships,  but will retain  positions on the  Reorganized  Debtor's board of
directors.

                                       23

<PAGE>

Post-Confirmation Compensation to Professional Persons
------------------------------------------------------

            The   Professional   Persons  may,   from  time  to  time,   provide
professional  services following the Confirmation Date until the Effective Date.
Such  Post-Confirmation  services that are performed prior to the Effective Date
shall be paid from the  Escrow  Account  within  five (5)  Business  Days  after
submission of a bill to the Creditor  Trustee,  with a copy to the Debtor and to
the  Committee,  as provided in section  10.4 of the Plan,  without the need for
filing an application or providing any other or further notice, provided that no
objection  to the payment is asserted  within such  period.  If an  objection is
asserted and remains unresolved, the Professional Person may file an application
for  allowance  with the  Bankruptcy  Court and such fees will be paid as may be
fixed by the Bankruptcy  Court.  Professional  Persons shall not be eligible for
compensation for services  provided after the Effective Date unless the Creditor
Trustee has consented and the  Professional  Persons have executed an engagement
agreement.

Procedures for Resolving and Treating Disputed Claims
-----------------------------------------------------

            Article VII of the Plan  provides for the  procedures  regarding the
resolution  and treatment of Disputed  Claims.  Upon of the Effective  Date, the
Creditor Trustee will open an interest-bearing account. When any Distribution is
to be made to  holders of Claims  entitled  to  payment  in Cash,  the  Creditor
Trustee will deposit  into the account any amount that would be  distributed  to
the  holder  of a  Disputed  Claim  if it were an  Allowed  Claim.  Such  amount
deposited  or recorded  will be held until  entry of a Final  Order  determining
whether the Disputed  Claim,  or any portion  thereof,  is an Allowed Claim.  No
Distributions  will  be  made  on  account  of a  Disputed  Claim.  As  soon  as
practicable  after a  Disputed  Claim  becomes an Allowed  Claim,  the  Creditor
Trustee will make the  Distributions  on such Allowed Claim from the appropriate
reserve.

Assumption/Rejection of Executory Contracts
-------------------------------------------

            Article VIII of the Plan provides for the  assumption  and rejection
of certain executory  contracts or unexpired leases.  The Plan provides that all
Executory  Contracts  that (a) have not been assumed and assigned by the Debtor,
(b) have not been  rejected by the Debtor,  or (c) are not currently the subject
of a motion to assume such Executory Contract, will be deemed rejected.

            With  respect to the curing of  defaults  under  assumed  contracts,
contracts that have already been assumed in connection  with the Asset Sale were
subject  to a cure  claim  bar  date,  and all cure  claims  asserted  have been
reconciled and paid. Any non-debtor  party to a rejected  contract or lease will
be entitled to file a proof of Claim for damages  with the  Bankruptcy  Court no
later than thirty (30) days following the Confirmation Date. A copy of the proof
of claim must also be  delivered to the  Creditor  Trustee.  The failure of such
entity to file or deliver to the  Creditor  Trustee a proof of claim  within the
period  prescribed  will  forever bar such entity from  asserting  any Claim for
damages arising from the rejection of such Executory Contract. The filing of any
such proof of Claim will be without prejudice to any and all rights the Creditor
Trustee may have to object to the allowance thereof.

                                       24

<PAGE>

Other Provisions of the Plan
----------------------------

            The Plan contemplates  that the Reorganized  Debtor will continue to
engage in business post-confirmation,  and this post-confirmation business forms
the basis for a recovery to holders of Claims and Interests.  Therefore, Article
XIII of the Plan  provides that the Debtor will receive a discharge in the Case.
Specifically,  the Plan provides that:  (a) the rights  afforded in the Plan and
the treatment of all Claims and Interests therein will be in exchange for and in
complete  satisfaction,  settlement,  discharge  and  release  of all Claims and
Interests of any nature whatsoever, known or unknown; (b) on the Effective Date,
all such  Claims  against,  and  Interests  in,  the Debtor  will be  satisfied,
discharged,  and  released in full;  and (c) all persons  and  entities  will be
precluded  from  asserting  against  the Debtor or  Reorganized  Debtor or their
assets or  properties  any Claims or  Interests  based upon any act or omission,
transaction  or other  activity of any kind or nature that occurred prior to the
Confirmation  Date.  In addition,  the Plan enjoins all  Claimants  and Interest
holders from commencing or continuing any judicial or administrative proceeding,
or employing  any judicial or  administrative  process  against the Debtor,  the
Reorganized  Debtor,  the  Creditor  Trustee  or the Plan  Sponsor  and/or  from
interfering  with the  implementation  and  consummation  of the  Plan,  and the
payments to be made under the Plan.

            Under the Plan, the Bankruptcy Court will retain  jurisdiction  over
the Case after the  Confirmation  Date and until the Case is closed for  certain
specific purposes.  For example,  the Bankruptcy Court will, among other things,
(a) hear and determine all objections to Claims and  Interests,  (b) any and all
controversies,  suits and disputes (c) hear and determine all  applications  for
compensation  by the  Professionals  Persons,  (d)  preside  over any  adversary
proceedings, and (e) enforce the provisions of the Plan.

            Finally,  the Plan  provides  that the Debtor,  the  Committee,  the
Authorized Officer and the Creditor Trustee and Professional Persons retained by
them will be  exculpated  from any liability to any person or entity for any act
or  omission  taken  in  good  faith  in  connection  with  or  related  to  the
negotiation,   formulation,  preparation  and  confirmation  of  the  Plan,  the
consummation and administration of the Plan, the Disclosure Statement, the Case,
or the property distributed under the Plan. This exculpation does not affect any
liability resulting from fraud, gross negligence or willful misconduct.

Certain Risks Associated with the Plan
--------------------------------------

            This Disclosure Statement contains forward-looking  statements.  The
statements relate to future events or the Reorganized Debtor's future activities
and/or performance,  and involve known and unknown risk, uncertainties and other
factors  that may cause  actual  results,  levels of  activity,  performance  or
achievements  to be  materially  different  from any future  results,  levels of
activity,   performance   or   achievements   expressed   or  implied  by  these
forward-looking statements. These statements are only predictions. Actual events
or results may differ  materially.  In evaluating these  statements,  you should
consider  that  various  factors  might cause the  Reorganized  Debtor's  actual
actions and results to differ materially from any forward-looking statement.

            Among other things,  the Plan  contemplates the infusion of $500,000
from the Plan Sponsor,  and that the Plan Sponsor will issue up to 7% of the New
Common Stock in the Reorganized  Debtor for distribution to unsecured  creditors
and existing shareholders.

                                       25

<PAGE>

            The  anticipated  merger with NorthStar may not occur.  In the event
the merger with  NorthStar  does not  ultimately  occur,  the Plan  Sponsor will
identify a suitable  alternative  merger  candidate and consummate a transaction
with such other entity at the earliest  possible  time.  Pending the merger with
NorthStar or an alternative merger candidate, the Plan Sponsor (or its designee)
will be prohibited from selling or otherwise  transferring any of the New Common
Stock it receives  under the Plan for a period of ninety (90) days following the
occurrence  of  all of the  following  events:  (a) a  transaction  between  the
Reorganized Debtor and a merger partner has been consummated,  (b) a Form 8K has
been filed by the Reorganized Debtor with the SEC setting forth the terms of the
merger,  acquisition  or  other  transaction,  with  disclosures  to be  made on
substantially  the  same  terms  as  would be  required  by an  entity  filing a
registration  statement  with the SEC, and (c) audited  financials of the merger
partner have been filed with the SEC.

            In the  event  the  Plan  Sponsor  withdraws,  the  Debtor  and  the
Committee  reserve the right - - at any time prior to the Effective  Date - - to
substitute the Plan Sponsor with another  person or entity  offering to purchase
the New  Common  Stock  under the Plan on such  terms and  conditions  as may be
agreed to  between  the Estate and such  person or entity,  including  terms and
conditions that are not the same, or as economically favorable to the Estate, as
those are being offered by the Plan Sponsor. It is strongly believed that if the
Estate were forced to find an  alternative  to the Plan Sponsor,  such person or
entity would not be likely to offer as much as the $500,000  proposed to be paid
by the  Plan  Sponsor.  In such  event,  the  recovery  to  creditors  would  be
dramatically  reduced. It also believed that any alternative to the Plan Sponsor
would not be likely to offer any New Common  Stock to existing  equity.  In such
event,  existing  equity would receive no Distribution in the Case. In the event
any  substitute  to the Plan  Sponsor  does not  enable  the Estate to provide a
Distribution to existing shareholders,  the Debtor and/or the Committee may seek
to invoke the cram-down provision of Section 1129(b) of the Bankruptcy Code. See
Plan at Section 10.6.

Filing of Reports With the SEC and Limited Market for New Common Stock
----------------------------------------------------------------------

            Upon  consummation  of the Plan, the  Reorganized  Debtor intends to
remain a reporting  company.  As of the Petition  Date, the Debtor has not filed
periodic reports due since September 30, 2002 under the Securities  Exchange Act
of 1934, as amended (the "Exchange Act") in respect of any periods subsequent to
the quarter ended June 30, 2002, given its limited cash and personnel  resources
at the time.  The failure to file periodic  reports under the Exchange Act could
subject the Debtor to a revocation  proceeding by the SEC, pursuant to which the
SEC could revoke the registration of its common stock under the Exchange Act. If
the registration of the existing common stock under the Exchange Act is revoked,
no member of a national  securities  exchange,  broker or dealer will be able to
effect any  transaction in, or induce the purchase or sale of, the common stock.
This may have an adverse  effect on the  liquidity  of the common  stock and the
prices at which it may  trade,  if at all.  Accordingly,  any  recipient  of New
Common Stock may have to hold its shares for an  indefinite  period of time.  As
the Plan  contemplates  that the  Reorganized  Debtor  will  remain a  reporting
company,  the  Debtor  will  concurrently  with  the  commencement  of the  plan
confirmation  process file all past periodic  reports and become  current in its
filings with the SEC under  Exchange  Act.  Thus it is believed  that the Debtor
will not be the subject of a revocation proceeding by the SEC.

                                       26

<PAGE>

            The  Distributions  to holders of Allowed Class 3 Claims and Allowed
Class 4 Interests  under the Plan will include New Common Stock.  The New Common
Stock is being  issued in  reliance  upon an  exemption  from  registration  and
qualification  requirements  contained in Section 1145 of the  Bankruptcy  Code.
Therefore,  it is  believed  that,  generally  speaking,  parties  who  are  not
affiliates  of the Debtor and who receive New Common  Stock in exchange of their
Claims  would be  legally  entitled  to trade  such  shares  in a public  market
immediately upon issuance thereof.  Note, however,  that no public market exists
for the New Common Stock,  and it is not anticipated  that any will  necessarily
develop in the foreseeable future. Therefore,  notwithstanding the legal ability
to trade the New Common Stock, any recipient should expect that it might have to
hold the stock for an indefinite period of time.

The Plan Contemplates the Issuance of Securities
------------------------------------------------

            The Plan contemplates the issuance of New Common Stock, having a par
value of $0.01 per share,  to: (i) holders of Allowed  Class 3 Claims;  and (ii)
holders of Allowed Class 4 Interests.

            In  general,   securities  issued  by  a  debtor  under  a  plan  of
reorganization may be resold by their holder without registration under the 1933
Act or other laws,  unless the holder is an  "underwriter"  with respect to such
securities,  as that term is  defined in section  1145(b)(1)  of the  Bankruptcy
Code,   which   provides   that  "except   with  respect  to  ordinary   trading
transactions...an  entity is an  underwriter"  if such entity:  (i)  purchases a
claim  against or interest in a debtor  with a view to the  distribution  of the
securities received in exchange for such claim or interest;  (ii) offers to sell
securities  on behalf of the  holders  thereof  (except  certain  offers to sell
fractional  interests);  (iii) offers to buy the securities if the offer is made
with a view to distributing them or is pursuant to a distribution agreement made
in  connection  with  the plan of  reorganization  or (iv) is an  "issuer"  with
respect to a reorganized debtor's securities, as the term "issuer" is defined in
section 2(11) of the 1933 Act.

            In the context of the Plan, an "issuer" under section 2(11) includes
any person  directly or indirectly  controlling or controlled by the Debtor,  or
any person under direct or indirect control with the Debtor. Whether a person is
an "issuer," and  therefore an  "underwriter"  for purposes of section  1145(b),
depends upon a number of factors,  including:  the relative size of the person's
Interest in the Debtor; the distribution and concentration of other Interests in
the Debtor;  whether the person,  either alone or acting in concert with others,
has a contractual or other relationship giving that person power over management
policies  and  decisions;  and  whether  the  person  actually  has  such  power
notwithstanding the absence of formal indicia of control. An officer or director
of the  Debtor may be deemed to be a  controlling  person,  particularly  if his
position is coupled with ownership of a significant  percentage of voting stock.
In addition,  the  legislative  history of section 1145 suggests that a creditor
receiving at least ten percent (10%) of the  securities of a reorganized  debtor
would be deemed to be a controlling person.

            Based  on  the  published  views  of  the  Securities  and  Exchange
Commission, it is believed that a person who receives less than one percent (1%)
of a class of securities  generally would not be deemed to be an underwriter and
that a person  receiving  more than one percent  (1%) (but less than ten percent
(10%)) are not necessarily deemed to be underwriters. Because of the complex and
subjective  issues  involved in determining  underwriter  status,  creditors and
interest

                                       27

<PAGE>

holders are urged to consult with their attorneys  concerning  whether they will
be able to trade freely the securities received. Persons who may be underwriters
must either  register the  securities  under the 1933 Act in  connection  with a
resale or utilize an exemption from registration.

Responsibilities for Securities Law Compliance
----------------------------------------------

            The  exemption  contained in Section  1145(a) is not available to an
entity that is an underwriter within the meaning of Section 1145(b) of the Code.
Further,  shares not  received in exchange of claims or  interests  (such as New
Common Stock issued to the holders of certain Allowed Claims and Interests), and
shares held by  insiders,  will not be deemed  issued in a public  offering  and
cannot be traded in a public  market  unless the New Common Stock is  registered
with the SEC and qualified under state  securities  laws or an exemption,  other
than Section 1145(a)(1),  from the registration or qualification requirements is
available to the recipient.

            The federal and state securities laws are complex and detailed.  The
description  and  legal  status  of the  New  Common  Stock  contained  in  this
Disclosure  Statement  is not  intended  to be  exhaustive.  The  Debtor and the
Committee  are not aware of the  particular  status of each  person  eligible to
receive  New  Common   Stock  under  the  Plan.   Accordingly,   Claimants   and
Interestholders   should  not  rely  on  the  description  contained  herein  in
determining  the effect of receiving New Common Stock.  You are urged to consult
with your own legal advisor  before making any decisions with respect to the New
Common Stock.

                                       V.
                                   Feasibility
                                   -----------

            The  Bankruptcy  Code provides that a plan may be confirmed  only if
confirmation is not likely to be followed by liquidation or the need for further
financial reorganization, unless such liquidation or reorganization is expressly
provided  for  in the  plan.  In  essence,  this  provision  requires  that  the
Bankruptcy  Court find that the Estate is capable of fulfilling its  commitments
under the Plan, or put simply, that the Plan is feasible.  The commitments under
the Plan require payment in Cash of Administrative Claims,  Priority Tax Claims,
Priority Claims and Unsecured Claims. It is submitted that the Creditor Trustee,
by virtue of Cash currently  held by the Estate and Cash to be  contributed  for
distribution  by the  Plan  Sponsor,  will  have  sufficient  funds  to make the
required  payments in  accordance  with the Plan.  Thus, it is believed that the
Estate will be able to meet its commitments under the Plan.

            THE ESTIMATED RECOVERIES,  PROJECTED FINANCIAL INFORMATION AND OTHER
FORWARD-LOOKING STATEMENTS, ARE BASED ON ESTIMATES AND ASSUMPTIONS. THERE CAN BE
NO  ASSURANCE  THAT SUCH  STATEMENTS  WILL BE  REFLECTIVE  OF  ACTUAL  OUTCOMES.
FORWARD-LOOKING STATEMENTS ARE PROVIDED IN THIS DISCLOSURE STATEMENT PURSUANT TO
THE SAFE HARBOR ESTABLISHED UNDER THE PRIVATE  SECURITIES  LITIGATION REFORM ACT
OF 1995 AND SHOULD BE  EVALUATED IN THE CONTEXT OF THE  ESTIMATES,  ASSUMPTIONS,
UNCERTAINTIES,  AND RISKS DESCRIBED  HEREIN.  ALL  PROJECTIONS ARE  ATTRIBUTABLE
EXCLUSIVELY TO THE DEBTOR AND NOT TO ANY OTHER PARTY.

                                       28

<PAGE>

            The projections  reflect  assumptions  concerning Allowed Claims and
Interests, some of which may not materialize. It is believed the assumptions are
reasonable.  However,  the  results of the claims  and  interest  reconciliation
process,  as well as the outcome of pending  litigation,  may not prove to be as
expected.   Therefore,  the  actual  results  achieved,  and  the  size  of  the
distributions made, may vary, and such variations may be material and adverse.

                                       VI.
      Confirmation Notwithstanding Rejection By Voting Class Under The Plan
      ---------------------------------------------------------------------

            Section 1129(a) of the Bankruptcy Code provides, among other things,
that a plan may be confirmed only if at least one impaired class votes to accept
the plan. Here, all Classes of Claims and Interests are impaired under the Plan,
except  for the  holders  of Claims in Class 1 (the  Secured  Claim) and Class 2
(Priority Claims).  It is possible that the Estate will need to invoke the "cram
down"   provisions  of  the  Bankruptcy   Code.  The  Bankruptcy   Code  permits
confirmation  of a plan even if it is not accepted by an impaired  class so long
as (a) the plan otherwise  satisfies the requirements for  confirmation,  (b) at
least one impaired  class of claims has  accepted  the plan without  taking into
consideration the votes of any insiders in such class, and (c) the plan is "fair
and  equitable"  and does not  "discriminate  unfairly" as to any impaired class
that has not accepted the plan.  These so called  "cramdown"  provisions are set
forth in Section  1129(b).  Here,  a "cram down" may be  necessary if holders of
Class 3 Claim vote, as a Class,  to reject the Plan.  The Plan provides that, if
that occurs,  the Debtor and/or the Committee may seek to confirm the Plan under
Section  1129(b) of the Bankruptcy  Code in which the Unsecured New Common Stock
would be  reduced  from 6% to 4% of the New  Common  Stock and  Interests  would
received no Distribution  under the Plan. It is submitted that the Plan is "fair
and  equitable" and does not  "discriminate  unfairly" and that the treatment of
all  Classes  of  Claims  and   Interests   satisfies   the   requirements   for
non-consensual confirmation of the Plan.

Tax Consequences Of The Plan
----------------------------

            THE TAX  CONSEQUENCES TO EACH PARTY IN INTEREST  DEPENDS ON NUMEROUS
CIRCUMSTANCES UNIQUE TO EACH PERSON. ACCORDINGLY,  CREDITORS,  INTEREST HOLDERS,
AND  PARTIES  IN  INTEREST  CONCERNED  WITH HOW THE PLAN MAY  AFFECT  THEIR  TAX
LIABILITY ARE ADVISED TO CONSULT WITH THEIR OWN ACCOUNTANTS,  ATTORNEYS,  AND/OR
ADVISORS.

                                      VII.
                      Alternative of Chapter 7 Liquidation
                      ------------------------------------

Alternatives To Confirmation
----------------------------

            If the Plan is not  confirmed  by the  Court  and  consummated,  the
alternatives  to the Plan include (a)  liquidation of the Debtor under Chapter 7
of the Bankruptcy Code and (b) an alternative plan.

                                       29

<PAGE>

Alternative of Chapter 7 Liquidation
------------------------------------

            The Bankruptcy  Code requires that unless all impaired  classes vote
to accept a plan,  the members of each impaired  rejecting  class must receive a
distribution  under the plan that is at least as much as the  distribution  they
would receive if the Estate were  liquidated  under chapter 7 of the  Bankruptcy
Code. In a liquidation under Chapter 7 of the Bankruptcy Code, the Distributions
will be substantially  diluted by the  administrative  expenses of the Chapter 7
Trustee and his/her  professionals  and the distribution  would be significantly
delayed.  Further,  in the event of a conversion  to Chapter 7, the Plan Sponsor
would not  contribute  $500,000  in Cash and New Common  Stock for  distribution
under the Plan.  As evidenced by Exhibit B hereto,  were the Estate to liquidate
under  chapter 7 instead of  reorganizing  under this  Plan,  recoveries  to all
impaired classes would be dramatically reduced.

Alternative Plan
----------------

            If the Plan is not  confirmed,  the Debtor and the  Committee  could
file a different plan. Such a plan might involve either a  reorganization  or an
orderly liquidation of assets.

Best Interests of Creditors
---------------------------

            Even if a plan was  accepted  by each  Impaired  Class of Claims and
Interests,  to confirm a plan the court must  determine  that the plan is in the
best interests of each  individual  holder of a Claim or Interest in an Impaired
Class that did not vote to accept the Plan.  Thus, if an Impaired Class does not
unanimously accept the Plan, the "best interests of creditors test" must be met.
That test  requires that the Court find that the Plan provides to each holder of
a Claim or Interest in such Impaired Class a recovery on account of the holder's
Claim  or  Interest  that  has a  value  at  least  equal  to the  value  of the
distribution  that each such holder would receive if the Debtors were liquidated
under Chapter 7 of the Bankruptcy Code.

            In a Chapter 7 case, a debtor's assets are usually sold by a Chapter
7 trustee, not the debtor. To calculate what non-accepting holders would receive
upon a liquidation  under  Chapter 7, the court must first  determine the dollar
amount that would be generated  upon the Chapter 7 trustee's  disposition of the
Debtor's  assets and then reduce such amount by the costs of  liquidation  under
Chapter 7. Such costs  would  include the fees of a trustee (as well as those of
counsel and other  professionals) and any additional expenses of a sale incurred
by such trustee.

            The  distribution  of the  proceeds  from the  sale of the  Debtor's
assets in Chapter 7 would occur in much the same manner as proposed in the Plan.
Secured  Claims  would be paid first from the sales  proceeds of  properties  on
which the secured  creditors  have a lien.  Administrative  Claims would be paid
next.  Priority Tax Claims and other  Priority  Claims  would be paid next,  and
Unsecured  Claims would be paid from any remaining sales proceeds,  according to
their relative priorities.

            IN LIGHT OF THE  FOREGOING,  IT IS  BELIEVED  THAT  CHAPTER  7 WOULD
RESULT IN A  SUBSTANTIAL  DIMINUTION  IN THE VALUE TO BE  REALIZED BY HOLDERS OF
CLAIMS AND  INTERESTS  DUE TO, AMONG OTHER  FACTORS,  (I)

                                       30

<PAGE>

ADDITIONAL COSTS AND EXPENSES INVOLVED IN THE APPOINTMENT OF A CHAPTER 7 TRUSTEE
AND THE TRUSTEE'S ATTORNEYS,  ACCOUNTANTS, AND OTHER PROFESSIONALS, AND (II) THE
TIME THAT WOULD ELAPSE BEFORE HOLDERS OF CLAIMS AND INTERESTS  WOULD RECEIVE ANY
DISTRIBUTION IN RESPECT OF THEIR CLAIMS AND INTERESTS, AS THE CASE MAY BE.

            THE DEBTORS AND THE COMMITTEE INTEND TO REQUEST  CONFIRMATION OF THE
PLAN PURSUANT TO THE CRAM-DOWN  PROVISIONS OF THE BANKRUPTCY CODE IF THE PLAN IS
NOT ACCEPTED BY ALL IMPAIRED CLASSES OF CLAIMS ENTITLED TO VOTE THEREON.

Injunction Provisions.
----------------------

            All entities  who are bound by this Plan,  including  entities  with
Claims or Interests not listed on the  Schedules,  or listed on the Schedules as
disputed,  unliquidated or contingent, which did not file proofs of claim by the
Bar Date, are hereby  enjoined and prevented  from  commencing or continuing any
judicial or administrative proceeding or employing any process to interfere with
the  consummation  or  implementation  of this  Plan,  or the  Distributions  of
Available  Cash  and/or  New  Common  Stock  to  be  made  hereunder,  including
commencing or continuing any judicial or administrative  proceeding or employing
any process against the Debtor, the Reorganized  Debtor, the Plan Sponsor or the
Creditor Trustee.

Exculpation.
------------

            The Debtor,  the  Committee,  the Authorized  Officer,  the Creditor
Trustee, the Plan Sponsor and the Professional Persons retained by them shall be
exculpated  from any  liability  to any person or entity for any act or omission
taken  in  good  faith  in  connection  with  or  related  to  the  negotiation,
formulation,  preparation  and  confirmation of the Plan, the  consummation  and
administration of the Plan, the Disclosure Statement,  the Case, or the property
distributed  under the Plan.  This  exculpation  does not affect  any  liability
resulting from fraud, gross negligence or willful misconduct.

Successor Liability.
--------------------

            Upon entry of the  Confirmation  Order,  there shall be no successor
liability for claims against the Debtor.  No holder of any claim,  lien or debt,
whether  secured,  priority tax,  non-priority  unsecured  claim or any interest
against such entities will have any rights or claims that survive  confirmation.
In addition,  any and all claims against Debtor shall be subject to the Plan and
the Injunction and Release provisions set forth herein. Accordingly,  holders of
claims  against Debtor  including  without  limitation  state and federal taxing
authorities,  shall  be  permanently  enjoined  as of the  Effective  Date  from
proceeding   against  the  Debtor,   its  stockholders,   officers,   directors,
responsible  parties  or any  company  into  which the Debtor is merged or which
merges into the Debtor on or after the Effective Date of the Plan.

                                       31

<PAGE>

VOTING INSTRUCTIONS, PROCEDURES AND REQUIREMENTS

Who May Vote On The Plan.
-------------------------

Classes of Claims and Interests Entitled to Vote.

            Each Class of Claims or Interests that is Impaired and not otherwise
deemed to have  accepted  or  rejected a plan is  entitled  to vote on the Plan.
Classes of Claims and Interests that are not Impaired under the Plan are deemed,
as a matter of law under the Bankruptcy  Code, to have accepted the plan and are
therefore  not permitted to vote on such plan.  Similarly,  Classes of Claims or
Interests that will not receive or retain any property under the Plan on account
of such Claims or Interests are deemed,  as a matter of law under the Bankruptcy
Code,  to have  rejected  the plan and are  likewise not entitled to vote on the
plan.

            A Class of Claims or Interests is  generally  considered  "Impaired"
under a plan  unless,  with  respect to each Claim or Interest in such Class (i)
the plan leaves unaltered the legal,  equitable and contractual  rights to which
such Claims or Interest  entitles the holder of such Claim or Interest;  or (ii)
notwithstanding  any  contractual  provision or applicable law that entitled the
holder of a Claim or  Interest to receive  accelerated  payment of such Claim or
Interest  after the  occurrence  of a default,  the plan cures any such default.
Creditors  whose  Claims  are  classified  in more than one  Impaired  Class are
entitled to accept or reject a Plan in both capacities by casting one ballot for
its Claim in each Class.

            Applying the foregoing  standards,  the Debtor believes that Classes
3, 4 and 5 are  Impaired  under the Plan and that  holders  of Claims in each of
these Classes are therefore  entitled to vote to accept or reject the Plan.  ALL
OTHER  CLASSES  OF CLAIMS  AND  INTERESTS  ARE DEEMED TO ACCEPT OR ARE DEEMED TO
REJECT THE PLAN AND,  ACCORDINGLY,  ARE NOT ENTITLED TO VOTE TO ACCEPT OR REJECT
THE PLAN.  PARTIES  WHO  DISPUTE  THE  CHARACTERIZATION  OF THEIR CLAIM AS BEING
IMPAIRED  MAY FILE AN  OBJECTION  TO THE PLAN  CONTENDING  THAT THE DEBTOR  HAVE
INCORRECTLY CHARACTERIZED THE CLASS.

Individual Claims and Interests Entitled to Vote.

            As long as a Claim or Interest is contained within an Impaired class
of Claims or Interests,  each  individual  holder of a Claim or Interest  within
such Class is entitled to vote on and receive  distributions under the Plan, but
only to the extent that such Claim or  Interest  is an Allowed  Claim or Allowed
Interest and such Claim or Interest  has not been paid or released  prior to the
Effective Date.

            The Bankruptcy Code provides that the Bankruptcy  Court may estimate
or  temporarily  allow a  disputed  Claim  for  purposes  of voting on the Plan.
However,  such an estimation or temporary  allowance  shall not be considered to
provide  the holder  with an Allowed

                                       32

<PAGE>

Claim. As of the date of this Disclosure  Statement,  no motions for estimations
or temporary allowance of Claims have been filed.

            Finally,  the vote of a holder of a Claim may be  disregarded if the
bankruptcy court determines,  after notice and a hearing, that the acceptance or
rejection was not solicited or procured in good faith or in accordance  with the
provisions of the Bankruptcy Code.

            NOTE,  THAT  IF A CLAIM  OR  INTEREST  IS NOT AN  ALLOWED  CLAIM  OR
INTEREST,   THE  HOLDER  OF  SUCH  CLAIM  WILL  ALSO  NOT  BE  ENTITLED  TO  ANY
DISTRIBUTIONS UNDER THE PLAN.

Votes Necessary To Confirm The Plan
-----------------------------------

            Chapter 11 does not require that each  individual  holder of a Claim
against or Interest in a Debtor accept a plan of reorganization in order for the
bankruptcy  court to confirm  the plan.  Ordinarily,  if each Class of  Impaired
Claims and Interests accepts the plan, the plan will be confirmed.  However, the
plan must be accepted by at least one Class of Claims that is Impaired under the
Plan, with such Class' acceptance  determined  without including any acceptances
of the plan by  insiders  of the  Debtors.  A Class of  Claims is deemed to have
accepted the Plan if the Plan is accepted by Creditors in such Class who hold at
least two-thirds in aggregate dollar amount and more than one-half of the number
of the Claims of such Class for Creditors in such Class that have actually voted
on the Plan.

            As  described in Article VII above,  if all Impaired  Classes do not
accept the Plan, the Court may confirm the Plan if the non-accepting Classes are
treated in the manner  required  by the  Bankruptcy  Code.  The process by which
non-accepting  Classes  are  forced  to be  bound  by the  terms  of the Plan is
commonly  referred to as "cramdown."  Generally,  the Bankruptcy Code allows the
Plan to be  "crammed  down" on  non-accepting  Classes of Claims if it (1) meets
certain requirements of the Bankruptcy Code, (2) does not discriminate unfairly,
and (3) is fair and equitable toward each Class that has not voted to accept the
Plan.

Instructions Regarding Voting and/or Objections to the Plan
-----------------------------------------------------------

Voting.

            In  order  to  simplify  the  voting  procedures,  ballots  based on
classifications  under the Plan have been sent to all known  holders of Impaired
Claims and Interests  under the Plan.  Creditors who are entitled to vote on the
Plan will find a ballot accompanying this Disclosure Statement and Plan.

            IF YOU DID NOT RECEIVE A BALLOT WITH THIS DISCLOSURE  STATEMENT,  IT
MAY MEAN THAT YOU DO NOT HOLD A CLAIM THAT IS  IMPAIRED  UNDER THE PLAN.  If you
did not receive a Ballot for a certain  Claim that you believe you hold and that
you believe is also in a Class  entitled to vote on the Plan,  or if a ballot is
damaged or lost,  or if you have any  questions  regarding  the  procedures  for
voting on the plan, you should contact:

                                       33

<PAGE>

                             Halperin Battaglia Raicht, LLP
                             555 Madison Avenue, 9th Floor
                             New York, NY 10022
                             Tel: (212) 765-1900
                             Fax (212) 765-0964
                             Attn:    Alan D. Halperin, Esq.
                                      Robert D. Raicht, Esq.

            The Bankruptcy  Court has fixed _____,  2008 as the time and date by
which  holders of Claims  must vote to accept or reject the Plan.  A holder of a
Claim desiring to vote on the Plan should  complete the enclosed ballot and send
it to

                             Halperin Battaglia Raicht, LLP
                             555 Madison Avenue, 9th Floor
                             New York, NY 10022
                             Tel: (212) 765-1900
                             Fax (212) 765-0964
                             Attn:    Alan D. Halperin, Esq.
                                      Robert D. Raicht, Esq.

            BALLOTS MUST BE RECEIVED AT THE FOREGOING  ADDRESS ON OR BEFORE 5:00
P.M.  EASTERN  STANDARD TIME ON ____, 2008 TO BE COUNTED IN THE VOTING.  BALLOTS
RECEIVED  AFTER THIS TIME WILL NOT BE  COUNTED  IN THE  VOTING  UNLESS THE COURT
ORDERS OTHERWISE.

            Since mail  delays may occur,  it is  important  that your ballot be
mailed or delivered well in advance of the date specified  above. If a ballot is
signed  and  returned  without  further  instruction   regarding  acceptance  or
rejection of the plan,  the signed  ballot shall be counted as a vote  accepting
the plan.

            IT IS URGED THAT YOU TO ACCEPT THE PLAN  BECAUSE  THE DEBTOR AND THE
COMMITTEE  BELIEVE IT TO BE BOTH FAIR AND  EQUITABLE AND IN THE BEST INTEREST OF
THE DEBTOR'S CREDITORS AND INTEREST HOLDERS.

Objections to Confirmation.

            The Debtor and the Committee will seek  confirmation  of the Plan at
the Confirmation Hearing. Any creditor or party in interest who wishes to object
to confirmation of the Plan must file a written  objection on or before __, 2008
with the Clerk of the United States  Bankruptcy Court for the Southern  District
of New York, One Bowling Green, New York, New York 10004 with a courtesy copy to
the Chambers of the Honorable Robert E. Gerber. On or before __, 2008, a copy of
the objection must also served upon (i) counsel for the Debtor; and (ii) counsel
for the Committee;  and (iii) Office of the United States Trustee,  33 Whitehall
Street,  New York, New York 10004. Any objection must be timely filed and served
in order to enable the Creditor or Interest  Holder filing such  objection to be
heard at the Confirmation Hearing.

                                       34

<PAGE>

                                      VIII.
                                   Conclusion
                                   ----------

            It is believed  that the Plan offers fair  treatment for all holders
of Claims and Interests under the most favorable  available  terms, and strongly
believes  that  the  Plan  should  be  confirmed.  It is  anticipated  that  the
Confirmation of the Plan will occur in early 2008.

Dated:   New York, New York
         January 14, 2008

                                           OCEAN POWER CORPORATION

                                           By: /s/ J. Michael Hopper
                                               ---------------------------------
                                                J. Michael Hopper,
                                                Authorized Officer

Dated:   New York, New York
         January 14, 2008
                                           OFFICIAL COMMITTEE OF UNSECURED
                                           CREDITORS OF OCEAN POWER CORPORATION
                                           Debtor and Debtor-in-Possession

                                           By: /s/ Arthur Rosenberg
                                               ---------------------------------
                                                    Arthur Rosenberg,
                                                    Its Chairman

                                       35

<PAGE>

                                    Exhibit A
                  Ocean Power Corporation Disclosure Statement

                              Liquidation Analysis
                              --------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Assets                 Liabilities                                     Recovery
--------------------------------------------------------------------------------------------------------------------
<S>                    <C>                        <C>                  <C>                                   <C>
Cash=$225,537          DIP Facility(3)                  $0.00          DIP Facility                           100%
--------------------------------------------------------------------------------------------------------------------
                       Administrative Claims(4)      $488,687          Administrative Claims                 46.1%
--------------------------------------------------------------------------------------------------------------------
                       Priority Tax Claims(5)        $106,845          Priority Tax Claims                      0%
--------------------------------------------------------------------------------------------------------------------
                       Priority Claims(6)             $23,250          Priority Claims                          0%
--------------------------------------------------------------------------------------------------------------------
                       Unsecured Claims           $19,780,186          Unsecured Claims                         0%
--------------------------------------------------------------------------------------------------------------------
                       Existing Equity                                 Existing Equity                          0%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                       Potential Recoveries Under the Plan
                       -----------------------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Assets                 Liabilities                                     Recovery
--------------------------------------------------------------------------------------------------------------------
<S>                    <C>                        <C>                  <C>                              <C>
Cash=$725,537          DIP Facility                     $0.00          DIP Facility                           100%
--------------------------------------------------------------------------------------------------------------------
                       Administrative Claims         $488,687          Administrative Claims                  100%(7)
--------------------------------------------------------------------------------------------------------------------
                       Priority Tax Claims           $106,845          Priority Tax Claims                    100%
--------------------------------------------------------------------------------------------------------------------
                       Priority Claims                $23,250          Priority Claims                        100%
--------------------------------------------------------------------------------------------------------------------
6% New Common Stock    Unsecured Claims           $19,780,186          Unsecured Claims                 6% of NCS(8)
("NCS")
--------------------------------------------------------------------------------------------------------------------
1% of NCS              Existing Equity                                 Existing Equity                  1% of NCS(9)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

----------
(3) By order dated August 6, 2007, the  obligations  under the DIP Facility were
satisfied by the payment of $380,000.

(4) The estimates are as of the first quarter of 2007.

(5) A portion  of the  asserted  claims  appear  to be  overstated.  The  Debtor
reserves  the  right to object  to all or a  portion  tax  claims on any and all
available grounds.

(6) Represents asserted priority wages claims subject to the statutory cap under
section of the Bankruptcy Code.

(7) After giving effect to voluntary reductions by the estate's professionals.

(8) In the event the Debtor and the Committee are required to seek  confirmation
of the Plan under section 1129(b) of the Bankruptcy Code, the NCS  distributable
to holders of Allowed Unsecured Claims shall be reduced from 6% to 4% of the NCS
under the Plan.

(9) In the event the Debtor and the Committee are required to seek  confirmation
of the Plan under section 1129(b) of the Bankruptcy Code, the holders of Allowed
Interests shall receive no distribution of NCS under the Plan.

                                       36