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Unassociated Document

    SUBSCRIPTION
      AND INVESTMENT AGREEMENT

     

    THIS
      SUBSCRIPTION AND INVESTMENT AGREEMENT (this “Agreement”)
      is
      made as of this 27th
      day of
      June, 2008, by and among ARGAN, INC., a Delaware corporation (the “Company”)
      and
      each of the other signatories to this Agreement, as identified on the signature
      pages attached hereto (each a “Buyer”,
      and
      collectively the “Buyers”).

     

    WHEREAS,
      the Company is offering up to 2,200,000 shares of the Company’s Common Stock,
      $.15 par value (the “Offered
      Common Stock”)
      to a
      limited number of accredited investors in a non-public offering (the
“Offering”);
      and

     

    WHEREAS,
      the
      Company and each Buyer are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the ÒSecurities
      ActÓ),
      and
      Rule 506 of Regulation D (ÒRegulation
      DÓ)
      as
      promulgated by the United States Securities and Exchange Commission (the
ÒSECÓ)
      under
      the Securities Act; and

     

    WHEREAS,
      each Buyer desires to purchase that number of shares of Offered Common Stock
      set
      forth on each Buyer’s respective signature page (in each case the “Shares”).

     

    NOW
      THEREFORE, in consideration of the foregoing and for valuable consideration,
      the
      receipt and sufficiency of which is acknowledged, the parties hereto agree
      as
      follows:

     

    1. Issuance
      of Shares

     

    (a) Subject
      to the terms and conditions contained herein, the Company will issue to each
      Buyer, and each Buyer will purchase from Company, severally and not jointly,
      for
      the purchase price of $12.00 per share, that number of shares of Offered Common
      Stock set forth on each Buyer’s respective signature page. The closing of the
      Offering is conditioned upon committed and fully paid subscriptions of not
      less
      than $21,000,000 in aggregate gross proceeds. The Company will not sell more
      than 2,200,000 Shares pursuant to this Offering. The closing date of this
      Offering shall be July 1, 2008 (the “Closing
      Date”).
      Upon
      receipt by the Company from Buyers of fully executed versions of this Agreement
      representing committed subscriptions of at least $21,000,000 aggregate gross
      proceeds the Company will provide notice to the Buyers that the closing of
      the
      Offering will proceed (the “Closing
      Notice”)
      and
      each Buyer shall send, via wire transfer in immediately available funds, such
      Buyer’s full purchase price to the Company on or before 1:00 p.m. EDT on the
      Closing Date. The Company’s wire information will be provided to each Buyer with
      the Closing Notice.

     

    In
      the
      event that we do not receive fully paid subscriptions of $21,000,000 or more
      on
      or before 5:00 p.m. EDT on July 7, 2008, we will refund each Buyer’s respective
      purchase price without interest. Upon the closing of the transactions
      contemplated hereby, the Company shall deliver to each Buyer a certificate
      in
      the name of such Buyer for the respective number of Shares issued to such Buyer
      (or its respective designee or nominee), containing, inter
      alia,
      the
      legend set forth in Section 2 below. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2. Restrictive
      Legends

     

    All
      certificates representing Shares shall have affixed thereto legends in
      substantially the following form, in addition to any other legends that may
      be
      required under federal or state securities laws:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE
      SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
      ASSIGNED EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
      SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
      SECURITIES AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
      LAWS.

     

    The
      Company acknowledges and agrees that upon such time as the legend is legally
      permitted to be removed from the certificates, the Company will take such steps
      as required in order to have the legend revised or removed.

     

    3. Investment
      Representations

     

    Each
      Buyer represents, warrants and covenants as follows:

     

    (a)
       The
      Buyer
      is an “accredited investor” as such term is defined in Rule 501(a) of Regulation
      D promulgated pursuant to the Securities Act and is purchasing the applicable
      Shares for its own account for investment only, and not with a view to, or
      for
      sale in connection with, any distribution of such Shares in violation of the
      Securities Act or applicable state securities laws, or any rule or regulation
      thereunder.

     

    (b)
       The
      Buyer
      has had such opportunity as it has deemed adequate to obtain from
      representatives of the Company such information as is necessary to permit it
      to
      evaluate the merits and risks of its investment in the Company, and has done
      so.

     

    (c)
       The
      Buyer
      understands that the Company is required to file periodic reports pursuant
      to
      the Securities Exchange Act of 1934 (the “1934
      Act”),
      as
      amended. The Buyer acknowledges that they have had such opportunity to obtain
      such periodic reports and are familiar with the information contained in such
      periodic reports, including without limitation the risk factors contained
      therein, and that each periodic report speaks only as of its respective date.
      The Buyer understands and acknowledges that no person has been authorized to
      give any information or make any representations in connection with the Offering
      other than the information contained in such periodic reports and the
      representations of the Company contained in Section 4 of this Agreement. The
      Buyer understands and acknowledges that, if given or made, other information
      or
      representations must not be relied on as having been made by or on behalf of
      the
      Company or Allen & Company LLC (the “Placement
      Agent”),
      and
      the Buyer represents and warrants that the Buyer’s decision to purchase Shares
      was not based on any information or representations other than as described
      in
      the immediately preceding sentence. The Buyer also acknowledges and understands
      that all information presented in such periodic reports was prepared by the
      Company and that the Placement Agent has not independently verified any such
      information and makes no representation as to accuracy or completeness of any
      such information or any other related disclosure materials or as to the current
      condition or future performance of the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)
       The
      Buyer
      has sufficient experience in business, financial and investment matters and,
      in
      particular, investments in businesses similar to the Company, to be able to
      evaluate the risks involved in the purchase of the Shares and to make an
      informed investment decision with respect to such purchase.

     

    (e)
       The
      Buyer
      can afford a complete loss of the value of the Shares and is able to bear the
      economic risk of holding such Shares for an indefinite period.

     

    (f)
       The
      Buyer
      understands that: (i) the Shares have not been registered under the Securities
      Act and are “restricted securities” within the meaning of Rule 144 under the
      Securities Act; (ii) the Shares cannot be sold, transferred or otherwise
      disposed of unless they are subsequently registered under the Securities Act
      or
      an exemption from registration is then available; (iii) in any event, the
      exemption from registration under Rule 144 will not be available for at least
      six months and even then will not be available unless a public market then
      exists for the Offered Common Stock, adequate information concerning the Company
      is then available to the public, and other terms and conditions of Rule 144
      are
      complied with; and (iv) there is now no registration statement on file with
      the
      SEC with respect to any stock of the Buyer and there is no assurance that any
      registration statement that may be filed with respect to the resale of the
      Shares will be declared effective when expected, or at all, or will remain
      effective for a sufficient time to enable the Buyer to sell any or all of its
      Shares.

     

    (g)
       The
      Buyer
      has consulted the Buyer’s own accountants, legal counsel and investment tax or
      other advisors as the Buyer deemed necessary in connection with the purchase
      of
      the Shares and has relied solely on the advice of such professionals and not
      on
      any information or statements from the Company or the Placement
      Agent.

     

    (h)
       The
      Buyer
      understands that neither the SEC nor any state securities commission or other
      governmental agency has reviewed or passed upon or made any recommendation
      or
      endorsement of the Shares or any investment therein.

     

    4. Company
      Representations

     

    The
      Company represents and warrants as follows:

     

      (a) Organization,
      Qualification and Corporate Power.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware. The Company is duly qualified to
      conduct business and is in corporate and tax good standing under the laws of
      each jurisdiction in which the nature of its businesses or the ownership or
      leasing of its properties requires such qualification, except where the failure
      to be so qualified or in good standing would not have a material adverse effect
      on the Company’s business. The Company has all requisite corporate power and
      authority to carry on the businesses in which it is engaged and to own and
      use
      the properties owned and used by it. 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

      (b) Authorization
      of Transaction.
      The
      Company has all requisite power and authority to execute and deliver this
      Agreement and to perform its obligations hereunder. The execution
      and delivery by the Company of this Agreement and the consummation by the
      Company of the transactions contemplated hereby have been duly and validly
      authorized by all necessary corporate action on the part of the Company.
      This Agreement has been duly and validly executed and delivered by the Company
      and constitutes a valid and binding obligation of the Company, enforceable
      against it in accordance with its terms.

     

    (c) Capital
      Stock/Anti-Dilution and Participation Rights.
      The
      Company’s authorized, issued and outstanding capital stock, warrants and options
      are as set forth in the Company’s most recent filings, as of the date of such
      filings, made by the Company pursuant to the 1934 Act. There are no pre-emptive
      rights, rights of first refusal or other participation rights, nor are there
      any
      anti-dilution or other adjustments, that would be triggered or subject to
      exercise by any person as a result of this Offering.

     

      (d) Noncontravention.
      Subject
      to compliance with the applicable requirements of the Securities Act, the 1934
      Act and any applicable state securities laws, neither the execution and delivery
      by the Company of this Agreement, nor the consummation by the Company of the
      transactions contemplated hereby will (i) conflict with or violate any
      provision of the charter or Bylaws of the Company, (ii) require on the part
      of the Company any filing with, or permit, authorization, consent or approval
      of, any court, arbitrational tribunal, administrative agency or commission
      or
      other governmental or regulatory authority or agency (“Governmental
      Entity”),
      (iii) conflict with, result in breach of, constitute (with or without due
      notice or lapse of time or both) a default under, result in the acceleration
      of
      obligations under, create in any party any right to terminate, modify or cancel,
      or require any notice, consent or waiver under, any contract or instrument
      to
      which the Company is a party or by which it is bound or to which any of its
      assets are subject, or (iv) violate any order, writ, injunction, decree,
      statute, rule or regulation applicable to the Company or any of its properties
      or assets.

     

    (e) SEC
      Documents; Financial Statements. 
      The Company has filed all reports, schedules, forms, statements and other
      documents required to be filed by it with the SEC pursuant to the reporting
      requirements of the 1934 Act (all of the foregoing filed prior to the date
      hereof, and all exhibits included therein and financial statements and schedules
      thereto and documents incorporated by reference therein being hereinafter
      referred to as the “SEC
      Documents”). As
      of their respective dates, the SEC Documents complied in all material respects
      with the requirements of the 1934 Act and the rules and regulations of the
      SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading. 
As
      of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto.  Such financial statements have been prepared in
      accordance with generally accepted accounting principles, consistently applied,
      during the periods involved (except (i) as may be otherwise indicated in such
      financial statements or the notes thereto, or (ii) in the case of unaudited
      interim statements, to the extent they may exclude footnotes or may be condensed
      or summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). The
      Company has timely filed all
      periodic reports with the SEC and with the American Stock Exchange (the
      "AMEX")
      and
      has complied with all applicable listing requirements necessary to maintain
      its
      qualification and eligibility on the AMEX. The Company is eligible to use Form
      S-3 in transactions involving secondary offerings.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (f) Sarbanes-Oxley
      Act. 
      The Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are applicable to the Company and effective
      as
      of the date hereof (as well as any and all applicable rules and regulations
      promulgated by the SEC thereunder that are applicable to the Company and
      effective as of the date hereof) except where such noncompliance would not
      have,
      individually or in the aggregate, a material adverse effect.

    

    (g) Litigation.
      There is
      no action,
      suit, proceeding, claim, arbitration or investigation before any Governmental
      Entity which is pending or, to the knowledge of the Company, has been threatened
      against the Company.
      There
      are no judgments, orders or decrees outstanding against the Company. To the
      knowledge of the Company, there is no threatened civil or criminal litigation,
      written notice of violation, formal administrative proceeding, or investigation,
      inquiry or information request by any governmental entity with respect to the
      business of the Company.

    

    (h) Valid
      Issuance.
      The
      Shares, when sold, issued and delivered in accordance with the terms of this
      Agreement, will be duly and validly issued, fully paid and nonassessable, and
      will be subject to restrictions on transfer under federal and applicable state
      securities law until the Registration Statement (as defined in Section 6(a)
      below) is declared effective by the SEC and then may be sold in accordance
      with
      the terms provided in the prospectus to the Registration Statement as long
      as
      the Registration Statement remains effective. The Shares will be issued in
      compliance in all material respects with an exemption from the registration
      requirements of the Securities Act, and the registration and qualification
      requirements of the securities laws of the applicable states.

    

    (i) Disclosure. 
      The Company confirms that neither it nor, to its knowledge, any officer,
      director or agent of the Company has provided any of the Buyers or their
      respective agents or counsel with any information that constitutes material,
      nonpublic information (other than the occurrence of the Offering). The
      Company understands and confirms that each of the Buyers will rely on the
      foregoing representations in effecting transactions in securities of the
      Company. All
      disclosure provided to the Buyers regarding the Company, its business and the
      transactions contemplated hereby, including the Schedules to this Agreement,
      furnished by or on behalf of the Company are true and correct and do not contain
      any untrue statement of a material fact or omit to state any material fact
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading. No
      event
      or circumstance has occurred or information exists with respect to the Company
      or its business, properties, prospects, operations or financial conditions,
      which, under applicable law, rule or regulation, requires public disclosure
      or
      announcement by the Company on or before the date hereof but which has not
      been
      so publicly announced or disclosed (assuming for this purpose that the Company’s
      reports filed under the 1934 Act, as amended, are being incorporated into an
      effective registration statement filed by the Company under the Securities
      Act). 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (j) Form
      D
      and Blue Sky. 
      The Company has conducted the Offering as a private placement in accordance
      with
      Regulation D and agrees to file a Form D with respect to the Securities as
      required under Regulation D and to provide a copy thereof to each Buyer promptly
      after such filing.  The Company shall, on or before the Closing Date, take
      such action as the Company shall reasonably determine is necessary in order
      to
      obtain an exemption for or to qualify the Securities for sale to the Buyers
      at
      the Closing pursuant to this Agreement under applicable securities or ÒBlue SkyÓ
laws of the states of the United States (or to obtain an exemption from such
      qualification), and shall provide evidence of any such action so taken to the
      Buyers on or prior to the Closing Date.  The Company shall make all filings
      and reports relating to the offer and sale of the Securities required under
      applicable securities or ÒBlue SkyÓ laws of the states of the United States
      following the Closing Date.

    

    (k) Same
      Terms.
      All
      Buyers are participating in the Offering on the same terms and conditions.
      There
      exist no alternate, individualized or exclusive agreements or arrangements
      with
      any Buyer in connection with the Offering. 

     

    5. Use
      of
      Proceeds.
      The
      Company expects to use a portion of the proceeds in connection with a planned
      joint venture with Invenergy Wind LLC to perform engineering, procurement and
      construction services for wind energy generating facilities, with the remaining
      proceeds to be used by the Company for general corporate purposes.

    

    6. Registration
      Rights Provisions.
      

    

    (a) The
      Company agrees that it will use its best efforts to, within 30 days following
      the closing of the Offering, prepare and file with the SEC a registration
      statement on Form S-3, or any equivalent form for registration by issuers
      similar to the Company in accordance with the Securities Act (“Registration
      Statement”),
      to
      permit a public offering and resale of the Shares on a continuous basis under
      Rule 415. The Company agrees that it will use commercially reasonable efforts
      to
      cause the Registration Statement to be declared effective by the SEC as soon
      as
      practicable following the filing thereof. The Company will cause the
      Registration Statement to remain effective until such time as all of the Shares
      are sold or all holders thereof are entitled to rely on Rule 144(b) for sales
      of
      the Shares without registration under the Securities Act and without compliance
      with the public information, sales volume, manner of sale or notice requirements
      of Rule 144. The Company will pay all registration expenses of the registration
      of the Shares pursuant to this Section 6(a). Other than Daniel A. Levinson
      and
      his affiliates, who collectively hold 200,000 shares of the Company’s Common
      Stock (collectively, the “Levinson
      Shares”),
      no
      person has or will have “piggy-back” or other participation rights with respect
      to the Registration Statement, nor will the Company file any other registration
      statement prior to the effectiveness of the Registration Statement. It is,
      however, acknowledged and agreed by Buyers, that the Company may include both
      the Shares and the Levinson Shares in the Registration
      Statement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) In
      the
      event of the offer and sale of Shares held by Buyers pursuant to the
      Registration Statement under the Securities Act, the Company must, and hereby
      does, indemnify and hold harmless, to the fullest extent permitted by law,
      each
      Buyer, its directors, officers, partners, consultants, each other person who
      participates as an underwriter in the offering or sale of such securities,
      and
      each other person, if any, who controls or is under common control with such
      Buyer or any such underwriter within the meaning of Section 15 of the Securities
      Act, against any losses, claims, damages or liabilities, joint or several,
      and
      expenses to which the Buyer or any such director, officer, partner, consultant
      or underwriter or controlling person may become subject under the Securities
      Act
      or otherwise, insofar as such losses, claims, damages, liabilities or expenses
      (or actions or proceedings, whether commenced or threatened, in respect thereof)
      arise out of or are based upon any untrue statement or alleged untrue statement
      of any material fact contained in any Registration Statement under which such
      Shares were registered under the Securities Act, any preliminary prospectus,
      final prospectus or summary prospectus contained therein, or any amendment
      or
      supplement thereto, or any omission or alleged omission to state therein a
      material fact required to be stated therein or necessary to make the statements
      therein in the light of the circumstances under which they were made not
      misleading, and the Company must reimburse the Buyer, and each such director,
      officer, partner, underwriter and controlling person for any legal or any other
      expenses reasonably incurred by them in connection with investigating, defending
      or settling any such loss, claim, damage, liability, action or proceeding;
      provided
      that the
      Company is not liable in any such case (i) to the extent that any such loss,
      claim, damage, liability (or action or proceeding in respect thereof) or expense
      arises out of or is based upon an untrue statement or omission from such
      Registration Statement, any such preliminary prospectus, final prospectus,
      summary prospectus, amendment or supplement made in reliance upon and in
      conformity with written information furnished to the Company by or on behalf
      of
      such Buyer or (ii) if the person asserting any such loss, claim, damage,
      liability (or action or proceeding in respect thereof) who purchased the Shares
      that are the subject thereof did not receive a copy of an amended preliminary
      prospectus or the final prospectus (or the final prospectus as amended or
      supplemented) at or prior to the written confirmation of the sale of such Shares
      to such person because of the failure of such Buyer or any underwriter to so
      provide such amended preliminary or final prospectus and the untrue statement
      or
      alleged untrue statement or omission or alleged omission of a material fact
      made
      in such preliminary prospectus was corrected in the amended preliminary or
      final
      prospectus (or the final prospectus as amended or supplemented). Such indemnity
      remains in full force and effect regardless of any investigation made by or
      on
      behalf of the Buyers, or any such director, officer, partner, underwriter or
      controlling person and survives the transfer of such shares by the
      Buyer.

    

    (c) As
      a
      condition to including Shares in a registration statement, each such Buyer
      agrees to be bound by the terms of this Section 6 and to indemnify and hold
      harmless, to the fullest extent permitted by law, the Company, its directors
      and
      officers, its consultants, underwriters and each other person, if any, who
      controls the Company within the meaning of Section 15 of the Securities Act,
      against any losses, claims, damages or liabilities, joint or several, to which
      the Company or any such director, officer, consultant or underwriter or
      controlling person may become subject under the Securities Act or otherwise,
      insofar as such losses, claims, damages or liabilities (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon any untrue statement or alleged untrue statement in or
      omission or alleged omission from such Registration Statement, any preliminary
      prospectus, final prospectus or summary prospectus contained therein, or any
      amendment or supplement thereto, if such statement or alleged statement or
      omission or alleged omission was made in reliance upon and in conformity with
      written information furnished to the Company by such Buyer, and such Buyer
      must
      reimburse the Company, and each such director, officer, and controlling person
      for any legal or other expenses reasonably incurred by them in connection with
      investigating, defending, or settling any such loss, claim, damage, liability,
      action, or proceeding; provided,
      however,
      that
      the liability of such Buyer hereunder shall be limited to the net proceeds
      received by such Buyer from the sale of Shares covered by such Registration
      Statement. Such
      indemnity remains in full force and effect regardless of any investigation
      made
      by or on behalf of the Company or any such director, officer or controlling
      person and shall survive the transfer by any Buyer of such
      Shares.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d) Promptly
      after receipt by an indemnified party of notice of the commencement of any
      action or proceeding involving a claim referred to in Sections 6(b) or (c)
      hereof (including any governmental action), such indemnified party must, if
      a
      claim in respect thereof is to be made against an indemnifying party, give
      written notice to the indemnifying party of the commencement of such action;
      provided that the failure of any indemnified party to give notice as provided
      herein does not relieve the indemnifying party of its obligations under Section
      6(b) or (c) hereof, except to the extent that the indemnifying party is actually
      prejudiced by such failure to give notice. In case any such action is brought
      against an indemnified party, unless in the reasonable judgment of counsel
      to
      such indemnified party a conflict of interest between such indemnified and
      indemnifying parties may exist or the indemnified party may have defenses not
      available to the indemnifying party in respect of such claim, the indemnifying
      party is entitled to participate in and to assume the defense thereof, with
      counsel reasonably satisfactory to such indemnified party and, after notice
      from
      the indemnifying party to such indemnified party of its election so to assume
      the defense thereof, the indemnifying party shall not be liable to such
      indemnified party for any legal or other expenses subsequently incurred by
      the
      latter in connection with the defense thereof, unless in such indemnified
      party’s reasonable judgment a conflict of interest between such indemnified and
      indemnifying parties arises in respect of such claim after the assumption of
      the
      defense thereof or the indemnifying party fails to defend such claim in a
      diligent manner. Neither an indemnified nor an indemnifying party is liable
      for
      any settlement of any action or proceeding effected without its consent, which
      shall not be unreasonably withheld or delayed. No indemnifying party may,
      without the consent of the indemnified party, consent to entry of any judgment
      or enter into any settlement, which does not include as an unconditional term
      thereof the giving by the claimant or plaintiff to such indemnified party of
      a
      release from all liability in respect of such claim or litigation.
      Notwithstanding anything to the contrary set forth herein, and without limiting
      any of the rights set forth above, in any event any party has the right to
      retain, at its own expense, counsel with respect to the defense of a
      claim.

     

    (e) In
      the
      event that an indemnifying party does or is not permitted to assume the defense
      of an action pursuant to Section 6(d) or in the case of the expense
      reimbursement obligation set forth in Sections 6(b) and (c), the indemnification
      required by Sections 6(b) and (c) hereof must be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as, and
      when bills received or expenses, losses, damages, or liabilities are
      incurred.

    

    (f) If
      the
      indemnification provided for in this Section 6 is held by a court of competent
      jurisdiction to be unavailable to an indemnified party with respect to any
      loss,
      liability, claim, damage or expense referred to herein, the indemnifying party,
      in lieu of indemnifying such indemnified party hereunder, must (i) contribute
      to
      the amount paid or payable by such indemnified party as a result of such loss,
      liability, claim, damage or expense as is appropriate to reflect the
      proportionate relative fault of the indemnifying party on the one hand and
      the
      indemnified party on the other (determined by reference to, among other things,
      whether the untrue or alleged untrue statement of a material fact or omission
      relates to information supplied by the indemnifying party or the indemnified
      party and the parties’ relative intent, knowledge, access to information and
      opportunity to correct or prevent such untrue statement or omission), or (ii)
      if
      the allocation provided by clause (i) above is not permitted by applicable
      law
      or provides a lesser sum to the indemnified party than the amount hereinafter
      calculated, not only the proportionate relative fault of the indemnifying party
      and the indemnified party, but also the relative benefits received by the
      indemnifying party on the one hand and the indemnified party on the other,
      as
      well as any other relevant equitable considerations. No indemnified party guilty
      of fraudulent misrepresentation (within the meaning of Section 11(f) of the
      Securities Act) is entitled to contribution from any indemnifying party who
      was
      not guilty of such fraudulent misrepresentation. Notwithstanding the foregoing,
      the contribution liability of a Buyer hereunder shall be limited to the net
      proceeds received by such Buyer from the sale of Shares covered by such
      Registration Statement.

    

    (g) The
      Company shall furnish to each Buyer whose Shares are included in any
      registration statement, without charge,  (i) promptly after the same is
      prepared and filed with the SEC, at least one copy of such registration
      statement and any amendment(s) thereto, including financial statements and
      schedules, all documents, including exhibits, incorporated therein by reference,
      if requested by an Investor and not otherwise available on the EDGAR system,
      all
      other exhibits if reasonably requested by the Investor and each preliminary
      prospectus, (ii) upon the effectiveness of any registration statement, a copy
      of
      the prospectus included in such registration statement and all amendments and
      supplements thereto (or such other number of copies as such Buyer may reasonably
      request) and (iii) such other documents, including copies of any preliminary
      or
      final prospectus, as such Buyer may reasonably request from time to time in
      order to facilitate the disposition of the Shares owned by such
      Buyer.

    

    (h) The
      Company will prepare and file with the SEC such amendments and supplements
      to
      the Registration Statement and take such other action, if any, as may be
      necessary to keep the Registration Statement effective until the earlier of
      (i) the date on which the Shares may be resold by the Buyers without
      registration and without regard to any volume limitations by reason of
      Rule 144 under the Securities Act or any other rule of similar effect,
      or (ii) all of the Shares have been sold pursuant to the Registration
      Statement or Rule 144 under the Securities Act or any other rule of
      similar effect.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7. Broker
      Fee

     

    It
      is
      acknowledged and agreed by Buyers that a broker fee, equal to 5% of the
      aggregate purchase price of all of the Shares sold in this Offering (the
“Broker
      Fee”)
      shall
      be payable by the Company to the Placement Agent. The Broker Fee shall be
      payable in full to the Placement Agent upon the closing of the Offering and
      the
      Company will reimburse the Placement Agent for its expenses in connection with
      the Offering.

    

    8. Miscellaneous

     

    (a)
       Severability.
      The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this Agreement,
      and each other provision of this Agreement shall be severable and enforceable
      to
      the extent permitted by law.

     

    (b)
       Waiver.
      Any
      provision for the benefit of the Company contained in this Agreement may be
      waived, either generally or in any particular instance, by the Board of
      Directors of the Company, as evidenced by a signed certificate of the Secretary
      of the Company certifying as to such action by the Board.

     

    (c)
       Binding
      Effect.
      This
      Agreement shall be binding upon and inure to the benefit of the Company and
      each
      Buyer and their respective heirs, executors, administrators, legal
      representatives, successors and assigns.

     

    (d)
       Notice.
      All
      notices required or permitted hereunder shall be in writing and deemed
      effectively given upon personal delivery or five days after deposit in the
      United States Post Office, by registered or certified mail, postage prepaid,
      addressed to the other party hereto at the address shown beneath his or its
      respective signature to this Agreement, or at such other address or addresses
      as
      either party shall designate to the other in accordance with this Section
      8(d).

     

    (e)
       Pronouns.
      Whenever the context may require, any pronouns used in this Agreement shall
      include the corresponding masculine, feminine or neuter forms, and the singular
      form of nouns and pronouns shall include the plural, and vice
      versa.

     

    (f)
       Entire
      Agreement.
      This
      Agreement constitutes the entire agreement between the parties with respect
      to
      the Shares, and supersedes all prior agreements and understandings, relating
      to
      the subject matter of this Agreement.

     

    (g)
       Amendment.
      This
      Agreement may be amended or modified only by a written instrument executed
      by
      the Company and by those Buyers who, in the aggregate, hold not less that 75%
      of
      the Shares sold in connection with this Offering.

     

    (h) Disclosure
      of Transactions and Other Material Information. 
      On or before the fourth business day following the date hereof, the Company
      shall file a Current Report on Form 8-K describing the terms of the Offering
      in
      the form required by the 1934 Act, and attaching the required documents as
      exhibits to such filing (including all attachments, the Ò8-K
      FilingÓ). 
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i)
       Governing
      Law.
      This
      Agreement and the rights and obligations of the parties hereunder shall be
      enforced, governed and construed in all respects in accordance with the internal
      substantive laws of the State of Delaware (without reference to principles
      of
      conflicts or choice of law that would cause the application of the internal
      laws
      of any other jurisdiction). Each Party hereby irrevocably submits and consents
      to the jurisdiction of Delaware with respect to any dispute, controversy, legal
      action or other proceeding that arises from, concerns or touches this Agreement
      or the purchase of the Shares and acknowledges that he, she or it will accept
      service of process by registered or certified mail or the equivalent directed
      to
      his, her or its address set forth herein or by whatever other means are
      permitted by such courts. Each party hereby acknowledges that said courts have
      jurisdiction over any such dispute, controversy, legal action or other
      proceeding and that he, she or its hereby waives any objection to personal
      jurisdiction or venue in these courts or that such courts are an inconvenient
      forum.

     

    (j)
       Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original and constitute the same instrument.

     

    

     

    [the
      following pages are the signature pages]

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      date
      first written above.

     

    THE
      COMPANY:

    

    ARGAN,
      INC.

    

    

    ____________________________________

    By:
      

    Its:
      

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              ENTITY
                BUYERS: 

               

               

                                  

              Name
                of Buyer

               

              BY:

               

                                  

              Name:

              Title:

              EIN:
                    

               

              Number
                of Shares:       

            
	 
	
               

              INDIVIDUAL
                BUYERS: 

               

                                  

              Name:

              Title:

              Address:

               

              SSN:
                    

               

              Number
                of Shares:EX 10.1

     

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of June 27, 2008, 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) or the Certificate of Designation, and (b)
      the following terms have the meanings set forth in this Section
      1.1:

     

    “Acquiring
      Person”
shall
      have the meaning ascribed to such term in Section 4.7. 

     

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

     

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

     

    “August
      2007 Debentures”
means
      the Variable Rate Self Liquidating Senior Secured Convertible Debenture issued
      by the Company in August 2007 in the aggregate principal amount of
      $500,000.

     

    “August
      2007 Purchase Agreement”
means
      that certain Securities Purchase Agreement, dated August 30, 2007, by and among
      the Company and the purchasers signatory thereto, as amended.

     

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

     

    “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.

     

    “Certificate
      of Designation”
means
      the Certificate of Designation to be filed prior to the Closing by the Company
      with the Secretary of State of Delaware, in the form of Exhibit
      A
      attached
      hereto. 

     

    “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’
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 United States Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.001 per share, and any other
      class
      of securities into which such securities may hereafter be reclassified or
      changed 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
      Richard A. Fisher, Esq., with offices located at the principal offices of the
      Company.

     

    “Conversion
      Price”
shall
      mean the Debenture Conversion Price and the Preferred Stock Conversion Price
      as
      such terms are defined in the Debentures and the Certificate of Designation,
      respectively.

     

    “Debentures”
means
      the Original Issue Discount Variable Rate Self-Liquidating Senior Secured
      Convertible Debentures due, subject to the terms therein, October 1, 2009,
      issued by the Company to the Purchasers hereunder, in the form of Exhibit
      B
      attached
      hereto.

     

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

     

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

     

    
      
         

      

      
        -
          2 -

        
          

        

      

      
         

      

    

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

     

    “Effective
      Date”
means
      the earlier of (a) the effective date of a Registration Statement and (b) the
      date that all of Underlying Shares are eligible for sale under Rule 144, without
      (i) the requirement for the Company to be in compliance with the current public
      information required under Rule 144 and (ii) volume or manner-of-sale
      restrictions.

     

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

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      for
      such purpose, by a majority of the non-employee members of the Board of
      Directors or a majority of the members of a committee of non-employee directors
      established for such purpose, (b) securities upon the exercise or exchange
      of or
      conversion of any Securities issued hereunder and/or other securities
      exercisable or exchangeable for or convertible into shares of Common Stock
      issued and outstanding on the date of this Agreement, provided that such
      securities have not been amended since the date of this Agreement to increase
      the number of such securities or to decrease the exercise, exchange or
      conversion price of such securities, (c) securities issued 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, and (d) shares of Common Stock to consultants or third
      parties to the Company in consideration for goods or services provided by such
      parties, provided that such issuances are each approved by a majority of the
      non-employee members of the Board of Directors. 

     

    “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).

     

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

     

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

     

    
      
         

      

      
        -
          3 -

        
          

        

      

      
         

      

    

    “January
      2007 Purchase Agreement”
means
      that certain Securities Purchase Agreement, dated January 17, 2007, by and
      among
      the Company and the purchasers signatory thereto, as amended.

     

    “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.

     

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

     

    “Preferred
      Stock”
means
      the up to 1,200 shares of the Company’s 0% Series D Convertible Preferred Stock
      issued hereunder having the rights, preferences and privileges set forth in
      the
      Certificate of Designation, in the form of Exhibit
      A hereto.
      

     

    “Preferred
      Stock Conversion Price”
shall
      have the meaning ascribed to such term in the Certificate of
      Designation.

     

    “Principal
      Amount”
means,
      as to each Purchaser, the amounts set forth below such Purchaser’s signature
      block on the signature pages hereto next to the heading “Principal Amount,” in
      United States Dollars, which shall equal such Purchaser’s Subscription Amount
      multiplied by 1.25. 

     

    “Prior
      Debentures”
means
      the January 2007 Debentures and the August 2007 Debentures.

     

    “Prior
      Purchase Agreements”
means
      the January 2007 Purchase Agreement and the August 2007 Purchase
      Agreement.

     

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

     

    “Public
      Information Failure”
shall
      have the meaning ascribed to such term in Section 4.3(b).

     

    
      
         

      

      
        -
          4 -

        
          

        

      

      
         

      

    

    “Public
      Information Failure Payments”
shall
      have the meaning ascribed to such term in Section 4.3(b). 

     

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

     

    “Registration
      Statement”
means
      a
      registration statement filed pursuant to Section 4.17, registering the resale,
      by the Purchasers, of all of the Underlying Shares.

     

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

     

    “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 conversion in full
      of
      (a) all Debentures (including Underlying Shares issuable as payment of interest
      on the Debentures), ignoring any conversion limits set forth therein, and
      assuming that the Debenture Conversion Price is at all times on and after the
      date of determination 90% of the then Debenture Conversion Price on the Trading
      Day immediately prior to the date of determination and (b) shares of Preferred
      Stock, ignoring any conversion limits set forth therein, and assuming that
      any
      previously unconverted shares of Preferred Stock are held until the third
      anniversary of the Closing Date.

     

    “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 Preferred Stock and the Underlying Shares.

     

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

     

    “Security
      Agreement”
means
      the Security Agreement, dated August 30, 2007, by among the Company and the
      Purchasers.

     

    “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). 

     

    “Stated
      Value”
means
      $1,000 per share of Preferred Stock.

     

    “Subscription
      Amount”
      means,
      as
      to each Purchaser, the aggregate amount
      to be
      paid for Debentures purchased hereunder as specified opposite such Purchaser’s
      name on

     

    
      
         

      

      
        -
          5 -

        
          

        

      

      
         

      

    

    Schedule
      1
      hereto
      and under the heading “Subscription Amount”, in United States dollars and in
      immediately available funds.

     

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

     

    “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 Certificate of Designation, 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 (a) upon conversion or redemption
      of the Debentures and issued and issuable in lieu of the cash payment of
      interest on the Debentures in accordance with the terms of the Debentures and
      (b) upon conversion or redemption of the Preferred Stock

     

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

     

    “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 selected in good faith by the Purchasers of a majority in interest
      of
      the Securities then

     

    
      
         

      

      
        -
          6 -

        
          

        

      

      
         

      

    

    outstanding
      and reasonably acceptable to the Holder, the fees and expenses of which shall
      be
      paid by the Company.

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      substantially concurrent with the execution and delivery of this Agreement
      by
      the parties hereto, the Company agrees to sell, and the Purchasers, severally
      and not jointly, agree to purchase, up to an aggregate of $1,000,000 in
      principal amount of the Debentures and up to 1,120 shares of Preferred Stock.
      Each Purchaser shall deliver to the Company via wire transfer or a certified
      check of immediately available funds equal to its Subscription Amount and the
      Company shall deliver to each Purchaser its respective Debenture and shares
      of
      Preferred Stock, as determined pursuant to Section 2.2(a), and the Company
      and
      each Purchaser shall deliver the other items set forth in Section 2.2
      deliverable at the Closing. Upon satisfaction of the covenants and conditions
      set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of
      FWS
      or such other location as the parties shall mutually agree.

     

    2.2  Deliveries. 

     

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

     

    
      	 	
              (i)

            	
              this
                Agreement duly executed by the
                Company;

            

    

     

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

            

    

     

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

            

    

     

    
      	
            	(iv)	
              a
                certificate evidencing such Purchaser’s pro rata amount of shares of
                Preferred Stock, registered in the name of such
                Purchaser.

            

    

     

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

     

    
      	 	
              (i)

            	
              this
                Agreement duly executed by such Purchaser;
                and

            

    

     

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

            

    

     

    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:

     

    
      
         

      

      
        -
          7 -

        
          

        

      

      
         

      

    

    (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.

     

    (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; and

     

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

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 Representations
      and Warranties of the Company.
      Except
      as set forth in the disclosure schedules delivered to the Purchasers
      concurrently herewith (the “Disclosure

     

    
      
         

      

      
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    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 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.

     

    
      
         

      

      
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    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations hereunder and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated hereby and thereby
      have
      been duly authorized by all necessary action on the part of the Company and
      no
      further action is required by the Company, the Board of Directors or the
      Company’s stockholders in connection therewith other than in connection with the
      Required Approvals. Each Transaction Document to which it is a party 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 by the Company of the Transaction Documents,
      the issuance and sale of the Securities and the consummation by it to which
      it
      is a party 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, (ii) conflict with, or constitute a default
      (or an event that with notice or lapse of time or both would become a default)
      under, result in the creation of any Lien upon any of the properties or assets
      of the Company or any Subsidiary, or give to others any rights of termination,
      amendment, acceleration or cancellation (with or without notice, lapse of time
      or both) of, any agreement, credit facility, debt or other instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other understanding
      to
      which the Company or any Subsidiary is a party or by which any property or
      asset
      of the Company or any Subsidiary is bound or affected, or (iii) subject to
      the
      Required Approvals, conflict with or result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company or a Subsidiary is subject
      (including federal and state securities laws and regulations), or by which
      any
      property or asset of the Company or a Subsidiary is bound or affected; except
      in
      the case of each of clauses (ii) and (iii), such as 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

     

    
      
         

      

      
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    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 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 (iii) the filing of Form D with the Commission and such filings as are
      required to be made under applicable state securities laws (collectively, the
      “Required
      Approvals”).

     

    (f) Issuance
      of the Securities.
      The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be duly and validly issued, fully
      paid and nonassessable, free and clear of all Liens imposed by the Company
      other
      than restrictions on transfer provided for in the Transaction Documents. The
      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 other than restrictions on transfer provided
      for in the Transaction Documents. 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 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 the purchase and sale of the Prior Debentures, 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

     

    
      
         

      

      
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    approval
      or authorization of any stockholder, the Board of Directors or others is
      required for the issuance and sale of the Securities. There are no stockholders
      agreements, voting agreements or other similar agreements with respect to the
      Company’s capital stock to which the Company is a party or, to the knowledge of
      the Company, between or among any of the Company’s stockholders.

     

    (h) SEC
      Reports; Financial Statements.
      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 (or such shorter period as the Company was required
      by
      law or regulation to file such material) (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act, as applicable,
      and
      none of the SEC Reports, when filed, contained any untrue statement of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. 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; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof, (i) there has been no event, occurrence or development
      that
      has had or that 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

     

    
      
         

      

      
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    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
      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 in favor of any third party, and the continued
      employment of each such executive officer does not subject the Company or any
      of
      its Subsidiaries to any liability with respect to any of the foregoing matters.
      The Company and its Subsidiaries are in compliance with all U.S. federal, state,
      local and foreign laws and regulations relating to employment and employment
      practices, terms and conditions of employment and wages and hours, except where
      the failure to be in compliance could not, individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

     

    
      
         

      

      
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    (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, (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.

     

    (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. Except as set
      forth in Schedule
      3.1(n),
      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

     

    
      
         

      

      
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    Schedule
      3.1(o),
      and in
      the SEC Reports, 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, but not limited to, 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.

     

    (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 $120,000
      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) 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 the Transaction Documents. The Purchasers shall have no
      obligation with respect to any fees or with respect to any claims made by or
      on
      behalf of other Persons for fees of a type contemplated in this Section that
      may
      be due in connection with the transactions contemplated by the Transaction
      Documents. 

     

    (t) Private
      Placement.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 3.2, no registration under the Securities

     

    
      
         

      

      
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    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),
      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, 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 the Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s certificate of
      incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or 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, non-public information. The Company understands
      and
      confirms that the Purchasers will rely on the foregoing representation in
      effecting transactions in securities of the Company. All disclosure furnished
      by
      or on behalf of the Company to the Purchasers regarding the Company, its
      business and the transactions contemplated hereby, including the Disclosure
      Schedules to this Agreement, is true and correct and

     

    
      
         

      

      
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    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; (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business as now conducted and as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company, and
      projected capital requirements and capital availability thereof; and (iii)
      the
      current cash flow of the Company, together with the proceeds the Company would
      receive, were it to liquidate all of its assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its liabilities when such amounts are required to be paid. The
      Company does not intend to incur debts beyond its ability to pay such debts
      as
      they mature (taking into account the timing and amounts of cash to be payable
      on
      or in respect of its debt). The Company has no knowledge of any facts or
      circumstances which lead it to believe that it will file for reorganization
      or
      liquidation under the bankruptcy or reorganization laws of any jurisdiction
      within one year from the Closing Date. Schedule
      3.1(aa)
      sets
      forth as of the 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, and

     

    
      
         

      

      
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    except
      as
      set forth in Schedule
      3.1(bb),
      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 : (i) directly or indirectly, used any
      funds for unlawful contributions, gifts, entertainment or other unlawful
      expenses related to foreign or domestic political activity, (ii) made any
      unlawful payment to foreign or domestic government officials or employees or
      to
      any foreign or domestic political parties or campaigns from corporate funds,
      (iii) failed to disclose fully any contribution made by the Company (or made
      by
      any person acting on its behalf of which the Company is aware) which is in
      violation of law or (iv) violated in any material respect any provision of
      the
      Foreign Corrupt Practices Act of 1977, as amended.

     

    (ee) Accountants.
      The
      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, 2008.

     

    (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 and the Preferred Stock 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 which could affect
      the
      Company’s ability to perform any of its obligations under any of the Transaction
      Documents.

     

    
      
         

      

      
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    (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 4.15 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 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

     

    
      
         

      

      
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    with
      the
      placement of the Securities.

     

    (kk) 3(a)(9)
      Exchange.
      The
      exchange of the Debentures for the Securities issuable hereunder is being
      consummated pursuant to Sections 3(a)(9) and 18(b)(4)(C) of the Securities
      Act.
      Accordingly, pursuant to Rule 144(d), as in effect on the date hereof, the
      holding period of the Underlying Shares shall tack back to the original issue
      date of the Prior Debentures.

     

    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.

     

    (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

     

    
      
         

      

      
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    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 converts any Debentures or shares of
      Preferred Stock 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 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:

     

    
      
         

      

      
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    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). .
      Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
      shall constitute a representation or warranty, or preclude any actions, with
      respect to the identification of the availability of, or securing of, available
      shares to borrow in order to effect short sales or similar transactions in
      the
      future.

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
      Restrictions.

     

    (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.

     

    (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:

     

    
      
         

      

      
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    [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, 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
      Section 4.17, 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 under the Securities Act, (ii) following any sale of such Underlying
      Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for
      sale under Rule 144, without the requirement for the Company to be in compliance
      with the current public information required under Rule 144 as to such
      Underlying Shares and without volume or manner-of-sale restrictions or (iv)
      if
      such legend is not required under applicable requirements of the Securities
      Act
      (including judicial interpretations and pronouncements issued by the staff
      of
      the Commission). The Company shall cause its counsel to issue a legal opinion
      to
      the Transfer Agent promptly after the Effective Date if required by the Transfer
      Agent to effect the removal of the legend hereunder. If all or any portion
      of a
      Debenture or shares of Preferred Stock are converted 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, without the requirement
      for the Company to be in compliance with the current public information required
      under Rule 144 as to such Underlying Shares and without volume or manner-of-sale
      restrictions or if such legend is not otherwise required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the Commission) then such

    
      
         

      

      
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    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 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.

     

    
      
         

      

      
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    4.3 Furnishing
      of Information; Public Information.
      

     

    (a) If
      the
      Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
      Act
      on the date hereof, the Company agrees to cause the Common Stock to be
      registered under Section 12(g) of the Exchange Act on or before the
      60th
      calendar
      day following the date hereof. Until the time that no Purchaser owns Securities,
      the Company covenants to maintain the registration of the Common Stock under
      Section 12(b) or 12(g) of the Exchange Act and 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. 

     

    (b)
       At
      any
      time during the period commencing from the six (6) month anniversary of the
      date
      hereof and ending at such time that all of the Securities may be sold without
      the requirement for the Company to be in compliance with Rule 144(c)(1) and
      otherwise without restriction or limitation pursuant to Rule 144, if the Company
      shall fail for any reason to satisfy the current public information requirement
      under Rule 144(c) (a “Public
      Information Failure”)
      then,
      in addition to such Purchaser’s other available remedies, the Company shall pay
      to a Purchaser, in cash, as partial liquidated damages and not as a penalty,
      by
      reason of any such delay in or reduction of its ability to sell the Securities,
      an amount in cash equal to two percent (2.0%) of the aggregate Subscription
      Amount of such Purchaser’s Securities on the day of a Public Information Failure
      and on every thirtieth (30th)
      day
      (pro rated for periods totaling less than thirty days) thereafter until the
      earlier of (a) the date such Public Information Failure is cured and (b) such
      time that such public information is no longer required  for the Purchasers
      to transfer the Underlying Shares pursuant to Rule 144.  The payments to
      which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred
      to herein as “Public
      Information Failure Payments.” 
      Public Information Failure Payments
      shall be paid on the earlier of (i) the last day of the calendar month during
      which such Public Information Failure Payments
      are incurred and (ii) the third (3rd)
      Business Day after the event or failure giving rise to the Public Information
      Failure Payments
      is cured.  In the event the Company fails to make Public Information
      Failure Payments
      in a timely manner, such Public Information Failure Payments
      shall bear interest at the rate of 1.5% per month (prorated for partial months)
      until paid in full. Nothing herein shall limit such Purchaser’s right to pursue
      actual damages for the Public Information Failure, and such Purchaser shall
      have
      the right to pursue all remedies available to it at law or in equity including,
      without limitation, a decree of specific performance and/or injunctive
      relief.

     

    
      
         

      

      
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    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
      Procedures.
      Each of
      the form of Notice of Conversion included in the Debentures and Certificate
      of
      Designation set forth the totality of the procedures required of the Purchasers
      in order to convert the Debentures or the Preferred Stock. No additional legal
      opinion or other information or instructions shall be required of the Purchasers
      to convert their Debentures or the Preferred Stock. The Company shall honor
      conversions of the Debentures or the Preferred Stock and shall deliver
      Underlying Shares in accordance with the terms, conditions and time periods
      set
      forth in the Transaction Documents.

     

    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 and including the Transaction Documents as exhibits thereto (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 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
      Section 4.17 of this 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

     

    
      
         

      

      
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    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:
      (a)
      the satisfaction of any portion of the Company’s debt (other than payment of
      trade payables in the ordinary course of the Company’s business and prior
      practices), (b) the redemption of any Common Stock or Common Stock Equivalents
      or (c) the settlement of 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

     

    
      
         

      

      
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    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.

     

    (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 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 or quotation on such Trading Market as soon as possible
      thereafter, (iii) provide to the Purchasers evidence of such listing or
      quotation, and (iv) maintain the listing or quotation of such
      Common

     

    
      
         

      

      
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    Stock
      on
      any date at least equal to the Required Minimum on such date on such Trading
      Market or another Trading Market.

     

    4.12 RESERVED.
      

     

    4.13 Subsequent
      Equity Sales.
      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 to
      effect any issuance by the Company or any of its Subsidiaries of Common Stock
      or
      Common Stock Equivalents for cash consideration, Indebtedness (or a combination
      of units hereof) (a “Subsequent
      Financing”)
      involving a Variable Rate Transaction. “Variable
      Rate Transaction”
means
      a
      transaction in which the Company (i) issues or sells any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive, additional shares of Common Stock either (A)
      at a
      conversion price, exercise price or exchange rate or other price that is based
      upon, and/or varies with, the trading prices of or quotations for the shares
      of
      Common Stock at any time after the initial issuance of such debt or equity
      securities or (B) with a conversion, exercise or exchange price that is subject
      to being reset at some future date after the initial issuance of such debt
      or
      equity security or upon the occurrence of specified or contingent events
      directly or indirectly related to the business of the Company or the market
      for
      the Common Stock or (ii) enters into any agreement, including, but not limited
      to, an equity line of credit, whereby the Company may sell securities at a
      future determined price. Any Purchaser shall be entitled to obtain injunctive
      relief against the Company to preclude any such issuance, which remedy shall
      be
      in addition to any right to collect damages. Notwithstanding the foregoing,
      this
      Section 4.13 shall not apply in respect of an Exempt Issuance or shares issued
      pursuant to Section 4.20, except that no Variable Rate Transaction shall be
      an
      Exempt Issuance. 

     

    4.14 Equal
      Treatment of Purchasers.
      No
      consideration (including any modification of any Transaction Document) 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

     

    
      
         

      

      
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    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 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 Piggy-Back
      Registration Rights.
      If at
      any time after the date hereof, the Company shall determine to prepare and
      file
      with the Commission a Registration Statement relating to an offering for its
      own
      account or the account of others of any of its equity securities, other than
      on
      Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their
      then equivalents, relating to equity securities to be issued solely in
      connection with any acquisition of any entity or business or equity securities
      issuable in connection with stock option or other employee benefit plans, then
      the Company shall send a written notice of such determination to each Purchaser
      and, if within ten calendar days after the date of delivery of such notice,
      any
      such Purchaser shall so request in writing, the Company shall include in such
      Registration Statement all or any part of the Underlying Shares as the Purchaser
      requests to be registered so long as such Underlying Shares are proposed to
      be
      disposed in the same manner as those securities set forth in the Registration
      Statement; provided, however, if the offering is an underwritten offering and
      was initiated by the Company or at the request of a shareholder, and if the
      managing underwriters advise the Company that the inclusion of Underlying Shares
      requested to be included in the Registration Statement would cause an adverse
      effect on the success of any such offering, based on market conditions or
      otherwise (an "Adverse
      Effect"),
      then
      the Company shall be required to include in such Registration Statement, to
      the
      extent of the amount of securities that the managing underwriters advise may
      be
      sold without causing such Adverse Effect, (a) first, the securities of the
      Company and (b) second, the shares, including the Underlying Shares, of
      all

     

    
      
         

      

      
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    shareholders,
      on a pro rata basis, requesting registration and whose shares the Company is
      obligated by contract to include in the Registration Statement; provided,
      further, however, to the extent that all of the Underlying Shares are not
      included in the initial Registration Statement, the Purchaser shall have the
      right to request the inclusion of its Underlying Shares in subsequent
      Registration Statements until all such Shares have been registered in accordance
      with the terms hereof and all such Underlying Shares have been registered in
      accordance with the terms thereof. If the offering in which the Underlying
      Shares is being included in a Registration Statement is a firm commitment
      underwritten offering, unless otherwise agreed by the Company, the Purchaser
      shall sell its Underlying Shares in such offering using the same underwriters
      and, subject to the provisions hereof, on the same terms and conditions as
      the
      other shares of Common Stock that are included in such underwritten offering.
      The Company shall use its best efforts to cause any Registration Statement
      to be
      declared effective by the Commission as promptly as is possible following it
      being filed with the Commission and to remain effective until all Underlying
      Shares subject thereto have been sold. All fees and expenses incident to the
      performance of or compliance with this Section 4.17 by the Company shall be
      borne by the Company whether or not any Underlying Shares are sold pursuant
      to
      the Registration Statement. The Company shall indemnify and hold harmless the
      Purchaser, the officers, directors, members, partners, agents, brokers,
      investment advisors and employees of each of them, each person who controls
      the
      Purchaser (within the meaning of Section 15 of the Securities Act or Section
      20
      of the Exchange Act), and the officers, directors, members, shareholders,
      partners, agents and employees of each such controlling person, to the fullest
      extent permitted by applicable law, from and against any and all losses, claims,
      damages, liabilities, costs (including, without limitation, reasonable
      attorneys’ fees) and expenses (collectively, the “Losses”),
      as
      incurred, arising out of or relating to (i) any untrue or alleged untrue
      statement of a material fact contained in the Registration Statement, any
      prospectus included therein or any form of prospectus or in any amendment or
      supplement thereto or in any preliminary prospectus, or arising out of or
      relating to any omission or alleged omission of a material fact required to
      be
      stated therein or necessary to make the statements therein (in the case of
      any
      prospectus or form of prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading or (ii) any violation
      or alleged violation by the Company of the Securities Act, the Exchange Act
      or
      any state securities law, or any rule or regulation thereunder, in connection
      with the performance of its obligations under this Section 4.17, except to
      the
      extent, but only to the extent, that such untrue statements or omissions
      referred to in (i) above are based solely upon information regarding the
      Purchaser furnished in writing to the Company by the Purchaser expressly for
      use
      therein, or to the extent that such information relates to the Purchaser or
      the
      Purchaser’s proposed method of distribution of Underlying Shares and was
      reviewed and expressly approved in writing by the Purchaser expressly for use
      in
      the Registration Statement, such prospectus or such form of prospectus or in
      any
      amendment or supplement thereto. The rights of the Purchaser under this Section
      4.17 shall survive until all Underlying Shares have been either registered
      under
      a Registration Statement or been sold pursuant to an exemption to the
      registration requirements of the Securities Act.

     

    4.18 Amendments
      to Prior Debentures.

     

    
      
         

      

      
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    (a) In
      connection with the transactions contemplated by the Transaction Documents,
      the
      Company and each of the Purchasers hereby agrees to amend the terms of the
      Prior
      Debentures:

     

    

    (i) The
      Maturity Date in each of the Prior Debentures is be amended and restated to
      be
      September 1, 2009.

     

    (ii) The
      Monthly Redemption Amount in each of the Prior Debentures is hereby amended
      and
      restated in its entirety with the following:

     

    “Monthly
      Redemption Amount”
      means an amount equal to one-fifteenth of the outstanding principal amount
      of
      the Debentures on July 1, 2008, plus accrued interest.” 

     

     

    (iii) Subsection
      (iii) of the Equity Conditions in each of the Prior Debentures is hereby amended
      and restated in its entirety with the following:

     

    “(iii)(a)
      there is an effective Registration Statement pursuant to which the Holder is
      permitted to utilize the prospectus thereunder to resell all of the shares
      issuable pursuant to the Transaction Documents (and the Company believes, in
      good faith, that such effectiveness will continue uninterrupted for the
      foreseeable future) or (b) all of the Conversion Shares issuable pursuant to
      the
      Transaction Documents may be resold pursuant to Rule 144 without volume or
      manner-of-sale restrictions or current public information requirements as
      determined by the counsel to the Company pursuant to a written opinion letter
      to
      such effect, addressed and acceptable to the Transfer Agent and the
      Holder,”

    

    (iv) Subsection
      (x) of the Equity Conditions in each of the Prior Debentures is hereby amended
      and restated in its entirety with the following:

     

    “(x)
      the aggregate daily trading volume for the Common Stock on the principal Trading
      Market exceeds 100,000 shares per Trading Day (subject to adjustment for forward
      and reverse stock splits and the like) during the 12 consecutive Trading Days
      (except that, with respect to any 5 Trading Day Interest Payment Period, the
      such aggregate trading volume shall exceed 30,000) (subject to adjustment for
      forward and reverse stock splits and the like) prior to the applicable date
      in
      question.”

    

    4.19 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 and Subsidiary Guarantee, dated August 30, 2007, by and
      among
      the Company and

     

    
      
         

      

      
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    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.
      

     

    4.20 Sale
      of Preferred Stock to Third Parties.
      The
      Company and each Purchaser agree and acknowledge that, until September 30,
      2008,
      the Company may sell up to an additional 1,120 shares of Preferred Stock to
      third parties that do not own Debentures, provided that such third parties
      make
      each of the representations and warranties set forth in Section 3.2 to the
      Company at the time of such issuance.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before June 30, 2008;
      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”)
      (a)
      the non-accountable sum of $35,000 for its due diligence fees and expenses
      and
      (b) actual legal fees and expenses equal to $16,364. 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 $51,364 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.

     

    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

     

    
      
         

      

      
        -
          34 -

        
          

        

      

      
         

      

    

    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 contained herein shall survive the Closing and
      the delivery of the Securities for the applicable statute 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.

     

    
      
         

      

      
        -
          35 -

        
          

        

      

      
         

      

    

    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 conversion of the
      Preferred Stock, the Purchaser shall be required to return any shares of Common
      Stock delivered in connection with any such rescinded conversion
      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

     

    
      
         

      

      
        -
          36 -

        
          

        

      

      
         

      

    

    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 Saturdays,
      Sundays, Holidays, etc. If
      the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day,

     

    
      
         

      

      
        -
          37 -

        
          

        

      

      
         

      

    

    then
      such
      action may be taken or such right may be exercised on the next succeeding
      Business Day.

     

    5.21 Construction.
      The
      parties agree that each of them and/or their respective counsel has reviewed
      and
      had an opportunity to revise the Transaction Documents and, therefore, the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

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

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        -
          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:
                Peter W. DeVecchis, Jr.

              Title:
                President

            	
              14
                Commerce Drive

              Danbury,
                CT 06810

              Fax:
                (203) 797-9285

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

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

               

              Richard
                A. Fisher, Esq.

              Solomon
                Technologies, Inc.

              14
                Commerce Drive

              Danbury,
                CT 06810

            	 
	 	 

    

    

    [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: _____________

    

    Principal
      Amount (Subscription
      Amount x 1.25):
      _______________

    

    Shares
      of
      Preferred Stock: _________________

    

    

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

    
      
         

      

      
        -
          40 -

        
          

        

      

      
         

      

    

    Disclosure
      Schedules

    to
      the Securities Purchase Agreement

    dated
      as of June 27, 2008 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 June 27, 2008 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.

    
      
         

      

      
        -
          41 -

        
          

        

      

      
         

      

    

    

      

    Schedule
      3.1(a)

    Subsidiaries

    

    The
      following are wholly-owned subsidiaries of the Company:

     

    
      	
               

            	
              o

            	
              Technipower,
                LLC, a Delaware limited liability company

            
	
               

            	
              o

            	
              Town
                Creek Industries, Inc., a Maryland
                corporation

            

    

    

    
      	
               

            	
              o

            	
              DEL-INC
                Acquisition LLC, a Delaware limited liability
                company

            

    

    

    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.

    

    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.

    
      
         

      

      
        -
          42 -

        
          

        

      

      
         

      

    

    

      

    Schedule
      3.1(g)

    Capitalization

    

    Immediately
      prior to the Closing, the authorized capital stock of the Company will consist
      of an aggregate of 500,000,000 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,
      approximately 114,614,980 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.

     

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

    

    
      	
               

            	
              o

            	
              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

            
	
               

            	
              o

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

            

    

    

    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

            	
              47,807
                shares

              26,810
                shares

            	
              $1.00

              $1.00

            
	
              David
                Lindahl

            	
              25,000
                shares

            	
              $0.55

            
	
              Jane
                Crawford

            	
              13,218
                shares

            	
              $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

            

    

    
      
         

      

      
        -
          43 -

        
          

        

      

      
         

      

    

    

    
      	
              Peter
                W. DeVecchis Jr.

            	
              100,000
                shares

              100,000
                shares

              40,000
                shares

            	
              $2.09

              $1.45

              $0.22

            
	
              Alex
                Pesiridis

            	
              40,000
                shares

              40,000
                shares

            	
              $2.09

              $1.45

            
	
              Samuel
                Occhipinti

            	
              75,000
                shares

              100,000
                shares

            	
              $1.45

              $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:

            	
              1,020,335
                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

            
	
              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

            
	
              Total:

            	
              386,000

            	
               

            

    

    

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

    

    The
      Company is obligation to issue 833,334 shares of its Common Stock to its
      Corporate Counsel, Richard Fisher for services rendered.

    
      
         

      

      
        -
          44 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(h)

    SEC
      Reports

    

    The
      Company has filed all SEC Reports.

     

    
      
         

      

      
        -
          45 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(i)

    Material
      Changes

    

    See
      Schedule 3.1(l) regarding a default under a promissory note issued by Deltron
      LLC, a subsidiary of the Company to JMC Venture Partners in the amount of
      $2,750,000. This note is guaranteed by the Company. See Schedule 3.1(l)
      regarding a default under a promissory note to the UHY LLC, the Company’s former
      auditors.

    
      
         

      

      
        -
          46 -

        
          

        

      

      
         

      

    

     

    Schedule
      3.l(l)

    Compliance

    

    At
      June
      23, 2008, Deltron LLC, a subsidiary of the Company, had a note payable of
      $2,750,000 to JMC Venture Partners used to finance the acquisition of Deltron
      Inc. The note bears interest at 12% per annum plus a quarterly investment fee
      of
      1%. The note matures on September 5, 2008, is collateralized by substantially
      all assets of Deltron, LLC and its subsidiary Delinc, and guaranteed by the
      Company. As of this date, the borrower is in default for failure to make
      interest payments when due and failure to comply with certain financial
      covenants and reporting requirements contained in the loan
      agreement

    

    On
      April
      16, 2008, the Company converted approximately $219,000 of trade accounts payable
      to UHY LLP to a promissory note payable with an original principal of $219,420.
      Following an initial principal payment of $15,000, principal payments are due
      in
      twelve consecutive bi-weekly installments of $10,000 commencing on May 23,
      2008
      and concluding October 24, 2008, plus a final payment due of $84,420. The unpaid
      principal balance is convertible into common shares of the Company at a
      conversion price of $0.35 per share, at the election of the noteholder. As
      of
      May 30, 2008 the note is in default for failure to make principal payments
      when
      due, and therefore the note bears interest at 10% per annum.

    
      
         

      

      
        -
          47 -

        
          

        

      

      
         

      

    

    

    

    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 $1,200,000 revolving credit facility with Citizens Bank of
      Massachusetts which expires on July 31, 2008. As of the date hereof, $1,200,000
      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.

    
      
         

      

      
        -
          48 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(o)

    Intellectual
      Property Rights

    

    Not
      applicable. 

    
      
         

      

      
        -
          49 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(s)

    Certain
      Fees

    

    The
      Company will pay Midtown Partners & Co., LLC (“Midtown”) a commission on the
      placement of the Debentures.

    
      
         

      

      
        -
          50 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(v)

    Registration
      Rights

    

    None.

    

    

    
      
         

      

      
        -
          51 -

        
          

        

      

      
         

      

    

    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. On September 28,
      2007, the Company entered into an agreement with the noteholders pursuant to
      which the maturity date of the notes was extended from September 30, 2007,
      to
      September 7, 2008. To induce the holders to extend the notes, the Company agreed
      to compensate the noteholders by an amount equal to 7% of the principal balance
      or $119,846. The noteholders were also offered the opportunity to buy, for
      $100,
      the right (subject to certain restrictions) to convert their notes to common
      stock in the future at a conversion price of $0.35 per common stock share.
      The
      notes are subject to further extension through April 17, 2009 based on the
      accrual or payment of additional extension fees. 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

            

    

    

    

    The
      Company received a going concern qualification from its firm of independent
      auditors in their report on the Company’s financial statements for the year
      ended December 31, 2008.

    

    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.

     

    On
      October 12, 2007, the Company converted the balance of the January 2007
      Promissory Note of $182,000 plus unpaid interest of approximately $16,000 and
      approximately $330,000 of trade accounts payable to a new promissory note
      payable (the “October 2007 Promissory Note”) with

    
      
         

      

      
        -
          52 -

        
          

        

      

      
         

      

    

    an
      original principal of $564,566. The original principal also includes an
      additional 7% of the above amounts as an inducement. The note bears interest
      at
      12% and is payable on September 7, 2008 unless an event occurs which requires
      a
      Mandatory Prepayment as described in the October 2007 Promissory Note. Subject
      to certain restrictions, any of the unpaid principal and interest may be
      converted to shares of common stock at a conversion price of $0.35 per common
      stock share, at any time.

    

    On
      April
      16, 2008, the Company converted approximately $219,000 of trade accounts payable
      to UHY LLP to a promissory note payable with an original principal of $219,420.
      Following an initial principal payment of $15,000, principal payments are due
      in
      twelve consecutive bi-weekly installments of $10,000 commencing on May 23,
      2008
      and concluding October 24, 2008, plus a final payment due of $84,420. The unpaid
      principal balance is convertible into common shares of the Company at a
      conversion price of $0.35 per share, at the election of the noteholder. As
      of
      May 30, 2008 the note is in default for failure to make principal payments
      when
      due, and therefore the note bears interest at 10% per annum.

    

    Technipower
      LLC has a $1,200,000 revolving credit facility with Citizens Bank of
      Massachusetts dated May 4, 2006, that was renewed in 2007 and was extended
      to
      July 31, 2008 . As of the date hereof, $1,200,000 is outstanding under the
      facility.

     

    At
      June
      23, 2008, Deltron, LLC had a note payable of $2,750,000 to JMC Venture Partners
      used to finance the acquisition of Deltron Inc. The note bears interest at
      12%
      per annum plus a quarterly investment fee of 1%. The note matures on September
      5, 2008, is collateralized by substantially all assets of Deltron, LLC and
      its
      subsidiary Delinc, and guaranteed by Solomon. As of this date the borrower
      is in
      default for failure to make interest payments when due, and failure to comply
      with certain financial covenants and reporting requirements contained in the
      loan agreement

    

    January
      2007 Debentures

    

    On
      January 22, 2007, the Company sold an aggregate of $5,350,000 principal amount
      of Variable Rate Self-Liquidating Senior Secured Convertible Debentures (the
      “January 2007 Debentures”) due March 17, 2008. 

     

    Initially,
      the January 2007 Debentures were convertible at any time at the option of the
      holder into shares of common stock at $2.00 per share, subject to adjustment
      for
      stock splits, stock dividends, and the like. On August 24, 2007, the Company
      entered into an Amendment Agreement to amend certain terms of the January 2007
      Debentures, including conversion price and exercise price of the January
      Warrants, and to extend the maturity date until April 17, 2009. In connection
      with the amended January 2007 Debentures, accrued interest of $32,100, as well
      as liquidated damages in the amount of $160,500, were added to the principal
      balance of the amended January 2007 Debentures.

    

    As
      part
      of the Amendment, the Company reduced conversion price of the January 2007
      Debenture from $2.00 per share to $0.35 per share. In November 2007, $35,000
      of
      the principal

    
      
         

      

      
        -
          53 -

        
          

        

      

      
         

      

    

    balance
      was converted into 100,000 shares of common stock based on the $0.35 per share
      conversion price.

     

    

    In
      the
      event that the Company issues or grants any rights to purchase any of its common
      stock, or other securities convertible into its common stock, for an effective
      per share price less than the conversion price then in effect, the conversion
      price of all unconverted amended January 2007 Debentures will be decreased
      to
      equal such lower price. The conversion price adjustment will not apply to
      certain exempt issuances.

    

    Prior
      to
      maturity, the amended January 2007 Debentures will bear interest at the higher
      of (i) 8% per annum or (ii) the six-month London Interbank Offered Rate plus
      2%,
      payable quarterly in arrears in cash, or, at the Company’s option, in shares of
      common stock. The Company’s ability to pay interest with shares of common stock
      will be subject to specified conditions, including the existence of an effective
      registration statement covering the resale of the shares issued in payment
      of
      interest and certain minimum trading volumes in the common stock. All overdue
      and accrued interest will accrue a late fee equal to the lesser of 15% per
      annum
      or the maximum rate permitted by applicable law. From and after an event of
      default under the amended January 2007 Debentures and for so long as the event
      of default is continuing, the amended January 2007 Debentures will bear default
      interest at a rate of the lesser of 15% per annum or the maximum rate permitted
      by applicable law.

    

    Under
      the
      terms of January 2007 Debentures, beginning on the earlier of the first day
      of
      the first month immediately following the effectiveness of a registration
      statement covering the resale of the shares of common stock issuable upon
      conversion of the amended January 2007 Debentures or January 1, 2008, and on
      the
      first day of each month thereafter, the Company is required to redeem 1/16th
      of
      the outstanding principal balance in cash or, at the Company’s options, with
      shares of common stock. The redemption in shares of common stock will be subject
      to certain conditions, including the existence of an effective registration
      statement, unless waived. Any common stock issued in connection with this
      redemption will be valued at 82.5% of the average of the daily volume weighted
      average price for the 10 trading days prior to the redemption.

    The
      Company’s obligations under the amended January 2007 Debentures are secured by a
      security interest in substantially all of the Company’s assets pursuant to a
      Security Agreement dated as of January 17, 2007 between the Company and the
      purchasers of the amended January 2007 Debentures. The Company has agreed that
      in the event that it forms any new subsidiaries and moves assets to those
      subsidiaries, those subsidiaries will become guarantors of the amended January
      2007 Debentures.

    

    At
      December 31, 2007 the Company was in default of the amended January 2007
      Debentures and the August Debentures for failure to make the redemption payments
      and to make effective a registration statement required with respect to those
      debentures. In the first quarter of 2008, all debenture holders waived the
      Company’s redemption defaults, requirements for filling and effectiveness of
      registration statement as well as certain provisions of the registration rights
      agreements and certain equity conditions governing the Company’s right to use
      shares of common stock rather than cash to make monthly
      redemptions.

    
      
         

      

      
        -
          54 -

        
          

        

      

      
         

      

    

    

    August
      2007 Debentures

    

    On
      August
      30, 2007, the Company sold an aggregate of $500,000 principal amount of Variable
      Rate Self-Liquidating Senior Secured Convertible Debentures (the “August 2007
      Debentures”) due April 17, 2009, under the same terms and conditions as the
      amended January 2007 Debentures. The August 2007 Debentures are convertible
      at
      any time at the option of the holder into shares of common stock at $0.35 per
      share, subject to adjustment for stock splits, stock dividends, and the like,
      and subject to the terms and provisions of the amended January 2007 Debentures.
      At December 31, 2007 the Company was in default of the amended January 2007
      Debentures and the August Debentures for failure to make the redemption payments
      and to make effective a registration statement required with respect to
      those debentures. In the first quarter of 2008, all debentures holders waived
      the Company’s redemption defaults, requirements for filling and effectiveness of
      registration statement as well as certain provisions of the registration rights
      agreements and certain equity conditions governing the Company’s right to use
      shares of common stock rather than cash to make monthly
      redemptions.

     

    

    Modifications
      to the amended January 2007 Debentures and August 2007
      Debentures

     

    During
      the first quarter of 2008, the Company had an early redemption of amended
      January 2007 Debenture with a face value of $343,132 issued 4,267,220 common
      shares to the holder, valued at $401,514. The Company also agreed to accelerate
      redemption $370,000 of amended January 2007 Debentures to May 30, 2008.
      Additionally, the Company agreed with two holders of both amended January 2007
      Debentures and August 2007 Debentures and one holder of amended January 2007
      Debentures to defer the monthly redemptions of $179,061 for January 2008 and
      March of 2008 until May and June of 2009, respectively. The Company granted
      an
      option to the holders to defer up to three additional monthly redemptions until
      July, August and September of 2009, respectively at the holders’ election.

    

    As
      of
      June 23, 2008 the outstanding principal of the January 2007 Debentures amounted
      to $960,770 the outstanding principal of the August 2007 Debentures amounted
      to
      $203,398.

    
      
         

      

      
        -
          55 -

        
          

        

      

      
         

      

    

    Schedule
      3.1(bb)

    Tax
      Status

    

    As
      of
      June 23, 2008, the Company has an outstanding payroll tax obligation to the
      IRS
      in the amount of $125,270.79 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.

    
      
         

      

      
        -
          56 -

        
          

        

      

      
         

      

    

    

     

    

    Schedule
      3.1(ee)

    Accountants

    

    Eisner
      LLP

    730
      Third
      Avenue

    New
      York,
      New York 10017

    
      
         

      

      
        -
          57 -

        
          

        

      

      
         

      

    

    

     

    

    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

            

    

    

    
      
         

      

      
        -
          58 -

        
          

        

      

      
         

      

    

    chedule
      3.1(gg)

    Disagreements
      with Accountants and Lawyers

    

    None.

    
      
         

      

      
        -
          59 -

        
          

        

      

      
         

      

    

    Schedule
      4.9

    Use
      of Proceeds

    

    Not
      applicable.

    

    

     

     

    -
      60
      -

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