SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of August 30, 2007, by and among Solomon Technologies, Inc., a Delaware
      corporation (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

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

     

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

     

     

    ARTICLE
      I.

    DEFINITIONS

     

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

     

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

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144 under the Securities
      Act.
      With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

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

     

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

     

    “Closing
      Date”
means
      a
      Trading Day when all of the Transaction Documents have been executed and
      delivered by the Company and each of the Purchasers purchasing Securities at
      the
      relevant Closing, and all conditions precedent to (i) the
      Purchasers’


    
      
         

      

      
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    obligations
      to pay the Subscription Amount for the Securities being purchased and (ii)
      the
      Company’s obligations to deliver the Securities being purchased have been
      satisfied or waived.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

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

     

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

     

    “Company
      Counsel”
means
      Davis & Gilbert LLP, with offices located at 1740 Broadway, New York, NY
      10019.

     

    “Conversion
      Price”
shall
      have the meaning ascribed to such term in the Debentures.

     

    “Debentures”
means
      the Variable Rate Self-Liquidating Senior Secured Convertible Debentures due,
      subject to the terms therein, April 17, 2009, issued by the Company to the
      Purchasers hereunder, in the form of Exhibit
      A
      attached
      hereto.

     

    “Disclosure
      Request”
shall
      have the meaning ascribed to such term in Section 4.6(b).

     

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

     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Escrow
      Agreement”
shall
      have the meaning ascribed to such term in Section 2.4.

     

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

    


    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      for
      such purpose by a majority of the non-employee members of the Board of Directors
      of the Company or a majority of the members of a committee of non-employee
      directors, (b) up to, in the aggregate, 250,000 shares of Common Stock or
      options (subject to reverse and forward stock splits and the like) during any
      12
      month


    
      
         

      

      
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    period
      issued to the officers, directors or employees of the Company or its
      Subsidiaries and approved by a majority of the members the Board of Directors
      of
      the Company, (c) up to, in the aggregate, $200,000 of Common Stock during any
      6
      month period approved by a majority of the members the Board of Directors of
      the
      Company, (d) securities upon the exercise or exchange of or conversion of any
      Securities issued hereunder and/or other securities exercisable or exchangeable
      for or convertible into shares of Common Stock issued and outstanding on the
      date of this Agreement (“Derivative
      Securities”),
      provided that the issuance of any additional securities as a result of any
      amendment, reset or adjustment (including resets and adjustments required
      pursuant to the terms of the Derivative Securities as in existence on the date
      hereof) of such Derivative Securities (other than pursuant to reverse and
      forward stock splits and the like) since the date of this Agreement shall not
      be
      exempt, (e) securities issued pursuant to acquisitions or strategic transactions
      approved by a majority of the disinterested directors of the Company, provided
      that any such issuance shall only be to a Person which is, itself or through
      its
      subsidiaries, an operating company in a business synergistic with the business
      of the Company and in which the Company receives benefits in addition to the
      investment of funds, but shall not include a transaction in which the Company
      is
      issuing securities primarily for the purpose of raising capital or to an entity
      whose primary business is investing in securities, (f)
      up to
      $375,000 of Common Stock to be issued to JMC Venture Partners LLC (“JMC”)
      or its
      assigns as a commitment fee for a $15 million acquisition line of credit to
      be
      entered into between the Company and JMC and an additional $100,000 of Common
      Stock per quarter to be issued to JMC as a monitoring fee, which shares shall
      be
      issued for an effective per share price of at least the fair market value of
      the
      Common Stock on the date of issuance of the applicable share
      as
      determined by the Company’s board of directors in good faith, and (g) as
      described in Section 2.1 below, up
      to an
      amount of Debentures and Warrants equal to the difference between $1,000,000
      and
      the aggregate Subscription Amounts on the Initial Closing Date, with “accredited
      investors” executing this Agreement and the other documents required to be
      delivered by such investors hereunder and such transactions having closed on
      or
      before the 20th
      calendar
      day following the date hereof. Notwithstanding anything herein or in any other
      Transaction Document to the contrary and consistent with clause (d) above,
      it is
      expressly agreed that any amendments, adjustments or resets that result in
      future issuances of Common Stock or Common Stock Equivalents pursuant to that
      certain Securities Purchase Agreement, dated August 17, 2006, by and among
      the
      Company, Integrated Power Systems LLC, Power Designs Inc., The Vantage Partners
      LLC, Technipower LLC and the other parties listed on the signature pages
      thereto, or pursuant to any other agreements or documents entered into or issued
      in connection therewith, shall not be an Exempt Issuance.

     

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

     

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

     

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

     


    
      
         

      

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

     

    “January
      Debentures”
means
      the Variable Rate Self-Liquidating Senior Secured Debentures issued by the
      Company in January 2007 in an aggregate initial principal amount of
      $5,350,000.

     

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

     

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

     

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

     

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

     

    “Maximum
      Rate”
shall
      have the meaning ascribed to such term in Section 5.17.

     

    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.12(a). 

     

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

     

    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.12(b). 

     

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

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.10.

     

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

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale of the Underlying Shares by each
      Purchaser as provided for in the Registration Rights Agreement.

     

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

     


    
      
         

      

      
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    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon exercise or conversion
      in full of all Warrants and Debentures (including Underlying Shares issuable
      as
      payment of interest), ignoring any conversion or exercise limits set forth
      therein, and assuming that the Conversion Price is at all times on and after
      the
      date of determination 90% of the then Conversion Price on the Trading Day
      immediately prior to the date of determination.

     

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

     

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

     

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

     

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

     

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

    


    “Security
      Documents”
shall
      mean the Security Agreement, the form of Subsidiary Guarantee and any other
      documents and filing required thereunder in order to grant the Purchasers a
      first priority security interest in the assets of the Company and the
      Subsidiaries as provided in the Security Agreement, including all UCC-1 filing
      receipts. 

     

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

     

    “Subscription
      Amount”
      means,
      as
      to each Purchaser, the aggregate amount
      to be
      paid for Debentures and Warrants purchased hereunder as specified opposite
      such
      Purchaser’s name on Schedule
      1
      hereto
      and under the heading “Subscription Amount”, in United States dollars and in
      immediately available funds.

     

    “Subsequent
      Financing”
shall
      have the meaning ascribed to such term in Section 4.12.

     

    “Subsequent
      Financing Notice”
shall
      have the meaning ascribed to such term in Section 4.12. 


    
      
         

      

      
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    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

     

    “Subsidiary
      Guarantee”
means
      the Subsidiary Guarantee, dated the date hereof, by certain Subsidiaries in
      favor of the Purchasers, in the form of Exhibit
      F
      attached
      hereto.

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

     

    “Transaction
      Documents”
means
      this Agreement, the Debentures, the Warrants, the Registration Rights Agreement,
      the Security Agreement, the Subsidiary Guarantee and any other documents or
      agreements executed in connection with the transactions contemplated
      hereunder.

     

    “Transfer
      Agent”
means
      Computershare Trust Company, Inc., with a mailing address of 350 Indiana Street,
      #800 and a facsimile number of (303) 262-0700, and any successor transfer agent
      of the Company.

     

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

     

    “Variable
      Rate Transaction”
      shall
      have the meaning ascribed to such term in Section 4.13(b).

     

    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
      from
      9:30 a.m. New York City time to 4:02 p.m. New York City time); (b)  if the
      OTC Bulletin Board is not a Trading Market, the volume weighted average price
      of
      the Common Stock for such date (or the nearest preceding date) on the OTC
      Bulletin Board; (c) if the Common Stock is not then listed or quoted on the
      OTC
      Bulletin Board and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (d) in all other cases, the fair
      market value of a share of Common Stock as determined by an independent
      appraiser


    
      
         

      

      
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    selected
      in good faith by the Company and reasonably acceptable to the Holder, the fees
      and expenses of which shall be paid by the Company.

     

    “Warrants”
means
      collectively the Common Stock purchase warrants delivered to the Purchasers
      at
      the applicable Closing in accordance with Section 2.2(a) hereof, in the form
      of
Exhibit C
      attached
      hereto.

     

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

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing;
      Escrow.
      On the
      initial Closing Date (the “Initial
      Closing Date”),
      upon
      the terms and subject to the conditions set forth herein, substantially
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company agrees to sell, and each Purchaser purchasing Securities
      at
      the initial Closing (the “Initial
      Closing”),
      severally and not jointly, agrees to purchase the principal amount of the
      Debentures and a Warrant to purchase the number of Warrant Shares, set forth
      opposite such Purchaser’s name on Schedule 1 hereto, which shall not exceed, in
      the aggregate, $1,000,000. Upon satisfaction of the conditions set forth in
      Sections 2.2 and 2.3, the Initial Closing shall occur at the offices of FWS
      or
      such other location as the parties shall mutually agree. Thereafter, on any
      subsequent Closing Date (each a “Subsequent
      Closing Date”),
      upon
      the terms and subject to the conditions set forth herein, substantially
      concurrent with the execution and delivery of this Agreement by the Purchasers
      purchasing Securities on such Subsequent Closing Date, the Company agrees to
      sell, and each Purchaser purchasing Securities at such subsequent Closing (each
      a “Subsequent
      Closing”),
      severally and not jointly, agrees to purchase the principal amount of the
      Debentures and a Warrant to purchase the number of Warrant Shares, set forth
      opposite such Purchaser’s name on Schedule 1 hereto, which shall not exceed, in
      the aggregate, $1,000,000 less the principal amount of Debentures issued and
      sold at all previous Closings. Notwithstanding anything herein to the contrary,
      any Subsequent Closing Date must occur on or before (i) the 20th
      calendar
      day following the date hereof, for any Purchasers who are holders of any of
      the
      January Debentures, or (ii) the 60th
      calendar
      day following the date hereof, for any Purchasers who are not holders of one
      or
      more of the January Debentures. Each Purchaser purchasing Securities on a
      Closing Date shall deliver to the Company, via wire transfer or a certified
      check, immediately available funds equal to its Subscription Amount and the
      Company shall deliver to each such Purchaser its respective Debenture and a
      Warrant, and the Company and each such Purchaser shall deliver the other items
      set forth in Section 2.2 deliverable at the Closing; provided, that a particular
      Purchaser’s obligation to deliver funds equal to its Subscription Amount shall
      be deemed satisfied by such Purchaser’s deposit of the applicable Subscription
      Amount into the Escrow Account and Company Counsel’s disbursement of escrowed
      funds in accordance with the Escrow Agreement, as contemplated by Section 2.4
      below. 

     

    2.2  Deliveries


    
      
         

      

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

     

    
      
        (i) 
          this
          Agreement duly executed by the Company;

         

      

    

    (ii) a
      legal
      opinion of Company Counsel, in substantially the form of Exhibit
      D
      attached
      hereto (or, at any Subsequent Closing, a bring-down certificate confirming
      the
      statements set forth in the legal opinion issued by Company Counsel at the
      Initial Closing);

     

    (iii) a
      Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
      registered in the name of such Purchaser;

     

    (iv) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 30% of such Purchaser’s Subscription Amount divided by
      $0.35 with term of exercise equal to 5 years from the Closing Date and an
      exercise price equal to $0.35 subject to adjustment therein;

    


    (v) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 40% of such Purchaser’s Subscription Amount divided by
      $0.35 with term of exercise equal to 1 year from the effective date of the
      registration statement registering the resale of the shares underlying such
      Warrant and an exercise price equal to $0.35 subject to adjustment
      therein;

    


    (vi) the
      Security Agreement, duly executed by the Company along with all of the Security
      Documents duly executed by the parties thereto;

     

    (vii) the
      Lock-up Agreements in the form of Exhibit
      G
      attached
      hereto duly executed by the Company and Power Designs, Inc., with respect to
      all
      shares held thereby, including but not limited to, 1,897,023 shares of Common
      Stock of which it is the record owner, Integrated Power Systems LLC, with
      respect to all shares held thereby, including but not limited to, 1,879,023
      shares of Common Stock of which it is the record owner and Jezebel Management
      Corporation, with respect to all shares held thereby, including but not limited
      to, 1,976,633 shares of Common Stock of which it is the record owner;
      and

     

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

     

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

     

    
      
        (i) 
          this
          Agreement duly executed by such Purchaser;

         

      

    

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

     

    
      
         

      

      
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    (iii) the
      Security Agreement duly executed by such Purchaser; and

     

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

     

    2.3 Closing
      Conditions. 

     

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

     

    (i) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Purchasers contained herein;

     

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

     

    (iii) the
      delivery by the Purchasers of the items set forth in Section 2.2(b) of this
      Agreement,
      including, in the case of the Initial Closing, an aggregate of at least $500,000
      in Subscription Amounts.

     

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

     

    (i) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Company contained herein;

     

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

     

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

     

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

     

    (v) in
      the
      case of the Initial Closing, the Company shall have received aggregate
      Subscription Amounts of at least $500,000; and

     

    (vi) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg L.P. shall not have been suspended or limited, or


    
      
         

      

      
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    minimum
      prices shall not have been established on securities whose trades are reported
      by such service, or on any Trading Market, nor shall a banking moratorium have
      been declared either by the United States or New York State authorities nor
      shall there have occurred any material outbreak or escalation of hostilities
      or
      other national or international calamity of such magnitude in its effect on,
      or
      any material adverse change in, any financial market which, in each case, in
      the
      reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to
      purchase the Debentures at the Closing.

     

    2.4 Escrow.
      As set
      forth in Section 2.3 above, the Initial Closing is conditioned upon, among
      other
      things, the receipt by the Company of a minimum of $500,000 of Subscription
      Amounts. To facilitate the foregoing, the Company has established an escrow
      account (the “Escrow
      Account”)
      with
      Company Counsel, into which each Purchaser participating in the Initial Closing
      shall deposit its Subscription Amount, by way of check or wire transfer of
      immediately available funds to the following account:

     

    ACCOUNT
      NAME:

    Davis
      & Gilbert LLP Escrow Account

    


    THE
      BANK:

    City
      National Bank

    400
      Park
      Avenue, 21st Floor 

    New
      York,
      NY 10022

    


    ACCOUNT
      NUMBER:

    665057925

    


    ABA
      NUMBER:

    0260
      1395
      8

    


    MANDATORY
      REFERENCE:

    20911/0007-000/Solomon/ref.
      Norton

    


    Amounts
      deposited into the Escrow Account will be held and disbursed in accordance
      with
      the terms and provisions of the Escrow Agreement.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 Representations
      and Warranties of the Company.
      Except
      as set forth in the disclosure schedules delivered to the Purchasers
      concurrently herewith (the “Disclosure
      Schedules”),
      which
      Disclosure Schedules shall be deemed a part hereof and to qualify any
      representation or warranty otherwise made herein to the extent of such
      disclosure, the Company hereby makes the following representations and
      warranties to each Purchaser:

     

    (a) Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all of the issued
      and outstanding shares of capital stock of each Subsidiary are
      validly

     


    
      
         

      

      
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    issued
      and are fully paid, non-assessable and free of preemptive and similar rights
      to
      subscribe for or purchase securities. 

     

    (b) Organization
      and Qualification.
      The
      Company and each of the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in material violation or default of any of the provisions of
      its
      respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the Subsidiaries
      is
      duly qualified to conduct business and is in good standing as a foreign
      corporation or other entity in each jurisdiction in which the nature of the
      business conducted or property owned by it makes such qualification necessary,
      except where the failure to be so qualified or in good standing, as the case
      may
      be, could not have or reasonably be expected to result in a Material Adverse
      Effect and to the Company’s knowledge no Proceeding has been instituted in any
      such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
      or curtail such power and authority or qualification. For purposes of this
      Agreement, “Material
      Adverse Effect”
means
      (i) a material adverse effect on the legality, validity or enforceability of
      any
      Transaction Document, (ii) a material adverse effect on the results of
      operations, assets, business, prospects or condition (financial or otherwise)
      of
      the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
      effect on the Company’s ability to perform in any material respect on a timely
      basis its obligations under any Transaction Document; provided that none of
      the
      following shall be deemed, either alone or in combination, to constitute a
      Material Adverse Effect, with respect to the Company: (a) conditions generally
      affecting any of the industries or markets of the United States and that do
      not
      disproportionately impact the Company and its Subsidiaries and Affiliates,
      taken
      as a whole, when compared with other businesses operating in the same sector,
      (b) financial market fluctuations or conditions (including changes in interest
      rates or foreign currency exchange rates) and that do not disproportionately
      impact the Company and its Subsidiaries and Affiliates, taken as a whole, when
      compared with other businesses operating in the same sector, (c) any changes
      in
      tax, securities or other Applicable Laws, (d) any action, omission, change,
      effect, circumstance or condition contemplated by this Agreement or attributable
      to the execution, performance or announcement of this Agreement and the
      transactions contemplated hereby or (e) acts of terrorism, war (whether declared
      or not), hostilities, or any similar event or occurrence.

     

    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations hereunder and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated hereby and thereby
      have
      been duly authorized by all necessary corporate action on the part of the
      Company and no further action is required by the Company, its board of directors
      or its

     


    
      
         

      

      
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    stockholders
      in connection therewith other than in connection with the Required Approvals.
      Each Transaction Document has been (or upon delivery will have been) duly
      executed by the Company and, when delivered in accordance with the terms hereof
      and thereof, will constitute the valid and legally binding obligation of the
      Company enforceable against the Company in accordance with its terms except
      (i)
      as limited by general equitable principles and applicable bankruptcy,
      insolvency, fraudulent conveyance, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights generally, (ii)
      as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by applicable
      law.

     

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

     

    (e) Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.6,
      (ii) the filing with the Commission of the Registration Statement, (iii) the
      notice and/or application(s) to each applicable Trading Market for the issuance
      and sale of the Securities and the listing of the Underlying Shares for trading
      thereon in the time and manner required thereby and (iv) the filing of Form
      D
      with the Commission and such filings as are required to be made under applicable
      state securities laws (collectively, the “Required
      Approvals”).

     

    (f) Issuance
      of the Securities.
      The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be


    
      
         

      

      
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    duly
      and
      validly issued, fully paid and nonassessable, free and clear of all Liens
      imposed by the Company other than restrictions on transfer provided for in
      the
      Transaction Documents. The Underlying Shares, when issued in accordance with
      the
      terms of the Transaction Documents, will be validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company. The Company
      has reserved from its duly authorized capital stock a number of shares of Common
      Stock for issuance of the Underlying Shares at least equal to the Required
      Minimum on the date hereof. 

     

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

     

    (h) SEC
      Reports; Financial Statements.
      Except
      as set forth on Schedule 3.1(h), the Company has filed all reports, schedules,
      forms, statements and other documents required to be filed by the Company under
      the Securities Act and the Exchange Act, including pursuant to Section 13(a)
      or
      15(d) thereof, for the two years preceding the date hereof (the foregoing
      materials, being collectively referred to herein


    
      
         

      

      
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    as
      the
“SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act, as applicable,
      and
      none of the SEC Reports, when filed, contained any untrue statement of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. Except as set forth
      on
      Schedule 3.1(h), the financial statements of the Company included in the SEC
      Reports (i) comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing and (ii) have been prepared in
      accordance with United States generally accepted accounting principles applied
      on a consistent basis during the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated Subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

    (i) Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof, (i) there has been no event, occurrence or development
      that
      has had or that could reasonably be expected to result in a Material Adverse
      Effect, (ii) the Company has not incurred any liabilities (contingent or
      otherwise) other than (A) trade payables and accrued expenses incurred in the
      ordinary course of business consistent with past practice and (B) liabilities
      not required to be reflected in the Company’s financial statements pursuant to
      GAAP or disclosed in filings made with the Commission, (iii) the Company has
      not
      altered its method of accounting, (iv) the Company has not declared or made
      any
      dividend or distribution of cash or other property to its stockholders or
      purchased, redeemed or made any agreements to purchase or redeem any shares
      of
      its capital stock and (v) the Company has not issued any equity securities
      to
      any officer, director or Affiliate, except pursuant to existing Company stock
      option plans. The Company does not have pending before the Commission any
      request for confidential treatment of information. Except for the issuance
      of
      the Securities contemplated by this Agreement or as set forth on Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      on
      Form 8-K at the time this representation is made that has not been publicly
      disclosed at least one Trading Day prior to the date that this representation
      is
      made.

     

    (j) Litigation.
      There
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, any Subsidiary or any of their respective properties before or
      by


    
      
         

      

      
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    any
      court, arbitrator, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Securities or (ii) could, if there
      were
      an unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
      officer thereof, is or has been the subject of any Action involving a claim
      of
      violation of or liability under federal or state securities laws or a claim
      of
      breach of fiduciary duty. There has not been, and to the knowledge of the
      Company, there is not pending or contemplated, any investigation by the
      Commission involving the Company or any current or former director or officer
      of
      the Company. The Commission has not issued any stop order or other order
      suspending the effectiveness of any registration statement filed by the Company
      or any Subsidiary under the Exchange Act or the Securities Act. 

     

    (k) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a Material Adverse Effect. None of the Company’s or its
      Subsidiaries’ employees is a member of a union that relates to such employee’s
      relationship with the Company, and neither the Company or any of its
      Subsidiaries is a party to a collective bargaining agreement, and the Company
      and its Subsidiaries believe that their relationships with their employees
      are
      good. No executive officer, to the knowledge of the Company, is, or is now
      expected by the Company to be, in violation of any material term of any
      employment contract, confidentiality, disclosure or proprietary information
      agreement or non-competition agreement, or any other contract or agreement
      or
      any restrictive covenant, and the continued employment of each such executive
      officer does not subject the Company or any of its Subsidiaries to any liability
      with respect to any of the foregoing matters. The Company and its Subsidiaries
      are in compliance with all U.S. federal, state, local and foreign laws and
      regulations relating to employment and employment practices, terms and
      conditions of employment and wages and hours, except where the failure to be
      in
      compliance could not, individually or in the aggregate, reasonably be expected
      to have a Material Adverse Effect.

     

    (l) Compliance.
      Except
      as set forth on Schedule 3.1(l), neither the Company nor any Subsidiary (i)
      is,
      to the Company’s knowledge, in default under or in violation of (and no event
      has occurred that has not been waived that, with notice or lapse of time or
      both, would result in a default by the Company or any Subsidiary under), nor
      has
      the Company or any Subsidiary received notice of a claim that it is in default
      under or that it is in violation of, any indenture, loan or credit agreement
      or
      any other agreement or instrument to which it is a party or by which it or
      any
      of its properties is bound (whether or not such default or violation has been
      waived), (ii) is in violation of any order of any court, arbitrator or
      governmental body, or (iii) is or has been, to the Company’s knowledge, in
      violation of any statute, rule or regulation of any governmental authority,
      including without limitation all foreign, federal, state and local laws
      applicable to its business and all such laws that affect the environment, except
      in each case as could not have or reasonably be expected to result in a Material
      Adverse Effect.


    
      
         

      

      
        15

        
          

        

      

      
         

      

    


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

     

    (n) Title
      to Assets.
      Neither
      the Company nor any of the Subsidiaries own any real property. The Company
      and
      the Subsidiaries have good and marketable title in all personal property owned
      by them that is material to the business of the Company and the Subsidiaries,
      in
      each case free and clear of all Liens, except for Liens as do not materially
      affect the value of such property and do not materially interfere with the
      use
      made and proposed to be made of such property by the Company and the
      Subsidiaries and Liens for the payment of federal, state or other taxes, the
      payment of which is neither delinquent nor subject to penalties. Any real
      property and facilities held under lease by the Company and the Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance, except where the failure to
      be
      in compliance would not, individually or in the aggregate, reasonably be
      expected to result in a Material Adverse Effect.

     

    (o) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights necessary or material for use in connection with
      their
      respective businesses as described in the SEC Reports and which the failure
      to
      so have could have a Material Adverse Effect (collectively, the “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any Subsidiary violates
      or
      infringes upon the rights of any Person. To the knowledge of the Company, except
      as set forth in Schedule 3.1(o), all such Intellectual Property Rights are
      enforceable and there is no existing infringement by another Person of any
      of
      the Intellectual Property Rights. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    (p) Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including directors and officers insurance coverage at least equal
      to
      $5 million. Neither the Company nor any Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business without a significant increase in
      cost.


    
      
         

      

      
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    (q) Transactions
      with Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $60,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

    (r) Sarbanes-Oxley;
      Internal Accounting Controls.
      The
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 which are applicable to it as of the Closing Date. 

     

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

     

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

     

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

     

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

     

    (w) Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act, and the Company has taken no action designed to, or which to its knowledge
      is likely to have the effect of,


    
      
         

      

      
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    terminating
      the registration of the Common Stock under the Exchange Act nor has the Company
      received any notification that the Commission is contemplating terminating
      such
      registration. The Common Stock is listed on the OTC Bulletin Board and the
      Company has not, in the 12 months preceding the date hereof, received notice
      from the OTC Bulletin Board to the effect that the Company is not in compliance
      with the listing or maintenance requirements of such Trading Market. The Company
      is, and has no reason to believe that it will not in the foreseeable future
      continue to be, in compliance with all such listing and maintenance
      requirements.

     

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

     

    (y) Disclosure.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company confirms that neither
      it
      nor any other Person acting on its behalf has provided any of the Purchasers
      or
      their agents or counsel with any information that it believes constitutes or
      might constitute material, nonpublic information. The Company understands and
      confirms that the Purchasers will rely on the foregoing representation in
      effecting transactions in securities of the Company. All disclosure furnished
      by
      or on behalf of the Company to the Purchasers regarding the Company, its
      business and the transactions contemplated hereby, including the Disclosure
      Schedules to this Agreement, is true and correct and does not contain any untrue
      statement of a material fact. The Company acknowledges and agrees that no
      Purchaser makes or has made any representations or warranties with respect
      to
      the transactions contemplated hereby other than those specifically set forth
      in
      Section 3.2 hereof.

     

    (z) No
      Integrated Offering.
      Assuming
      the accuracy of the Purchasers’ representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any offers
      or
      sales of any security or solicited any offers to buy any security, under
      circumstances that would cause this offering of the Securities to be integrated
      with prior offerings by the Company for purposes of the Securities
      Act.

     

    (aa) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the
      Securities hereunder, (i) the fair saleable value of the Company’s assets
      exceeds the amount that will be required to be paid on or in respect of the
      Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature;


    
      
         

      

      
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    (ii)
      the
      Company’s assets do not constitute unreasonably small capital to carry on its
      business as now conducted and as proposed to be conducted including its capital
      needs taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its liabilities when such
      amounts are required to be paid. The Company has no knowledge of any facts
      or
      circumstances which lead it to believe that it will file for reorganization
      or
      liquidation under the bankruptcy or reorganization laws of any jurisdiction
      within one year from the Closing Date. Schedule
      3.1(aa)
      sets
      forth as of the dates thereof all outstanding secured and unsecured Indebtedness
      of the Company or any Subsidiary, or for which the Company or any Subsidiary
      has
      commitments. For the purposes of this Agreement, “Indebtedness”
means
      (a) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Except
      as
      set forth on Schedule 3.1(aa), neither the Company nor any Subsidiary is in
      default with respect to any Indebtedness.

     

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

     

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

     

    (dd) Foreign
      Corrupt Practices.
      Neither
      the Company, nor to the knowledge of the Company, any agent or other person
      acting on behalf of the Company, has violated in any material respect any
      provision of the Foreign Corrupt Practices Act of 1977, as
      amended.


    
      
         

      

      
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    (ee) Accountants.
      The
      name of the Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the knowledge and belief of the Company, (i) such
      accounting firm is a registered public accounting firm as required by the
      Exchange Act and (ii) there is no reason to expect that such accounting firm
      will refuse to express its opinion with respect to the financial statements
      to
      be included in the Company’s Annual Report on Form 10-KSB for the year ending
      December 31, 2007.

     

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

     

    (gg) No
      Disagreements with Accountants and Lawyers.
      Except
      as set forth on Schedule
      3.1(gg),
      there
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company and the Company is current with
      respect to any fees owed to its accountants and lawyers.

     

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

     

    (ii) Acknowledgment
      Regarding Purchasers’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding
      (except for Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged
      by the Company (i) that none of the Purchasers have been asked to agree, nor
      has
      any Purchaser agreed, to desist from purchasing or selling, long and/or short,
      securities of the Company, or “derivative” securities based on securities issued
      by the Company or to hold the Securities for any specified term; (ii) that
      past
      or future open market or other transactions by any Purchaser, including Short
      Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
      placement transactions, may negatively impact the market price of the Company’s
      publicly-traded securities; (iii) that any Purchaser, and counter-parties in
      “derivative” transactions to


    
      
         

      

      
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    which
      any
      such Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock; and (iv) that each Purchaser shall not be deemed
      to have any affiliation with or control over any arm’s length counter-party in
      any “derivative” transaction. The
      Company further understands and acknowledges that (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Underlying Shares deliverable with respect to Securities
      are being determined and (b) such hedging activities (if any) could reduce
      the
      value of the existing stockholders' equity interests in the Company at and
      after
      the time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents.

     

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

     

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

     

    (a) Organization;
      Authority.
      Such
      Purchaser is an entity duly incorporated or otherwise organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization with the requisite, corporate or partnership
      power
      and authority to enter into and to consummate the transactions contemplated
      by
      the Transaction Documents and otherwise to carry out its obligations hereunder
      and thereunder. The execution and delivery of each of the Transaction Documents
      by such Purchaser and the consummation by it of the transactions contemplated
      hereby and thereby have been duly authorized by all necessary corporate or
      similar action on the part of such Purchaser its board of directors or its
      stockholders in connection therewith. Each Transaction Document to which it
      is a
      party has been duly executed by such Purchaser, and when delivered by such
      Purchaser in accordance with the terms hereof, and thereof, will constitute
      the
      valid and legally binding obligation of such Purchaser, enforceable against
      it
      in accordance with its terms, except (i) as limited by general equitable
      principles and applicable bankruptcy, insolvency, reorganization, moratorium
      and
      other laws of general application affecting enforcement of creditors’ rights
      generally, (ii) as limited by laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies and (iii) insofar
      as
      indemnification and contribution provisions may be limited by applicable
      law.


    
      
         

      

      
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    (b) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the
      Purchaser and the consummation by the Purchaser of the other transactions
      contemplated hereby and thereby do not and will not: (i) conflict with or
      violate any provision of the Purchaser’s certificate or articles of
      incorporation, bylaws or other organizational or charter documents, or (ii)
      subject to the Required Approvals, conflict with or result in a violation of
      any
      law, rule, regulation, order, judgment, injunction, decree or other restriction
      of any court or governmental authority to which the Purchaser is subject
      (including federal and state securities laws and regulations.

     

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

     

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

     

    (e) Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its purchaser representatives (as
      such
      term is defined in Rule 501(h) of Regulation D under the Securities Act), has
      such knowledge, sophistication and experience in business and financial matters
      so as to be capable of evaluating the merits and risks of the prospective
      investment in the Securities, and has so evaluated the merits and risks of
      such
      investment. Such Purchaser is able to bear the economic risk of an investment
      in
      the Securities and, at the present time, is able to afford a complete loss
      of
      such investment.

     

    (f) General
      Solicitation.
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over


    
      
         

      

      
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    television
      or radio or presented at any seminar or any other general solicitation or
      general advertisement.

     

    (g) Residence.
      If such
      Purchaser is an individual, then such Purchaser resides in the state or province
      identified in the address of such Purchaser set forth on the signature page
      hereto; if such Purchaser is a partnership, corporation, limited liability
      company or other entity, then the office or offices of such Purchaser in which
      its investment decision was made is located at the address or addresses of
      such
      Purchaser set forth on the signature page hereto.

     

    (h)  Rule
      144.
      Subject
      to Section 4.1(a), such Purchaser acknowledges and agrees that the Securities
      are “restricted securities” as defined in Rule 144 promulgated under the
      Securities Act as in effect from time to time and must be held indefinitely
      unless they are subsequently registered under the Securities Act or an exemption
      from such registration is available. Such Purchaser has been advised or is
      aware
      of the provisions of Rule 144, which permits limited resale of shares purchased
      in a private placement subject to the satisfaction of certain conditions,
      including, among other things: the availability of certain current public
      information about the Company, the resale occurring following the required
      holding period under Rule 144 and the number of shares being sold during any
      three-month period not exceeding specified limitations.

     

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

     

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
      Restrictions.


    
      
         

      

      
        23

        
          

        

      

      
         

      

    


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

     

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

     

    [NEITHER]
      THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
      [CONVERTIBLE]] HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
      COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      ACT”) AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER
      THE ACT. THE SECURITIES MAY NOT BE OFFERED OR FOR SALE, SOLD OR OTHERWISE
      TRANSFERED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
      SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM, OR UNDER THE ACT, THE
      AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE
      COMPANY.

     

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

     

    (c) Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective


    
      
         

      

      
        24

        
          

        

      

      
         

      

    


    under
      the
      Securities Act, or (ii) following any sale of such Underlying Shares pursuant
      to
      Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule
      144(k). The Company shall cause its counsel to issue a legal opinion to the
      Transfer Agent promptly after the Effective Date if required by the Transfer
      Agent to effect the removal of the legend hereunder. If all or any portion
      of a
      Debenture or Warrant is converted or exercised (as applicable) at a time when
      there is an effective registration statement to cover the resale of the
      Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k)
      then such Underlying Shares shall be issued free of all legends. The Company
      agrees that following the Effective Date or at such time as such legend is
      no
      longer required under this Section 4.1(c), it will, no later than three Trading
      Days following the delivery by a Purchaser to the Company or the Transfer Agent
      of a certificate representing Underlying Shares, as applicable, issued with
      a
      restrictive legend (such third Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to the Transfer Agent
      that enlarge the restrictions on transfer set forth in this Section. If
      requested by a Purchaser, Certificates for Underlying Shares subject to legend
      removal hereunder shall be transmitted by the Transfer Agent to such Purchaser
      by crediting the account of the Purchaser’s prime broker with the Depository
      Trust Company System.

    


    (d) In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
      the
      date such Securities are submitted to the Transfer Agent) delivered for removal
      of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
      (increasing to $20 per Trading Day 5 Trading Days after such damages have begun
      to accrue) for each Trading Day after the 2nd
      Trading
      Day immediately following the Legend Removal Date until such certificate is
      delivered without a legend. Nothing herein shall limit such Purchaser’s right to
      pursue actual damages for the Company’s failure to deliver certificates
      representing any Securities as required by the Transaction Documents, and such
      Purchaser shall have the right to pursue all remedies available to it at law
      or
      in equity including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    (e) Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 4.1 is predicated upon the Company’s reliance that the
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a Registration Statement, they will be sold in compliance with
      the
      plan of distribution set forth therein.

     

    4.2 Acknowledgment
      of Dilution.
      The
      Company acknowledges that the issuance of the Securities may result in dilution
      of the outstanding shares of Common Stock, which dilution


    
      
         

      

      
        25

        
          

        

      

      
         

      

    


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

     

    4.3 Furnishing
      of Information.
      As long
      as any Purchaser owns Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
      the
      Company is not required to file reports pursuant to the Exchange Act, it will
      prepare and furnish to the Purchasers and make publicly available in accordance
      with Rule 144(c) such information as is required for the Purchasers to sell
      the
      Securities under Rule 144. The Company further covenants that it will take
      such
      further action as any holder of Securities may reasonably request, to the extent
      required from time to time to enable such Person to sell such Securities without
      registration under the Securities Act within the requirements of the exemption
      provided by Rule 144.

     

    4.4 Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market.

     

    4.5 Conversion
      and Exercise Procedures.
      The
      form of Notice of Exercise included in the Warrants and the form of Notice
      of
      Conversion included in the Debentures set
      forth
      the totality of the procedures required of the Purchasers in order to exercise
      the Warrants or convert the Debentures. No additional legal opinion or other
      information or instructions shall be required of the Purchasers to exercise
      their Warrants or convert their Debentures. 

     

    4.6 Securities
      Laws Disclosure; Publicity.
      

     

    a) The
      Company shall, within 2 Trading Days of the date hereof, issue a Current Report
      on Form 8-K disclosing the material terms of the transactions contemplated
      hereby (the “Form
      8-K”).
      The
      Company and each Purchaser shall consult with each other in issuing any other
      press releases with respect to the transactions contemplated hereby, and neither
      the Company nor any Purchaser shall issue any such press release or otherwise
      make any such public statement without the prior consent of the Company, with
      respect to any press release of any Purchaser, or without the prior consent
      of
      each Purchaser, with respect to any press release of the Company, which consent
      shall not unreasonably be withheld or delayed, except if such disclosure is
      required by law, in which case the disclosing party shall promptly provide
      the
      other party

     


    
      
         

      

      
        26

        
          

        

      

      
         

      

    


    with
      prior notice of such public statement or communication. Notwithstanding the
      foregoing, the Company shall not publicly disclose the name of any Purchaser,
      or
      include the name of any Purchaser in any filing with the Commission or any
      regulatory agency or Trading Market, without the prior written consent of such
      Purchaser, except (i) as required by federal securities law in connection with
      (A) the Form 8-K, (B) any registration statement contemplated by the
      Registration Rights Agreement and (C) the filing of final Transaction Documents
      (including signature pages thereto) with the Commission and (ii) to the extent
      such disclosure is required by law or Trading Market regulations, in which
      case
      the Company shall provide the Purchasers with prior notice of such disclosure
      permitted under this subclause (ii).

     

    b) In
      the
      event that the Company shall, on or after the date hereof, provide any material
      nonpublic information (as such term is used in Regulation FD under the
      Securities Act) to any Purchaser without such Purchaser’s prior written consent
      or request, then, in addition to any other remedy provided herein or in the
      Transaction Documents, if such Purchaser shall request that the Company publicly
      disclose such information (a “Disclosure
      Request”),
      the
      Company shall, within 5 business days after receiving such Disclosure Request,
      either (i) make public disclosure of such information in a manner consistent
      with Rule 101(e) of Regulation FD or (ii) provide such Purchaser with a written
      statement that the Company does not believe that the information disclosed
      to
      such Purchaser is material nonpublic information or that it was delivered
      pursuant to the prior written request or consent of such Purchaser.

     

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

     

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

     

    4.9 Use
      of
      Proceeds.
      Except
      as set forth on Schedule
      4.9
      attached
      hereto, the Company shall use the net proceeds from the sale of the Securities
      hereunder for working capital purposes and shall not use such proceeds for
      the
      satisfaction of any portion of the Company’s debt (other than payment of trade
      payables in the ordinary course of the Company’s business and


    
      
         

      

      
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    prior
      practices), or to redeem any Common Stock or Common Stock Equivalents or to
      settle any outstanding litigation.

     

    4.10 Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.10, the Company will indemnify and hold
      each
      Purchaser and its directors, officers, shareholders, members, partners,
      employees and agents (and any other Persons with a functionally equivalent
      role
      of a Person holding such titles notwithstanding a lack of such title or any
      other title), each Person who controls such Purchaser (within the meaning of
      Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
      directors, officers, shareholders, agents, members, partners or employees (and
      any other Persons with a functionally equivalent role of a Person holding such
      titles notwithstanding a lack of such title or any other title) of such
      controlling person (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to (a) any breach of any of the representations, warranties,
      covenants or agreements made by the Company in this Agreement or in the other
      Transaction Documents or (b) any action instituted against a Purchaser, or
      any
      of them or their respective Affiliates, by any stockholder of the Company who
      is
      not an Affiliate of such Purchaser, with respect to any of the transactions
      contemplated by the Transaction Documents (unless such action is based upon
      a
      breach of such Purchaser’s representations, warranties or covenants under the
      Transaction Documents or any agreements or understandings such Purchaser may
      have with any such stockholder or any violations by the Purchaser of state
      or
      federal securities laws or any conduct by such Purchaser which constitutes
      fraud, gross negligence, willful misconduct or malfeasance). If any action
      shall
      be brought against any Purchaser Party in respect of which indemnity may be
      sought pursuant to this Agreement, such Purchaser Party shall promptly notify
      the Company in writing, and the Company shall have the right to assume the
      defense thereof with counsel of its own choosing reasonably acceptable to the
      Purchaser Party. Any Purchaser Party shall have the right to employ separate
      counsel in any such action and participate in the defense thereof, but the
      fees
      and expenses of such counsel shall be at the expense of such Purchaser Party
      except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time to assume such defense and to employ counsel or (iii)
      in such action there is, in the reasonable opinion of such separate counsel,
      a
      material conflict on any material issue between the position of the Company
      and
      the position of such Purchaser Party, in which case the Company shall be
      responsible for the reasonable fees and expenses of no more than one such
      separate counsel. The Company will not be liable to any Purchaser Party under
      this Agreement (i) for any settlement by a Purchaser Party effected without
      the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed or (ii) to the extent, but only to the extent that a loss, claim, damage
      or liability is attributable to any Purchaser Party’s breach of any of the
      representations, warranties, covenants or agreements made by such Purchaser
      Party in this Agreement or in the other Transaction Documents.

     

    4.11 Reservation
      and Listing of Securities.

     


    
      
         

      

      
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    (a) The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction
      Documents.

     

    (b) If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than the Required Minimum on such date, then
      the
      Board of Directors of the Company shall use commercially reasonable efforts
      to
      amend the Company’s certificate or articles of incorporation to increase the
      number of authorized but unissued shares of Common Stock to at least the
      Required Minimum at such time, as soon as possible and in any event not later
      than the 75th day after such date.

     

    (c) The
      Company shall, if applicable: (i) in the time and manner required by the
      principal Trading Market, prepare and file with such Trading Market an
      additional shares listing application covering a number of shares of Common
      Stock at least equal to the Required Minimum on the date of such application,
      (ii) take all steps necessary to cause such shares of Common Stock to be
      approved for listing on such Trading Market as soon as possible thereafter,
      (iii) provide to the Purchasers evidence of such listing, and (iv) maintain
      the
      listing of such Common Stock on any date at least equal to the Required Minimum
      on such date on such Trading Market or another Trading Market.

     

    4.12 Participation
      in Future Financing.
      

     

    (a) From
      the
      date hereof until the date that is the 12 month anniversary of the Effective
      Date, upon any issuance by the Company or any of its Subsidiaries of Common
      Stock or Common Stock Equivalents (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to the lesser of (i) 100% of the Subsequent Financing
      and (ii) $500,000 (the “Participation
      Maximum”)
      on the
      same terms, conditions and price provided for in the Subsequent Financing.
      

     

    (b) At
      least
      5 Trading Days prior to the closing of the Subsequent Financing, the Company
      shall deliver to each Purchaser a written notice of its intention to effect
      a
      Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Purchaser if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”).
      Upon
      the request of a Purchaser, and only upon a request by such Purchaser, for
      a
      Subsequent Financing Notice, the Company shall promptly, but no later than
      1
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
      the proposed terms of such Subsequent Financing, the amount of proceeds intended
      to be raised thereunder and the Person or Persons through or with whom such
      Subsequent Financing is proposed to be effected and shall include a term sheet
      or similar document relating thereto as an attachment. 

     

    (c) Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice that
      the


    
      
         

      

      
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    Purchaser
      is willing to participate in the Subsequent Financing, the amount of the
      Purchaser’s participation, and that the Purchaser has such funds ready, willing,
      and available for investment on the terms set forth in the Subsequent Financing
      Notice. If the Company receives no notice from a Purchaser as of such
      5th
      Trading
      Day, such Purchaser shall be deemed to have notified the Company that it does
      not elect to participate. 

     

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

     

    (e) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers seeking
      to
      purchase more than the aggregate amount of the Participation Maximum, each
      such
      Purchaser shall have the right to purchase their Pro Rata Portion (as defined
      below) of the Participation Maximum.  “Pro
      Rata Portion”
means
      the ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date by a Purchaser participating under this Section 4.12 and (y) the sum of
      the
      aggregate Subscription Amounts of Securities purchased on the Initial Closing
      Date and any Subsequent Closing Date by all Purchasers participating under
      this
      Section 4.12.

     

    (f) The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice. 

     

    (g) Notwithstanding
      the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
      Issuance or (ii) an underwritten public offering of Common Stock.

     

    4.13 Subsequent
      Equity Sales.
      

     

    (a) From
      the
      date hereof until 60 days after the Effective Date, neither the Company nor
      any
      Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
      provided,
      however,
      the 90
      day period set forth in this Section 4.13 shall be extended for the number
      of
      Trading Days during such period in which (i) trading in the Common Stock is
      suspended by any Trading Market, or (ii) following the Effective Date, the
      Registration Statement is not effective or the prospectus included in the
      Registration Statement may not be used by the Purchasers for the resale of
      the
      Underlying Shares. 

     

    (b) From
      the
      date hereof until such time as no Purchaser holds any of the Securities, the
      Company shall be prohibited from effecting or entering into an
      agreement


    
      
         

      

      
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    to
      effect
      any Subsequent Financing involving a Variable Rate Transaction. “Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock or
      (ii) enters into any agreement, including, but not limited to, an equity line
      of
      credit, whereby the Company may sell securities at a future determined price.
      

     

    (c) Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance. 

     

    4.14 Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any Person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. Further, the Company shall not make any payment of
      principal or interest on the Debentures in amounts which are disproportionate
      to
      the respective principal amounts outstanding on the Debentures at any applicable
      time. For clarification purposes, this provision constitutes a separate right
      granted to each Purchaser by the Company and negotiated separately by each
      Purchaser, and is intended for the Company to treat the Purchasers as a class
      and shall not in any way be construed as the Purchasers acting in concert or
      as
      a group with respect to the purchase, disposition or voting of Securities or
      otherwise.

     

    4.15 Short
      Sales and Confidentiality After The Date Hereof.
      Each
      Purchaser severally and not jointly with the other Purchasers covenants that
      neither it nor any Affiliate acting on its behalf or pursuant to any
      understanding with it will execute any Short Sales during the period commencing
      at the Discussion Time and ending at the time that the transactions contemplated
      by this Agreement are first publicly announced as described in Section 4.6.
      Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      until such time as the transactions contemplated by this Agreement are publicly
      disclosed by the Company as described in Section 4.6, such Purchaser will
      maintain the confidentiality of all disclosures made to it in connection with
      this transaction (including the existence and terms of this transaction). Each
      Purchaser understands and acknowledges, severally and not jointly with any
      other
      Purchaser, that the Commission currently takes the position that coverage of
      short sales of shares of the Common Stock “against the box” prior to the
      Effective Date of the Registration Statement with the Securities is a violation
      of Section 5 of the Securities Act, as set forth in Item 65, Section A, of
      the
      Manual of Publicly Available Telephone Interpretations, dated July 1997,
      compiled by the Office of Chief Counsel, Division of Corporation Finance.
      Notwithstanding the foregoing, no Purchaser makes any representation, warranty
      or covenant hereby that it will not engage in Short Sales in
      the
      securities of the Company after the time that the transactions


    
      
         

      

      
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    contemplated
      by this Agreement are first publicly announced as described in Section 4.6.
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser's assets and the portfolio managers have
      no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such Purchaser's assets, the covenant set forth
      above
      shall only apply with respect to the portion of assets managed by the portfolio
      manager that made the investment decision to purchase the Securities covered
      by
      this Agreement.

     

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

     

    4.17 Capital
      Changes.
      Until
      the one year anniversary of the Effective Date, the Company shall not undertake
      a reverse stock split or reclassification of the Common Stock without the prior
      written consent of the Purchasers holding a majority in principal amount
      outstanding of the Debentures except for a reverse stock split directly related
      to the Company’s listing of the Common Stock on a Trading Market other than the
      OTC Bulletin Board or the American Stock Exchange.

     

    4.18 Secured
      Obligation.
      The
      parties acknowledge and agree that the obligations of the Company under the
      Transaction Documents, including but not limited to the Debentures, are subject
      to the security interest granted by the Company pursuant to that certain
      Security Agreement, dated January 17, 2007, by and among the Company and the
      secured parties thereto and that such obligations are “Obligations” under such
      Security Agreement and are guaranteed by the Subsidiaries pursuant to any
      Subsidiary Guarantee entered into in connection therewith. The Company and
      the
      Subsidiaries shall take any and all actions requested by the Purchasers in
      order
      to grant the Purchasers a first priority security interest in the assets of
      the
      Company and the Subsidiaries, including all UCC-1 filing receipts if
      required.

     

    4.19 Debt
      Extensions.
      The
      Company hereby agrees to deliver evidence on
      or
      before September 24, 2007, that
      the
      maturity dates of those 21 senior
      secured promissory notes (the “Senior Notes”) in the aggregate principal amount
      of $1,712,085 described in the first paragraph of Schedule 3.1(aa) attached
      hereto have been extended until September 7, 2008 and have been amended to
      include standard cross-default provisions. Such evidence will also demonstrate
      that the Senior Notes are subject to further extension as follows:

     

    (a) If
      there
      is no Registration Statement effective by September 7, 2008, the maturity date
      of the Senior Notes will be extended until December 31, 2008, upon notice to
      the
      holders of the Senior Notes (the “Senior Holders”) and the accrual or payment of
      no more than 5% of the Senior Holder’s principal balance or, at the Senior
      Holder’s option, a payment of an equal amount in Common Stock;
      and


    
      
         

      

      
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    (b) If
      there
      is no Registration Statement effective by December 31, 2008, the maturity date
      of the Senior Notes will be further extended until April 17, 2009, upon notice
      to the Senior Holders and the accrual or payment of no more than an additional
      5% of the Senior Holder’s principal balance or, at the Senior Holder’s option, a
      payment of an equal amount in Common Stock; and

     

    (c) Under
      no
      circumstances shall the maturity date of the Senior Notes be extended beyond
      April 17, 2009. 

     

    The
      evidence of the extension described in this Section 4.19 shall be in form and
      substance reasonably satisfactory to the Purchasers. The parties agree that
      failure to deliver such evidence on or before September 24, 2007 shall
      constitute an Event of Default (as defined in the Debentures) under the
      Debentures. 

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser purchasing Securities at
      the
      Initial Closing, as to such Purchaser’s obligations hereunder by written notice
      to the other parties, if the Initial Closing has not been consummated on or
      before August 10 2007; provided,
      however,
      that
      such termination will not affect the right of any party to sue for any breach
      by
      the other party (or parties).

     

    5.2 Fees
      and Expenses.
      At the
      Closing, the Company has agreed to reimburse Truk Opportunity Fund, LLC
      (“Truk
      Opportunity”)
      the
      non-accountable sum of $15,000 for its legal fees and expenses. Accordingly,
      in
      lieu of the foregoing payments, the aggregate amount that Truk Opportunity
      is to
      pay for the Securities at the Closing shall be reduced by $15,000 in lieu
      thereof. Except as expressly set forth in the Transaction Documents to the
      contrary, each party shall pay the fees and expenses of its advisers, counsel,
      accountants and other experts, if any, and all other expenses incurred by such
      party incident to the negotiation, preparation, execution, delivery and
      performance of this Agreement. The Company shall pay all transfer agent fees,
      stamp taxes and other taxes and duties levied in connection with the delivery
      of
      any Securities to the Purchasers at a Closing.

     

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

     

    5.4 Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number set forth on the signature
      pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading
      Day,
      (b) the next Trading Day after the date of

     


    
      
         

      

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

     

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

     

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

     

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

     

    5.8 No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.10.

     

    5.9 Governing
      Law; Arbitration.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York. Any controversy or claim arising out of or
      related to this Agreement or the breach thereof, shall be settled by binding
      arbitration in New York, New York in accordance with the Expedited Procedures
      (Rules 53-57) of the Commercial Arbitration Rules of the American Arbitration
      Association (“AAA”).
      A
      proceeding shall be commenced upon written demand by the Company or Purchaser
      to
      the other. The arbitrator(s) shall enter a judgment by default against any
      party, which fails or refuses to appear in any properly noticed arbitration
      proceeding. The proceeding shall be conducted by one (1) arbitrator, unless
      the
      amount alleged to be in dispute exceeds two hundred fifty thousand dollars
      ($250,000), in which case three (3) arbitrators shall preside. The arbitrator(s)
      will be chosen by the parties from a list provided by the AAA, and if the
      parties are unable to agree within ten (10) days, the AAA shall select the
      arbitrator(s). The arbitrators must be experts in securities law
      and


    
      
         

      

      
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    financial
      transactions. The arbitrators shall assess costs and expenses of the
      arbitration, including all attorneys’ and experts’ fees, as the arbitrators
      believe is appropriate in light of the merits of the parties’ respective
      positions in the issues in dispute. Each party submits irrevocably to the
      jurisdiction of any state court sitting in New York, New York or to the United
      States District Court sitting in New York, New York for purposes of enforcement
      of any discovery order, judgment or award in connection with such arbitration.
      The award of the arbitrator(s) shall be final and binding upon the parties
      and
      may be enforced in any court having jurisdiction. The arbitration shall be
      held
      in such place as set by the arbitrator(s) in accordance with Rule 55. With
      respect to any arbitration proceeding in accordance with this section, the
      prevailing party’s reasonable attorney’s fees and expenses shall be borne by the
      non-prevailing party.

     

    Although
      the parties, as expressed above, agree that all claims, including claims that
      are equitable in nature, for example specific performance, shall initially
      be
      prosecuted in the binding arbitration procedure outlined above, if the
      arbitration panel dismisses or otherwise fails to entertain any or all of the
      equitable claims asserted by reason of the fact that it lacks jurisdiction,
      power and/or authority to consider such claims and/or direct the remedy
      requested, then, in only that event, will the parties have the right to initiate
      litigation respecting such equitable claims or remedies. The forum for such
      equitable relief shall be in either a state or federal court sitting in New
      York, New York. Each party waives any right to a trial by jury, assuming such
      right exists in an equitable proceeding, and irrevocably submits to the
      jurisdiction of said New York court. New York law shall govern both the
      proceeding as well as the interpretation and construction of this Agreement
      and
      the transaction as a whole.

     

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

     

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

     

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


    
      
         

      

      
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    5.13 Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) any of the other Transaction Documents, whenever any
      Purchaser exercises a right, election, demand or option under a Transaction
      Document and the Company does not timely perform its related obligations within
      the periods therein provided, then such Purchaser may rescind or withdraw,
      in
      its sole discretion from time to time upon written notice to the Company, any
      relevant notice, demand or election in whole or in part without prejudice to
      its
      future actions and rights; provided,
      however,
      in the
      case of a rescission of a conversion of a Debenture or exercise of a Warrant,
      the Purchaser shall be required to return any shares of Common Stock delivered
      in connection with any such rescinded conversion or exercise
      notice.

     

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

     

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

     

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

     

    5.17 Usury.
      To the
      extent it may lawfully do so, the Company hereby agrees not to insist upon
      or
      plead or in any manner whatsoever claim, and will resist any and all efforts
      to
      be compelled to take the benefit or advantage of, usury laws wherever enacted,
      now or at any time hereafter in force, in connection with any claim, action
      or
      proceeding that may be brought by any Purchaser in order to enforce any right
      or
      remedy under any Transaction Document. Notwithstanding any provision to the
      contrary contained in any Transaction Document, it is


    
      
         

      

      
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    expressly
      agreed and provided that the total liability of the Company under the
      Transaction Documents for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum
      Rate”),
      and,
      without limiting the foregoing, in no event shall any rate of interest or
      default interest, or both of them, when aggregated with any other sums in the
      nature of interest that the Company may be obligated to pay under the
      Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
      contract rate of interest allowed by law and applicable to the Transaction
      Documents is increased or decreased by statute or any official governmental
      action subsequent to the date hereof, the new maximum contract rate of interest
      allowed by law will be the Maximum Rate applicable to the Transaction Documents
      from the effective date forward, unless such application is precluded by
      applicable law. If under any circumstances whatsoever, interest in excess of
      the
      Maximum Rate is paid by the Company to any Purchaser with respect to
      indebtedness evidenced by the Transaction Documents, such excess shall be
      applied by such Purchaser to the unpaid principal balance of any such
      indebtedness or be refunded to the Company, the manner of handling such excess
      to be at such Purchaser’s election.

     

    5.18 Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under any Transaction Document are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance or non-performance of the obligations
      of any other Purchaser under any Transaction Document. Nothing contained herein
      or in any other Transaction Document, and no action taken by any Purchaser
      pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Purchaser shall be entitled to independently protect
      and enforce its rights, including without limitation the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. For reasons of administrative convenience only, Purchasers and their
      respective counsel have chosen to communicate with the Company through FWS.
      FWS
      does not represent all of the Purchasers but only Truk Opportunity. The Company
      has elected to provide all Purchasers with the same terms and Transaction
      Documents for the convenience of the Company and not because it was required
      or
      requested to do so by the Purchasers.

     

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

     

    5.20 Construction.
      The
      parties agree that each of them and/or their respective counsel has reviewed
      and
      had an opportunity to revise the Transaction Documents and, therefore, the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the


    
      
         

      

      
        37

        
          

        

      

      
         

      

    


    drafting
      party shall not be employed in the interpretation of the Transaction Documents
      or any amendments hereto.

     

    (Signature
      Pages Follow)

     


    
      
         

      

      
        38

        
          

        

      

      
         

      

    


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

     

    
      	
              SOLOMON
                TECHNOLOGIES, INC.

            	
              Address
                for Notice:

            
	 	 
	
            	 
	
              By: 
                __________________________________________

              Name:

              Title:

            	
              1400
                L&R Industrial Blvd.

              Tarpon
                Springs, Florida 34689

              Facsimile:
                (727) 934-8779

              Attention:
                Peter W. De Vecchis, Jr., President

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

               

              Davis
                & Gilbert LLP

              1740
                Broadway

              New
                York, New York 10019

              Facsimile:
                (212) 468-4888

              Attention:
                Ralph W. Norton

            	 
	 	 


    

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     


    
      
         

      

      
        39

        
          

        

      

      
         

      

    


    [PURCHASER
      SIGNATURE PAGES TO SOLM SECURITIES PURCHASE AGREEMENT]

    


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

     

    Name
      of
      Purchaser: ________________________________________________________

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________

    Email
      Address of Purchaser:
      ________________________________________________

    Facsimile
      Number of Purchaser:
      ________________________________________________

    


    Address
      for Notice of Purchaser:

     

     

     

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

     

     

     

    Subscription
      Amount: _____________

     

    Warrant
      Shares: _________________

     

     

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

     

     

    [SIGNATURE
      PAGES CONTINUE]

     

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

     

    Disclosure
      Schedules

    
      to
        the Securities Purchase Agreement

      dated
        as of August 30, 2007 by and among Solomon Technologies, Inc.
        and

      each
        of the Purchasers identified on the signature pages
        thereto

      


      Capitalized
        terms used but not otherwise defined in these Disclosure Schedules shall
        have
        the same meanings ascribed to such terms in the
        Securities Purchase Agreement dated as of August 30,
        2007
        by and among Solomon Technologies, Inc. and each of the purchasers identified
        on
        the signature pages thereto (the “Purchase Agreement”).

       

      Nothing
        in these Disclosure Schedules is intended to broaden the scope of any
        representation or warranty of the Company or to create any covenant on the
        part
        of the Company. Further, inclusion of information herein shall not be construed
        as an admission that such information is material to the condition of the
        Company. Any matter disclosed on any part of these Disclosure Schedules shall
        be
        deemed disclosed for purposes of every part of these Disclosure Schedules
        to the
        extent the applicability of such disclosure to such other paragraphs or parts
        of
        the Disclosure Schedules is reasonably apparent on its face.

       

      Where
        the
        terms of an agreement or other disclosure item have been summarized or described
        in these Disclosure Schedules, such summary or description does not purport
        to
        be a complete statement of the material terms of such agreement or other
        item.

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(a)

      Subsidiaries

      


      The
        following are wholly-owned subsidiaries of the Company:

       

      
        	 	
                §

              	
                Technipower,
                  LLC, a Delaware limited liability
                  company

              


      

      
        	 	
                §

              	
                Town
                  Creek Industries, Inc., a Maryland
                  corporation

              


      

      
        	 	
                §

              	
                DEL-INC
                  Acquisition LLC, a Delaware limited liability
                  company

              


      

      


      The
        stock
        of each subsidiary is security for the Company’s senior loan obligations
        identified in Sections 3.1(n), 3.1(aa) and 3.1(ff) of these Disclosure
        Schedules.

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(b)

      Organization
        and Qualification

      


      Town
        Creek Industries,
        Inc. was forfeited in Maryland on October 7, 2005 for failure to file the
        2004
        Personal Property Return, which was due April 15, 2004. In order to return
        to
        active, good standing status Town Creek Industries, Inc. must file 2004,
        2005
        and 2006 Property Returns and Articles of Revival in Maryland.

       

      Beginning
        in February 2007, the Company began to employ officers located in the state
        of
        Connecticut and, therefore, it is necessary that the Company be qualified
        to do
        business in Connecticut. The Company is in the process of applying for such
        qualification. 

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(g)

      Capitalization

      


      Immediately
        prior to the Closing, the authorized capital stock of the Company will consist
        of an aggregate of 100,000,000 shares of Common Stock and an aggregate of
        7,450,000 shares of Preferred Stock. Immediately prior to the Closing, the
        Company will have issued and outstanding, to the Company’s best knowledge,
        42,117,480 shares of Common Stock. There is some uncertainty about the precise
        number of shares of Common Stock outstanding because the Company changed
        transfer agents in November 2003 and the Company’s recordkeeping prior to a
        change in management in May 2004 was deficient. Since May 2004 there have
        been a
        few instances in which holders have presented stock certificates for small
        numbers of shares that were not included on the current transfer agent’s
        records. With respect to any issuances of stock prior to May 2004, the Company
        cannot verify whether or not any shares
        were issued in violation of any preemptive rights or similar rights to subscribe
        for or purchase securities.

       

      In
        connection with a consulting arrangement with David B. Stout Associates,
        LLC,
        Stout Associates has agreed to provide certain marketing consulting services
        to
        the Company in exchange for a consulting fee of $1,500 per day or $187 per
        hour,
        subject to possible discounts for long term assignments. Stout Associates
        has
        agreed to accept payment for up to 1/3 of its chargeable time in the form
        of
        shares of Common Stock of the Company.

       

      Pursuant
        to the Securities Purchase Agreement dated as of August 17, 2006 by and among
        the Company, Technipower LLC and the former owners of Technipower LLC (the
        “Sellers”), in respect of any shares of Common Stock that are held as of August
        17, 2007 by any Seller (“Retained Shares”), if the market price of the Common
        Stock as of August 17, 2007 (the “Post-Closing Stock Price”) is less than the
        $0.65 per share market price of the Common Stock on August 17, 2006 (the
        “Closing Stock Price”), and such difference represents more than 5% of the
        Closing Stock Price, the Company must either, at its option:

       

      (i)
        issue
        additional shares of Common Stock equal to the number determined by multiplying
        the Closing Stock Price by the number of Retained Shares, then (y) dividing
        the
        result in (x) by the Post-Closing Stock Price and (z) subtracting from such
        amount the number of Retained Shares, or

      


      (ii)
        in
        lieu of issuance of the Additional Shares, pay an amount in cash equal to
        the
        result of (x) the number of Additional Shares multiplied by (y) the Post-Closing
        Stock Price.

      


      On
        July
        13, 2007, the Company’s Board of Directors adopted a 2007 Non-Employee Director
        Compensation Plan pursuant to which

      
        	 	
                ·

              	
                all
                  non-employee directors of the Company received a one-time grant
                  of 150,000
                  restricted shares of Common Stock, subject to a 60 day holding
                  period;
                  and

              


      

      
        	 	
                ·

              	
                all
                  non-employee directors serving on committees of the Board of Directors
                  will receive compensation equal to $10,000 per year, payable in
                  cash.

              


      

      


      On
        July
        13, 2007, the Company’s Board of Directors also determined to issue 25,000
        shares in 2007 to each member of its Advisory Board and an additional 25,000
        shares to the Chairman of the Advisory Board.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      


      The
        following is a list of outstanding option and warrants of the
        Company:

      


      
        	
                Name
                  of Option Holder

              	
                Number
                  of Shares of Common Stock Subject to Options:

              	
                Exercise
                  Price

              
	
                David
                  Tether

              	
                115,000
                  shares

                47,807
                  shares

                26,810
                  shares

              	
                $2.00

                $1.00

                $1.00

              
	
                Barry
                  DeGroot

              	
                10,000
                  shares

              	
                $2.00

              
	
                David
                  Lindahl

              	
                10,000
                  shares

                25,000
                  shares

              	
                $2.00

                $0.55

              
	
                Jane
                  Crawford

              	
                27,500
                  shares

                13,218
                  shares

              	
                $2.00

                $1.00

              
	
                Charlie
                  Shannon

              	
                150,000
                  shares

                50,000
                  shares

              	
                $1.00

                $2.00

              
	
                Robert
                  Caper

              	
                17,500
                  shares

              	
                $1.00

              
	
                Jonathan
                  Betts

              	
                25,000
                  shares

              	
                $0.55

              
	
                Gary
                  Laskowski

              	
                25,000
                  shares

              	
                $0.55

              
	
                Michael
                  D’Amelio

              	
                25,000
                  shares

              	
                $0.55

              
	
                Andy
                  Christian

              	
                40,000
                  shares

                40,000
                  shares

              	
                $2.09

                $1.45

              
	
                Peter
                  W. DeVecchis Jr.

              	
                100,000
                  shares

                100,000
                  shares

              	
                $2.09

                $1.45

              
	 	
                40,000
                  shares

              	
                $0.22

              
	
                Alex
                  Pesiridis

              	
                40,000
                  shares

                40,000
                  shares

              	
                $2.09

                $1.45

              
	
                Jammie
                  Stafford

              	
                15,000
                  shares

                15,000
                  shares

              	
                $2.09

                $1.45

              
	
                Samuel
                  Occhipinti

              	
                75,000
                  shares

              	
                $1.45

              
	 	
                100,000
                  shares

              	
                $0.22

              
	
                Gary
                  G. Brandt

              	
                750,000
                  shares

              	
                $2.80

              
	
                Jack
                  Worthen

              	
                250,000
                  shares

              	
                $0.22

              
	
                Anthony
                  Intino, II

              	
                40,000
                  shares

              	
                0.22

              
	
                Allison
                  Bertorelli

              	
                40,000
                  shares

              	
                0.22

              
	
                Mariano
                  Moran

              	
                40,000
                  shares

              	
                0.22

              
	
                Total:

              	
                2,292,835
                  shares

              	 


      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                Name
                  of Warrant Holder

              	
                Number
                  of Shares of Common Stock Issuable Upon Exercise of
                  Warrants:

              	
                Exercise
                  Price

              
	
                Hugh
                  Murray

              	
                150,000

              	
                $2.00

              
	
                Charles
                  County EDC

              	
                10,000

              	
                $4.00

              
	
                Investor
                  Awareness

              	
                50,000

              	
                $3.15

              
	
                Fred
                  Halbig

              	
                6,000

              	
                $4.00

              
	
                James
                  Prescott

              	
                10,000

              	
                $4.00

              
	
                John
                  Kirkwood

              	
                5,000

              	
                $4.00

              
	
                John
                  Lamere

              	
                5,000

              	
                $4.00

              
	
                Davis
                  & Gilbert LLP

              	
                200,000

              	
                $1.00

              
	
                Cornix
                  Management LLC

              	
                37,500

              	
                $0.35*

              
	
                Double
                  U Master Fund LP

              	
                150,000

              	
                $0.35*

              
	
                Nite
                  Capital LP

              	
                125,000

              	
                $0.35*

              
	
                Iroquois
                  Master Fund Ltd.

              	
                500,000

              	
                $0.35*

              
	
                Truk
                  Opportunity Fund, LLC

              	
                67,500

              	
                $0.35*

              
	
                Truk
                  International Fund, LP

              	
                250,000

              	
                $0.35*

              
	
                Shelter
                  Island Opportunity Fund, LLC

              	
                250,000

              	
                $0.35*

              
	
                Rockmore
                  Investment Fund Ltd.

              	
                75,000

              	
                $0.35*

              
	
                BridgePointe
                  Master Fund Ltd.

              	
                750,000

              	
                $0.35*

              
	
                Alpha
                  Capital Anstalt

              	
                150,000

              	
                $0.35*

              
	
                Harborview
                  Master Fund L.P.

              	
                125,000

              	
                $0.35*

              
	
                Total:

              	
                2,916,000

              	 


      

      


      Subject
        to adjustment in accordance with the terms of the warrants.

      


      The
        following is a list of outstanding convertible debentures of the Company
        issued
        in January 2007 (the “January Debentures”):

      


      
        	
                Name
                  of Debenture Holder

              	
                Principal
                  Amount of Debenture 

              	
                Conversion
                  Price

              
	
                Cornix
                  Management LLC

              	
                $90,000

              	
                $0.35*

              
	
                Double
                  U Master Fund LP

              	
                $360,000

              	
                $0.35*

              
	
                Nite
                  Capital LP

              	
                $225,000

              	
                $0.35*

              
	
                Iroquois
                  Master Fund Ltd.

              	
                $900,000

              	
                $0.35*

              
	
                Truk
                  Opportunity Fund, LLC

              	
                $688,500

              	
                $0.35*

              
	
                Truk
                  International Fund, LP

              	
                $121,500

              	
                $0.35*

              
	
                Shelter
                  Island Opportunity Fund, LLC

              	
                $450,000

              	
                $0.35*

              
	
                Rockmore
                  Investment Fund Ltd.

              	
                $135,000

              	
                $0.35*

              
	
                BridgePointe
                  Master Fund Ltd.

              	
                $1,350,000

              	
                $0.35*

              
	
                Alpha
                  Capital Anstalt

              	
                $270,000

              	
                $0.35*

              
	
                Harborview
                  Master Fund L.P.

              	
                $225,000

              	
                $0.35*

              
	
                Total

              	
                $4,815,000

              	 


      

      


      *
        Subject
        to adjustment in accordance with the terms of the debentures. A lower conversion
        price applies in the case of shares of Common Stock issued to redeem principal
        and accrued interest on the debentures. 


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      The
        following is a list of Additional Debentures of the Company being issued
        pursuant to an Amendment Agreement dated as of August 24, 2007 (the “Amendment
        Agreement”), among the Company and the holders of the January
        Debentures:

      


      
        	
                Name
                  of Debenture Holder

              	
                Principal
                  Amount of Additional Debenture 

              	
                Conversion
                  Price

              
	
                Cornix
                  Management LLC

              	
                $3,000.00

              	
                $0.35*

              
	
                Double
                  U Master Fund LP

              	
                $12,000.00

              	
                $0.35*

              
	
                Nite
                  Capital LP

              	
                $7,500.00

              	
                $0.35*

              
	
                Iroquois
                  Master Fund Ltd.

              	
                $30,000.00

              	
                $0.35*

              
	
                Truk
                  Opportunity Fund, LLC

              	
                $22,950.00

              	
                $0.35*

              
	
                Truk
                  International Fund, LP

              	
                $4,050.00

              	
                $0.35*

              
	
                Shelter
                  Island Opportunity Fund, LLC

              	
                $15,000.00

              	
                $0.35*

              
	
                Rockmore
                  Investment Fund Ltd.

              	
                $4,500.00

              	
                $0.35*

              
	
                BridgePointe
                  Master Fund Ltd.

              	
                $45,000.00

              	
                $0.35*

              
	
                Alpha
                  Capital Anstalt

              	
                $9,000.00

              	
                $0.35*

              
	
                Harborview
                  Master Fund L.P.

              	
                $7,500.00

              	
                $0.35*

              
	
                Total

              	
                $160,500.00

              	 


      

      


      *
        Subject
        to adjustment in accordance with the terms of the debentures. A lower conversion
        price applies in the case of shares of Common Stock issued to redeem principal
        and accrued interest on the debentures. 

      


      Included
        in the total number of shares of Common Stock that the Company believes are
        issued and outstanding is an aggregate of 1,747,267 shares that the Company
        authorized for issuance to the parties to the Amendment Agreement pursuant
        to
        the terms of the Amendment Agreement. On August 24, 2007 the Company instructed
        its transfer agent to issue these shares by DWAC to each of the parties to
        the
        Amendment Agreement upon the request of each party’s broker.

      


      Also
        included in the total number of shares of Common Stock that the Company believes
        are issued and outstanding is an aggregate of 401,250 restricted shares of
        Common Stock that that Company authorized for issuance to the parties to
        Amendment Agreement, as an inducement to the holders of the January Debentures
        to enter into the Amendment Agreement. Each party’s shares have been calculated
        by multiplying the dollar amount of that party’s investment by 0.075. On August
        27, 2007 the Company instructed its transfer agent to issue to each of the
        parties to the Amendment Agreement, a certificate representing that party’s
        respective shares. 

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      Schedule
        3.1(h)

      SEC
        Reports; Financial Statements

      


      On
        November 21, 2006, the Company received a comment letter from the Commission
        in
        response to the Company’s registration statement on Form SB-2 that was filed
        with the Commission on October 27, 2006. The comment letter included 49
        comments, all of which pertained to the Company’s financial statements and
        MD&A. The Company ultimately amended its Quarterly Report on Form 10-QSB for
        the quarter ended September 30, 2006, to reflect the resolution of some of
        the
        comments. In particular, the Company’s financial statements for the third
        quarter of 2006 were restated to, among other things, reduce the accumulated
        deficit at September 30, 2006 by $1,004,136 and reduce the loss attributable
        to
        common stockholders for the quarter ended on such date by $1,063,836, all
        as
        described in Note 2 to the Company’s unaudited financial statements for the
        quarter ended September 30, 2006 included in Amendment No. 1 to its registration
        statement on Form SB-2, File No. 333-138240, as filed with the Commission
        on
        January 11, 2007. Further the Company included the following disclosure in
        Note
        2 to its Annual Report on Form 10-KSB for the year ended December 31,
        2006:

       

      “As
        a
        result of an annual impairment review performed in the fourth quarter,
        management determined that goodwill was impaired and recorded a $3,346,153
        impairment adjustment. The impairment was primarily due to stock market
        volatility and an unexpected increase in the market value of the Company’s
        common stock on and around the closing date of the transaction. The agreed-to
        value of $0.65 was based on the average closing bid prices of the common
        stock
        over two 30-day periods, one ending three days before the closing and one
        ending
        two days before the closing. As required by EITF 99-12, management used the
        closing price on the date of the closing of the transaction of $1.40 a share
        to
        record the value of the 4,464,537 shares of common stock issued in the
        acquisition. The $3,346,153 impairment adjustment represented the $0.75 per
        share difference between the closing market price on the closing date and
        the
        agreed-to 30 day average price. Management compared the carrying amount of
        the
        Power Electronics Division (the former Technipower business) to its fair
        value
        and concluded that the carrying value of goodwill was impaired. Fair value
        was
        determined using expected discounted cash flow projections.”

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      Schedule
        3.1(i)

      Material
        Changes

      


      On
        July
        13, 2007, the Board adopted a 2007 Non-Employee Director Compensation Plan
        pursuant to which the Company issued 150,000 shares of Common Stock to each
        of
        its non-employee directors: Jonathan Betts, Duane Crisco, Kenneth Przysiecki,
        Thomas Kell and Shannon LeRoy, in consideration of their services as directors.
        Also on July 13, 2007, the Company issued 50,000 shares of Common Stock to
        Glen
        Wegner, the chairman of the Company’s advisory board, in consideration of his
        agreement to serve in such capacity.

      


      On
        August
        17, 2007, the Company authorized the issuance of an aggregate of 401,250
        restricted shares of Common Stock, as an inducement to the holders of the
        January Debentures to enter into the Amendment Agreement dated as of August
        24,
        2007. Each party’s shares were calculated by multiplying the dollar amount of
        that party’s investment by 0.075. 

      


      On
        August
        24, 2007, the Company authorized the issuance of an aggregate of 1,747,267
        shares to the parties to the Amendment Agreement pursuant to the terms of
        the
        Amendment Agreement. 

      


      On
        August
        24, 2007, the Company entered into an agreement with JMC Venture Partners
        LLC
        (“JMC”), pursuant to which JMC agreed to provide the Company with a line of
        credit, the aggregate principal amount of which shall not exceed $15,000,000,
        that is to be used exclusively for acquisitions (the “Line of Credit”). The Line
        of Credit will be available through August 24, 2008. Any amounts loaned under
        the Line of Credit will accrue interest at a rate of 12% per annum, plus
        quarterly investment fees of 1% of the amounts then outstanding and monitoring
        fees of 2.5% of the amounts advanced under the Line of Credit. Upon execution
        of
        the Line of Credit agreement, the Company incurred a 2.5% commitment fee
        on the
        full amount of the Line of Credit. The monitoring fees and commitment fee
        are
        each payable in shares of common stock of the Company. The number of shares
        to
        be issued will be calculated by dividing the dollar amount of the fee by
        the
        average closing price of a share of common stock for the 10 business days
        preceding the date of payment. On August 27, 2007, the Company instructed
        its
        transfer agent to issue 974,026 shares to JMC in payment of the commitment
        fee.
        The Company has agreed to register all of the shares issued to JMC for resale
        under the Securities Act of 1933, as amended, within 120 days. In the event
        of a
        default, the interest rate will increase to 18% per annum. Loans made under
        the
        Line of Credit will be conditioned upon the approval of the proposed acquisition
        by the lender’s investment committee and will be subject to the lender’s normal
        due diligence and will mature on the last day of the twelfth month after
        they
        are made. The loans will be made to the Company’s acquisition subsidiaries and
        unconditionally guaranteed by the Company. The Line of Credit is subject
        to
        ordinary documentation requirements for each closing. The Line of Credit
        may be
        drawn upon at the Company’s sole discretion. The lender, JMC, is an affiliate of
        Michael D’Amelio, a director and officer of the Company.

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      Schedule
        3.1(j)

      Litigation

      


      On
        September 12, 2005, the Company filed a lawsuit against Toyota Motor
        Corporation, Toyota Motor Sales U.S.A., Inc. and Toyota Motor Manufacturing
        North America in the United States District Court for the Middle District
        of
        Florida, Tampa Division, Tampa, Florida for infringement of our Electric
        Wheel
        patent. In the lawsuit, the Company alleges that the hybrid transmission
        drive
        in the Toyota Prius and Highlander infringes a number of claims contained
        in its
        U.S. Patent No. 5,067,932 and it is asking for an injunction barring further
        infringement as well as damages for the unauthorized use of the patent by
        Toyota
        and its affiliates.

       

      On
        January 10, 2006, the Company filed a complaint with the
        United States International Trade Commission in Washington D.C. seeking an
        exclusion order prohibiting the importation of infringing technology. On
        or
        about February 8, 2006, the ITC instituted an investigation based on the
        complaint. On September 19, 2006, the Company expanded this claim to include
        the
        Toyota Camry and Lexus hybrid models. The ITC held a hearing on the complaint
        from October 30 through November 3, 2006. On February 13, 2007, the ITC
        Administrative Law Judge who conducted the hearing issued a final initial
        determination in favor of Toyota, finding no infringement of Claim 7 in the
        U.S.
        Patent No. 5,067,932 and that the Company had not satisfied certain other
        legal
        requirements that would support an exclusion order against Toyota. On review,
        the full ITC decided to take no position on the Administrative Law Judge’s
        findings concerning the economic prong of the domestic industry requirement.
        The
        remainder of the initial determination became the ITC final
        determination.

       

      On
        April
        30, 2007, the ITC terminated the investigation with a finding of no violation
        of
        Section 337 of the Tariff Act of 1930. On June 1, 2007, the Company announced
        that it will appeal the decision to the Court of Appeals for the Federal
        Circuit.

       

      The
        patent infringement action brought in the United States District Court for
        the
        Middle District of Florida, Tampa Division, is stayed until the ITC case
        is
        completed.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.l(l)

      Compliance

      


      On
        July
        28, 2006,
        the
        Company borrowed $125,000 from Jezebel Management Corporation and issued
        a
        promissory note in the principal amount of $125,000 to Jezebel. The new note
        bears interest at a rate of 15% per annum and matured on August 28, 2006.
        The
        note is currently in default and carries a default interest rate of 18% per
        annum.

       

      Solomon
        Technologies, Inc. (the “Company”) has not made the monthly redemption payments
        due on July 1, 2007, and August 1, 2007, under its Variable Rate
        Self-Liquidating Senior Secured Convertible Debentures due March 18, 2008
        (the
“January Debentures”).

       

      The
        Company’s failure to make the redemption payment when due is a default under the
        terms of the January Debentures. The unpaid portion of that redemption amount
        will begin to accrue interest at an annual rate of 15% (or the maximum permitted
        by law, if lower) beginning 5 days after date that the redemption amount
        became
        due and continuing through the date of repayment of the redemption amount
        (but
        only if the holders ultimately elect to accelerate the January Debentures).
        Further, at the election of the holders to accelerate the January Debentures,
        the outstanding principal amount and accrued interest will become due at
        the
        Mandatory Default Amount (generally, the sum of (i) the greater of (A) 130%
        of
        the outstanding principal amount of the January Debentures, plus all accrued
        and
        unpaid interest thereon, or (B) the outstanding principal amount of the January
        Debentures, plus all accrued and unpaid interest thereon, divided by the
        conversion price of the January Debentures multiplied by the volume weighted
        average price of Solomon’s common stock on the date the Mandatory Default Amount
        is either (x) demanded or otherwise due or (y) paid in full, whichever has
        a
        higher volume weighted average price, and (ii) all other amounts, costs,
        expenses and liquidated damages due in respect of the January
        Debentures).

       

      In
        connection with the sale of the January Debentures, the Company and the
        purchasers of the January Debentures entered into a registration rights
        agreement under which, among other things, the Company agreed to file a new
        registration statement within 30 days after determining that the shares covered
        by any existing registration statements are insufficient to permit the sale
        of
        all shares that may be issued upon redemption or conversion of the January
        Debentures and exercise of the warrants issued to the purchasers of the January
        Debentures. The Company is required to cause such new registration statement
        to
        be declared effective within 60 days after making such determination. The
        Company will be subject to certain monetary penalties if the registration
        statement is not filed or does not become effective on a timely basis. The
        penalties are generally equal to 2% of the aggregate purchase price paid
        for the
        January Debentures then held by the purchasers. If the penalties are not
        paid in
        full within 10 days after the date payable, the Company will be liable for
        interest on the unpaid penalties at a rate of 15% per annum, accruing daily.
        The
        penalties may not exceed 2% of the aggregate Subscription Amount of the
        purchasers in any 30-day period and the maximum aggregate liquidated damages
        payable to a purchaser is 24% of the aggregate subscription amount paid by
        such
        holder.

       

      The
        Company and the holders of the January Debentures have entered into an agreement
        pursuant to which, among other things, the defaults under the January Debentures
        and the related registration right agreement were waived, the maturity of
        the
        Debentures was extended to April 17,
        2009,
        and the Company agreed to file a new registration statement covering the
        shares
        underlying the January Debentures by October 1, 2007.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(n)

      Title
        to Assets

      


      The
        Company has issued senior secured promissory notes in the aggregate principal
        amount of $1,712,085 and is authorized to issue up to $2,000,000 in principal
        amount of such notes. The holders of these notes have a
        first
        priority security interest in all of the tangible and intangible assets of
        the
        Company.

       

      Technipower
        LLC has a $1,500,000 revolving credit facility with Citizens Bank of
        Massachusetts dated May 4, 2006. The facility was renewed in 2007. As of
        the
        date hereof, $700,000 is outstanding under the facility. In connection with
        the
        facility, Citizens Bank has a continuing interest in all tangible and intangible
        personal property of Technipower LLC.

       

      The
        Company’s obligations under the January Debentures are secured by a security
        interest in substantially all of its assets pursuant to a Security Agreement
        dated as of January 17, 2007, between it and the purchasers of the
        Debentures.

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(o)

      Patents
        and Trademarks

      


      On
        September 12, 2005, the Company filed a lawsuit against Toyota Motor
        Corporation, Toyota Motor Sales U.S.A., Inc. and Toyota Motor Manufacturing
        North America in the United States District Court for the Middle District
        of
        Florida, Tampa Division, Tampa, Florida for infringement of our Electric
        Wheel
        patent. In the lawsuit, the Company alleges that the hybrid transmission
        drive
        in the Toyota Prius and Highlander infringes a number of claims contained
        in its
        U.S. Patent No. 5,067,932 and it is asking for an injunction barring further
        infringement as well as damages for the unauthorized use of the patent by
        Toyota
        and its affiliates.

       

      On
        January 10, 2006, the Company filed a complaint with the ITC in Washington
        D.C.
        seeking an exclusion order prohibiting the importation of infringing technology.
        On or about February 8, 2006, the ITC instituted an investigation based on
        the complaint. On September 19, 2006, the Company expanded this claim to
        include
        the Toyota Camry and Lexus hybrid models. The ITC held a hearing on the
        complaint from October 30 through November 3, 2006. On
        February 13, 2007, the ITC Administrative Law Judge who conducted the hearing
        issued a final initial determination in favor of Toyota, finding no infringement
        of Claim 7 in the U.S. Patent No. 5,067,932 and that the Company had not
        satisfied certain other legal requirements that would support an exclusion
        order
        against Toyota. On review, the full ITC decided to take no position on the
        Administrative Law Judge’s findings concerning the economic prong of the
        domestic industry requirement. The remainder of the initial determination
        became
        the ITC final determination.

       

      On
        April
        30, 2007, the ITC terminated the investigation with a finding of no violation
        of
        Section 337 of the Tariff Act of 1930. On June 1, 2007, the Company announced
        that it will appeal the decision to the Court of Appeals for the Federal
        Circuit.

       

      The
        patent infringement action brought in the United States District Court for
        the
        Middle District of Florida, Tampa Division, is stayed until the ITC case
        is
        completed.

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      Schedule
        3.1(s)

      Certain
        Fees

      


      No
        exceptions.

      


      



      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(v)

      Registration
        Rights

      


      On
        August
        17, 2006, the Company entered into a Securities Purchase Agreement with
        Integrated Power Systems LLC, Power Designs Inc., The Vantage Partners LLC,
        certain other persons and Technipower LLC and simultaneously closed on the
        acquisition of all of the outstanding membership units and warrants to purchase
        membership units of Technipower. In connection with this transaction, the
        Company entered into a registration
        rights agreement with the sellers, dated as of August 17, 2006, pursuant
        to
        which the Company agreed to file, on or before November 1, 2006, a registration
        statement covering the shares of Common Stock issued to the sellers in
        connection with the closing and the shares of Common Stock underlying the
        Series
        C Preferred Stock issued to the sellers in connection with the
        closing.

       

      On
        November 17, 2006, the Company converted $526,149 of trade accounts payable
        to
        Davis & Gilbert LLP (“D&G”) to a promissory note payable with an
        original principal of $526,149. The note and accrued and unpaid interest
        at 12%
        was payable on the earlier of the Company’s receipt of any proceeds from
        litigation, or receipts from an equity financing of at least $5 million,
        or
        March 31, 2007. To induce D&G to enter into this agreement, the Company
        issued a warrant to purchase 200,000 shares of Common Stock at $1.73 a share.
        The exercise price was adjusted down to $1.00 on May 14, 2007, because the
        market price of the common stock was below $1.73 on such date. The Company
        agreed to register the warrant shares.

       

      The
        Company repaid substantially all of the Promissory Note in 2007 with proceeds
        from the sale of the January Debentures. On January 19, 2007, the Company
        converted approximately $163,000 of trade accounts payable and the remaining
        balance and unpaid interest on the note to D&G to a new promissory note
        payable with an original principal of $182,000. The new promissory note and
        accrued and unpaid interest at 12% is payable the earlier of the Company’s
        receipt of any proceeds from litigation, or receipts from an equity financing
        of
        at least $3 million, or September 30, 2007. The Company also issued 46,296
        shares issued to D&G as a retainer for future work and agreed to register
        the shares.

       

      The
        Company agreed to register the 290,000 shares of Common Stock that were issued
        to Ardour Capital Investments, LLC, in connection with the sale of the January
        Debentures and pursuant to a financial advisory agreement dated September
        8,
        2006, as amended on January 17, 2007. 

       

      The
        Company issued to Neal Brown 10,000 shares of Common Stock in settlement
        of
        legal fees owed. 

       

      All
        of
        the shares described above were included on a registration statement on Form
        SB-2, SEC File No. 333-138240, that was declared effective on May 14,
        2007.

       

      In
        connection with the sale of the January Debentures, the Company and the
        purchasers of the January Debentures entered into a registration rights
        agreement under which, among other things, the Company was required, on or
        before February 16, 2007, to file a registration statement with the Securities
        and Exchange Commission covering the resale of the Common Stock issuable
        pursuant to the January Debentures and the related warrants and to use its
        best


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      efforts
        to have the registration declared effective as promptly as possible thereafter
        but in any event, by May 17, 2007. The Company timely filed a registration
        statement on Form SB-2 covering such Common Stock and warrants, SEC File
        No.
        333-140618, and the registration statement was declared effective on May
        14,
        2007. The registration rights agreement also required the Company to file
        a new
        registration statement within 30 days after determining that the shares covered
        by any existing registration statements are insufficient to permit the sale
        of
        all shares that may be issued upon redemption or conversion of the January
        Debentures and exercise of the warrants issued to the purchasers of the January
        Debentures. The Company is required to cause such new registration statement
        to
        be declared effective within 60 days after making such determination. The
        Company will be subject to certain monetary penalties if the registration
        statement is not filed or does not become effective on a timely basis. The
        penalties are generally equal to 2% of the aggregate purchase price paid
        for the
        January Debentures then held by the purchasers. If the penalties are not
        paid in
        full within 10 days after the date payable, the Company will be liable for
        interest on the unpaid penalties at a rate of 15% per annum, accruing daily.
        The
        penalties may not exceed 2% of the aggregate Subscription Amount of the
        purchasers in any 30-day period and the maximum aggregate liquidated damages
        payable to a purchaser is 24% of the aggregate subscription amount paid by
        such
        holder.

      


      The
        Company has determined that the number of shares of Common Stock covered
        by the
        333-140618 registration statement was not sufficient to permit the sale of
        all
        shares that may be issued
        upon redemption or conversion of the January Debentures and exercise of the
        warrants issued to the purchasers of the January Debentures. The Company
        and the
        holders of the January Debentures have entered into an agreement pursuant
        to
        which, among other things, the defaults under the January Debentures and
        the
        related registration right agreement were waived, the maturity of the Debentures
        was extended to April 17, 2009, and the Company agreed to file a new
        registration statement covering the shares underlying the January Debentures
        by
        October 1, 2007.

       

      On
        August
        17, 2007, the Company authorized the issuance of an aggregate of 401,250
        restricted shares of Common Stock, as an inducement to the holders of the
        January Debentures to enter into the Amendment Agreement dated as of August
        24,
        2007. Each party’s shares were calculated by multiplying the dollar amount of
        that party’s investment by 0.075. The Company agreed to grant the holders of
        these shares “piggy-back” registration rights and to include the shares on the
        Company’s next registration statement on Form SB-2 to be filed with the
        Securities and Exchange Commission.

      


      The
        Company issued 50,000 shares of Common Stock to David Long in July 2007 and
        agreed to include the shares on the Company’s next registration statement on
        Form SB-2 to be filed with the Securities and Exchange Commission, subject
        to
        the consent of the holders of the Corporation’s Variable Rate Self-Liquidating
        Senior Secured Convertible Debentures due March 18, 2008.

      


      In
        connection with the Company’s $15,000,000 acquisition Line of Credit, the
        Company agreed to pay JMC Venture Partners LLC quarterly monitoring fees
        of 2.5%
        of the outstanding balance under the Line of Credit and a one-time commitment
        fee of 2.5% of the Line of Credit, in shares of common stock of the Company.
        The
        number of shares to be issued will be calculated by dividing the dollar amount
        of the fee by the average closing price of a share of common stock
        for


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      the
        10
        business days preceding the date of payment. The Company has agreed to include
        the shares in its next registration statement filed with the Securities and
        Exchange Commission on Forms S-1, SB-2, S-3 or equivalent in accordance with
        “piggy-back” registration rights accorded by the Company to investors generally
        but in no event later than 120 days after the execution of the Line of Credit
        agreement. 


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(y)

      Disclosure

      


      Some
        of
        the investors have entered into nondisclosure agreements with the Company
        and
        have received information from the Company that may be material and
        non-public.

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(aa)

      Solvency

      


      The
        Company has issued senior secured promissory notes in the aggregate principal
        amount of $1,712,085 and is authorized to issue up to $2,000,000 in principal
        amount of such notes. The notes are due September 30, 2007. The following
        is a
        list of the noteholders:

       

      


      
        	
                Name
                  of Investor

              	
                Date
                  Issued

              	
                Principal
                  Amount

              
	
                Woodlaken
                  LLC

              	
                March
                  7, 2005

              	
                $40,000.00

              
	
                Jezebel
                  Management Corporation

              	
                March
                  16, 2005

              	
                $100,000.00

              
	
                Pinetree
                  (Barbados) Inc.

              	
                April
                  1, 2005

              	
                $50,000.00

              
	
                Woodlaken
                  LLC

              	
                April
                  1, 2005

              	
                $10,000.00

              
	
                Jezebel
                  Management Corporation

              	
                April
                  18, 2005

              	
                $75,000.00

              
	
                Coady
                  Family LLC

              	
                May
                  25, 2005

              	
                $100,000.00

              
	
                Jezebel
                  Management Corporation

              	
                July
                  8, 2005

              	
                $75,000.00

              
	
                Jezebel
                  Management Corporation

              	
                August
                  16, 2005

              	
                $150,000.00

              
	
                Jezebel
                  Management Corporation

              	
                September
                  15, 2005

              	
                $150,000.00

              
	
                Jezebel
                  Management Corporation

              	
                November
                  18, 2005

              	
                $100,000.00

              
	
                Pinetree
                  (Barbados) Inc.

              	
                November
                  18, 2005

              	
                $100,000.00

              
	
                F.
                  Jay Leonard

              	
                March
                  20, 2006

              	
                $25,000.00

              
	
                Woodlaken
                  LLC

              	
                March
                  31, 2006

              	
                $72,000.00

              
	
                Peter
                  and Barbara Carpenter

              	
                April
                  7, 2006

              	
                $100,000.00

              
	
                Pascal
                  Partners, LLC

              	
                April
                  10, 2006

              	
                $100,000.00

              
	
                Coady
                  Family LLC

              	
                May
                  23, 2006

              	
                $200,000.00

              
	
                Steven
                  Kilponen

              	
                June
                  13, 2006

              	
                $25,000.00

              
	
                Millennium
                  Trust Co. LLC Custodian FBO Joseph Cooper Rollover IRA
                  90M020013

              	
                July
                  3, 2006

              	
                $100,000.00

              
	
                F.
                  Jay Leonard

              	
                October
                  13, 2006

              	
                $25,000.00

              
	
                Millennium
                  Trust Co. LLC Custodian FBO Joseph Cooper Rollover IRA
                  90M020013

              	
                October
                  13, 2006

              	
                $85,000.00

              
	
                Steven
                  Kilponen

              	
                October
                  31, 2006

              	
                $30,085.00

              
	
                Total

              	 	
                $1,712,085.00

              


      

      


      On
        November 18, 2005, the
        Company entered into an agreement with Oliver Street Finance LLC pursuant
        to
        which Oliver Street provides funding to the Company to prosecute the Company’s
        patent infringement action against Toyota Motor Corporation, Toyota Motor
        Sales
        U.S.A., Inc. and Toyota Motor Manufacturing North America. Under the terms
        of
        the agreement, Oliver Street pays all legal fees and out-of pocket expenses
        billed by the Company’s special patent counsel, Mintz, Levin, Cohn, Ferris,
        Glovsky and Popeo, P.C., in connection with the litigation against Toyota
        and
        approved by the Company in exchange for a portion of any recovery that the
        Company receives in the Litigation equal to the greater of 40% of the recovery
        or the actual amount of legal fees and expenses Oliver Street pays on the
        Company’s behalf.

       

      On
        July
        28, 2006 the Company borrowed $125,000 from Jezebel Management Corporation
        and
        issued a promissory note in the principal amount of $125,000 to Jezebel.
        The new
        note bears interest at a rate of 15% per annum and matured on August 28,
        2006.
        The
        note
        is currently in default and carries a default interest rate of 18% per
        annum.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      On
        November 17, 2006, the Company converted $526,149 of trade accounts payable
        to
        Davis & Gilbert LLP (D&G”) to a promissory note payable with an original
        principal of $529,149. The note and accrued and unpaid interest at 12% was
        payable the earlier of the Company’s receipt of any proceeds from litigation, or
        receipts from an equity financing of at least $5 million, or March 31, 2007.
        To
        induce D&G to enter into this agreement, the Company issued a warrant to
        purchase 200,000 shares of Common Stock at $1.73 a share. The exercise price
        was
        adjusted down to $1.00 on May 14, 2007, because the market price of the common
        stock was below $1.73 on such date. The Company repaid substantially all
        of the
        Promissory Note in 2007 with proceeds from the sale of the January
        Debentures.

       

      On
        January 19, 2007, the Company converted approximately $163,000 of trade accounts
        payable and the remaining balance and unpaid interest on the note to D&G to
        a new promissory note payable with an original principal of $182,000. The
        new
        promissory note and accrued and unpaid interest at 12% is payable the earlier
        of
        the Company’s receipt of any proceeds from litigation, or receipts from an
        equity financing of at least $3 million, or September 30, 2007.

       

      Technipower
        LLC has a $1,500,000 revolving credit facility with Citizens Bank of
        Massachusetts dated May 4, 2006, that was renewed in 2007. As of the date
        hereof, $700,000 is outstanding under the facility.

       

      The
        Company issued an aggregate of $5,350,000 aggregate principal amount of January
        Debentures in a private placement on January 22, 2007. The Company made the
        first required Monthly Redemption payment that was due on June 1, 2007, leaving
        a balance of $4,815,000 of principal outstanding on the January Debentures.
        See
        Schedule 3.1(g) for a list of the holders of the January Debentures and the
        principal amount remaining on their January Debentures.

       

      The
        Company is issuing an aggregate of $160,500 of additional January Debentures
        “Additional Debentures”) in payment of accrued penalties under the registration
        rights agreement among the Company and the holders of the January Debentures
        pursuant to a First Amendment Agreement dated as of August 24, 2007, among
        the
        Company and such holders. See Schedule 3.1(g) for a list of the holders of
        the
        Additional Debentures and the principal amounts of such Additional
        Debentures.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(bb)

      Tax
        Status

      


      As
        of
        July 3, 2007, the Company has an outstanding payroll tax obligation to the
        IRS
        in the amount of $221,601.14 and has negotiated an arrangement with the IRS
        to
        pay this liability in monthly installments of $10,000 each until the obligation
        is paid in full. 

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(ee)

      Accountants

      


      Eisner
        LLP

      730
        Third
        Avenue

      New
        York,
        New York 10017


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(ff)

      Seniority

      


      The
        Company has issued senior secured promissory notes in the aggregate principal
        amount of $1,712,085 and is authorized to issue up to $2,000,000 in principal
        amount of such notes. The notes are due September 30, 2007. The following
        is a
        list of the noteholders:

       

      


      
        	
                Name
                  of Investor

              	
                Date
                  Issued

              	
                Principal
                  Amount

              
	
                Woodlaken
                  LLC

              	
                March
                  7, 2005

              	
                $40,000.00

              
	
                Jezebel
                  Management Corporation

              	
                March
                  16, 2005

              	
                $100,000.00

              
	
                Pinetree
                  (Barbados) Inc.

              	
                April
                  1, 2005

              	
                $50,000.00

              
	
                Woodlaken
                  LLC

              	
                April
                  1, 2005

              	
                $10,000.00

              
	
                Jezebel
                  Management Corporation

              	
                April
                  18, 2005

              	
                $75,000.00

              
	
                Coady
                  Family LLC

              	
                May
                  25, 2005

              	
                $100,000.00

              
	
                Jezebel
                  Management Corporation

              	
                July
                  8, 2005

              	
                $75,000.00

              
	
                Jezebel
                  Management Corporation

              	
                August
                  16, 2005

              	
                $150,000.00

              
	
                Jezebel
                  Management Corporation

              	
                September
                  15, 2005

              	
                $150,000.00

              
	
                Jezebel
                  Management Corporation

              	
                November
                  18, 2005

              	
                $100,000.00

              
	
                Pinetree
                  (Barbados) Inc.

              	
                November
                  18, 2005

              	
                $100,000.00

              
	
                F.
                  Jay Leonard

              	
                March
                  20, 2006

              	
                $25,000.00

              
	
                Woodlaken
                  LLC

              	
                March
                  31, 2006

              	
                $72,000.00

              
	
                Peter
                  and Barbara Carpenter

              	
                April
                  7, 2006

              	
                $100,000.00

              
	
                Pascal
                  Partners, LLC

              	
                April
                  10, 2006

              	
                $100,000.00

              
	
                Coady
                  Family LLC

              	
                May
                  23, 2006

              	
                $200,000.00

              
	
                Steven
                  Kilponen

              	
                June
                  13, 2006

              	
                $25,000.00

              
	
                Millennium
                  Trust Co. LLC Custodian FBO Joseph Cooper Rollover IRA
                  90M020013

              	
                July
                  3, 2006

              	
                $100,000.00

              
	
                F.
                  Jay Leonard

              	
                October
                  13, 2006

              	
                $25,000.00

              
	
                Millennium
                  Trust Co. LLC Custodian FBO Joseph Cooper Rollover IRA
                  90M020013

              	
                October
                  13, 2006

              	
                $85,000.00

              
	
                Steven
                  Kilponen

              	
                October
                  31, 2006

              	
                $30,085.00

              
	
                Total

              	 	
                $1,712,085.00

              


      

      


      On
        November 18, 2005, the
        Company entered into an agreement with Oliver Street Finance LLC pursuant
        to
        which Oliver Street provides funding to the Company to prosecute the Company’s
        patent infringement action against Toyota Motor Corporation, Toyota Motor
        Sales
        U.S.A., Inc. and Toyota Motor Manufacturing North America. Under the terms
        of
        the agreement, Oliver Street pays all legal fees and out-of pocket expenses
        billed by the Company’s special patent counsel, Mintz, Levin, Cohn, Ferris,
        Glovsky and Popeo, P.C., in connection with the litigation against Toyota
        and
        approved by the Company in exchange for a portion of any recovery that the
        Company receives in the Litigation equal to the greater of 40% of the recovery
        or the actual amount of legal fees and expenses Oliver Street pays on the
        Company’s behalf.

       

      The
        January Debentures will be payable pari
        passu
        with the
        Debentures.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        3.1(gg)

      No
        Disagreements with Accountants and Lawyers

      


      No
        exceptions.

      



      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        4.9

      Use
        of Proceeds

      


      At
        closing, the Company shall pay the law firm of Davis & Gilbert, LLP $50,000
        from the proceeds of the sale of the Securities for services provided in
        connection with this Agreement.

      


      At
        closing, the law firm of Feldman Weinstein & Smith LLP will be paid (i)
        $15,000 for services provided in connection with this Agreement, and (ii)
        $10,000 for services provided in connection with the Amendment Agreement.
        These
        amounts will be paid form the proceeds of the sale of the
        Securities.