Document:

Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         THIS  SECURITIES  PURCHASE  AGREEMENT  (this  "Agreement")  dated as of
August 27, 2004, by and among POWER TECHNOLOGY,  INC., a Nevada corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").

                                   WITNESSETH:

         WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation  D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Buyer(s),
as provided herein,  and the Buyer(s) shall purchase up to Five Hundred Thousand
Dollars   ($500,000)  of  secured   convertible   debentures  (the  "Convertible
Debentures"),  which shall be  convertible  into shares of the Company's  common
stock,  par value  $0.001 per share (the  "Common  Stock")  (as  converted,  the
"Conversion  Shares"),  of which Two Hundred Fifty Thousand  Dollars  ($250,000)
shall be funded within five (5) business  days hereof (the "First  Closing") and
Two Hundred Fifty Thousand  Dollars  ($250,000) shall be funded at the Company's
discretion  within  five (5)  business  days after the filing of a  registration
statement (the "Registration  Statement") pursuant to the Investor  Registration
Rights  Agreement of even date herewith,  with the United States  Securities and
Exchange Commission (the "SEC") (the "Second Closing") (collectively referred to
as the  "Closings"),  for a total purchase price of up to Five Hundred  Thousand
Dollars  ($500,000) (the "Purchase  Price") in the respective  amounts set forth
opposite each Buyer(s) name on Schedule I (the "Subscription Amount"); and

         WHEREAS,  contemporaneously  with the  execution  and  delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement  substantially in the form attached hereto as Exhibit A (the "Investor
Registration  Rights  Agreement")  pursuant  to which the  Company has agreed to
provide  certain  registration  rights  under  the  1933 Act and the  rules  and
regulations promulgated there under, and applicable state securities laws; and

         WHEREAS,  the  aggregate  proceeds  of  the  sale  of  the  Convertible
Debentures  contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement  substantially in the form of the Escrow Agreement  attached
hereto as Exhibit B.

         WHEREAS,  contemporaneously  with the  execution  and  delivery of this
Agreement,  the parties hereto are executing and delivering Irrevocable Transfer
Agent  Instructions  substantially in the form attached hereto as Exhibit C (the
"Irrevocable Transfer Agent Instructions").

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         WHEREAS,  contemporaneously  with the  execution  and  delivery of this
Agreement,  the parties hereto are executing and delivering a Security Agreement
substantially   in  the  form  attached  hereto  as  Exhibit  D  (the  "Security
Agreement")  pursuant  to which the  Company  has agreed to provide  the Buyer a
security interest in Pledged Collateral (as this term is defined in the Security
Agreement  dated the date  hereof) to secure  Company's  obligations  under this
Agreement,   the  Convertible   Debenture,   the  Investor  Registration  Rights
Agreement,  the Irrevocable Transfer Agent Instructions,  the Security Agreement
or any other obligations of the Company to the Buyer; and

         NOW,  THEREFORE,  in  consideration  of the mutual  covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:

         1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.

                  (a)  Purchase  of  Convertible  Debentures.   Subject  to  the
satisfaction  (or waiver) of the terms and  conditions of this  Agreement,  each
Buyer  agrees,  severally  and not  jointly,  to purchase at Closing (as defined
herein below) and the Company agrees to sell and issue to each Buyer,  severally
and not jointly,  at Closing,  Convertible  Debentures in amounts  corresponding
with the Subscription  Amount set forth opposite each Buyer's name on Schedule I
hereto.  Upon  execution  hereof by a Buyer,  the Buyer shall wire  transfer the
Subscription  Amount set forth opposite his name on Schedule I in same-day funds
or a  check  payable  to  "Butler  Gonzalez  LLP,  as  Escrow  Agent  for  Power
Technology,  Inc./Cornell Capital Partners, LP", which Subscription Amount shall
be held in escrow pursuant to the terms of the Escrow  Agreement (as hereinafter
defined) and disbursed in accordance therewith. Notwithstanding the foregoing, a
Buyer may withdraw his  Subscription  Amount and terminate  this Agreement as to
such Buyer at any time  after the  execution  hereof  and prior to  Closing  (as
hereinafter defined).

                  (b) Closing  Date.  The First Closing of the purchase and sale
of the  Convertible  Debentures  shall take  place on or before the fifth  (5th)
business day following the date hereof,  subject to notification of satisfaction
of the  conditions to the First Closing set forth herein and in Sections 6 and 7
below  (or such  later  date as is  mutually  agreed to by the  Company  and the
Buyer(s))  (the "First Closing Date") and the Second Closing of the purchase and
sale of the Convertible  Debentures  shall take place at the Company's option on
or before the fifth (5th) business day after the Registration Statement is filed
with the SEC,  subject to  notification of satisfaction of the conditions to the
Second  Closing  set forth  herein and in  Sections 6 and 7 below (or such later
date as is  mutually  agreed to by the Company and the  Buyer(s))  (the  "Second
Closing Date")  (collectively  referred to a the "Closing Dates").  The Closings
shall occur on the respective  Closing Dates at the offices of Butler  Gonzalez,
LLP, 1418 Morris Avenue,  Suite 207,  Union, NJ 07083 (or such other place as is
mutually agreed to by the Company and the Buyer(s)).

                  (c)  Escrow  Arrangements;  Form of  Payment.  Upon  execution
hereof by Buyer(s) and pending the Closings,  the aggregate proceeds of the sale
of the Convertible  Debentures to Buyer(s) pursuant hereto shall be deposited in
a non-interest  bearing escrow account with Butler Gonzalez LLP, as escrow agent
(the "Escrow Agent"),  pursuant to the terms of an escrow agreement  between the
Company,  the  Buyer(s)  and the  Escrow  Agent in the form  attached  hereto as
Exhibit B (the "Escrow Agreement"). Subject to the satisfaction of the terms and
conditions of this Agreement,  on the Closing Dates,  (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement such

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aggregate proceeds for the Convertible  Debentures to be issued and sold to such
Buyer(s),  minus a structuring  fee of $10,000 to the Buyer  pursuant to Section
4(g) hereof,  which shall be paid directly from the gross  proceeds of the First
Closing held in escrow,  the ten percent (10%) discount to the Buyer pursuant to
Section  4(g) hereof,  and $15,000 to the Buyer  pursuant to Section 12.4 of the
Standby Equity  Distribution  Agreement shall be paid directly from the proceeds
of the First  Closing,  all by wire transfer of immediately  available  funds in
accordance with the Company's  written wire  instructions,  and (ii) the Company
shall  deliver to each  Buyer,  Convertible  Debentures  which such  Buyer(s) is
purchasing in amounts  indicated  opposite such Buyer's name on Schedule I, duly
executed on behalf of the Company.

         2. BUYER'S REPRESENTATIONS AND WARRANTIES.

         Each Buyer represents and warrants, severally and not jointly, that:

                  (a)   Investment   Purpose.   Each  Buyer  is  acquiring   the
Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer
will  acquire  the  Conversion  Shares  then  issuable,  for its own account for
investment only and not with a view towards,  or for resale in connection  with,
the public sale or distribution thereof,  except pursuant to sales registered or
exempted   under  the  1933  Act;   provided,   however,   that  by  making  the
representations  herein,  such  Buyer  reserves  the  right  to  dispose  of the
Conversion  Shares at any time in  accordance  with or pursuant to an  effective
registration statement covering such Conversion Shares or an available exemption
under the 1933 Act.

                  (b) Accredited  Investor Status.  Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.

                  (c) Reliance on Exemptions.  Each Buyer  understands  that the
Convertible  Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities  laws and that the  Company  is  relying  in part  upon the truth and
accuracy of, and such Buyer's compliance with, the representations,  warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the  availability  of such  exemptions and the eligibility of
such Buyer to acquire such securities.

                  (d) Information.  Each Buyer and its advisors (and his or, its
counsel),  if any,  have  been  furnished  with all  materials  relating  to the
business,  finances  and  operations  of the Company and  information  he deemed
material to making an informed investment decision regarding his purchase of the
Convertible  Debentures and the Conversion Shares,  which have been requested by
such  Buyer.  Each  Buyer  and its  advisors,  if any,  have been  afforded  the
opportunity  to ask  questions of the Company and its  management.  Neither such
inquiries nor any other due diligence  investigations conducted by such Buyer or
its advisors,  if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's  representations and warranties contained
in  Section  3  below.  Each  Buyer  understands  that  its  investment  in  the
Convertible Debentures and the Conversion Shares involves a high degree of risk.

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Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has  considered  necessary to make an informed  investment  decision  with
respect to its  acquisition  of the  Convertible  Debentures  and the Conversion
Shares.

                  (e) No Governmental  Review.  Each Buyer  understands  that no
United States  federal or state agency or any other  government or  governmental
agency  has  passed  on  or  made  any  recommendation  or  endorsement  of  the
Convertible  Debentures or the Conversion Shares, or the fairness or suitability
of the investment in the Convertible  Debentures or the Conversion  Shares,  nor
have such authorities  passed upon or endorsed the merits of the offering of the
Convertible Debentures or the Conversion Shares.

                  (f) Transfer or Resale.  Each Buyer understands that except as
provided in the Investor  Registration  Rights  Agreement:  (i) the  Convertible
Debentures have not been and are not being  registered under the 1933 Act or any
state  securities  laws,  and may not be offered  for sale,  sold,  assigned  or
transferred  unless (A) subsequently  registered  thereunder,  or (B) such Buyer
shall have  delivered  to the  Company an opinion  of  counsel,  in a  generally
acceptable  form,  to the effect that such  securities  to be sold,  assigned or
transferred may be sold,  assigned or transferred  pursuant to an exemption from
such  registration  requirements;  (ii)  any  sale  of such  securities  made in
reliance on Rule 144 under the 1933 Act (or a  successor  rule  thereto)  ("Rule
144") may be made only in accordance with the terms of Rule 144 and further,  if
Rule 144 is not applicable, any resale of such securities under circumstances in
which the seller (or the person  through whom the sale is made) may be deemed to
be an  underwriter  (as  that  term is  defined  in the 1933  Act)  may  require
compliance  with  some  other  exemption  under  the 1933 Act or the  rules  and
regulations of the SEC  thereunder;  and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state  securities  laws or to comply  with the terms and  conditions  of any
exemption  thereunder.  The Company  reserves  the right to place stop  transfer
instructions against the shares and certificates for the Conversion Shares.

                  (g) Legends.  Each Buyer  understands that the certificates or
other instruments  representing the Convertible Debentures and or the Conversion
Shares shall bear a restrictive  legend in substantially the following form (and
a  stop  transfer   order  may  be  placed   against   transfer  of  such  stock
certificates):

              THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
              REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
              APPLICABLE  STATE  SECURITIES  LAWS. THE SECURITIES  HAVE BEEN
              ACQUIRED  SOLELY FOR  INVESTMENT  PURPOSES AND NOT WITH A VIEW
              TOWARD  RESALE  AND  MAY  NOT  BE  OFFERED  FOR  SALE,   SOLD,
              TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE
              REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES

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<PAGE>

              ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES LAWS,
              OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
              REGISTRATION  IS NOT  REQUIRED  UNDER  SAID ACT OR  APPLICABLE
              STATE SECURITIES LAWS.

The  legend set forth  above  shall be removed  and the  Company  within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion  Shares upon which it is stamped,  if, unless  otherwise  required by
state securities laws, (i) in connection with a sale  transaction,  provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale  transaction,  after such holder  provides  the Company  with an opinion of
counsel,  which  opinion  shall be in form,  substance  and scope  customary for
opinions  of counsel in  comparable  transactions,  to the effect  that a public
sale,  assignment  or  transfer  of the  Conversion  Shares may be made  without
registration under the 1933 Act.

                  (h) Authorization,  Enforcement.  This Agreement has been duly
and validly authorized,  executed and delivered on behalf of such Buyer and is a
valid and binding  agreement of such Buyer  enforceable  in accordance  with its
terms,  except as such  enforceability  may be limited by general  principles of
equity  or  applicable  bankruptcy,  insolvency,   reorganization,   moratorium,
liquidation  and other  similar laws  relating to, or affecting  generally,  the
enforcement of applicable creditors' rights and remedies.

                  (i)  Receipt of  Documents.  Each Buyer and his or its counsel
has  received  and  read  in  their  entirety:   (i)  this  Agreement  and  each
representation,  warranty and covenant set forth herein, the Security Agreement,
the  Investor  Registration  Rights  Agreement,  the Escrow  Agreement,  and the
Irrevocable  transfer  Agent  Instructions;  (ii) all due  diligence  and  other
information   necessary  to  verify  the  accuracy  and   completeness  of  such
representations,  warranties and covenants;  (iii) the Company's Form 10-KSB for
the fiscal  year ended June 30,  2003;  (iv) the  Company's  Form 10-QSB for the
fiscal  quarter ended March 31, 2004 and (v) answers to all questions each Buyer
submitted to the Company regarding an investment in the Company;  and each Buyer
has relied on the information  contained  therein and has not been furnished any
other documents, literature, memorandum or prospectus.

                  (j) Due  Formation  of  Corporate  and  Other  Buyers.  If the
Buyer(s) is a  corporation,  trust,  partnership  or other entity that is not an
individual  person,  it has been  formed  and  validly  exists  and has not been
organized for the specific purpose of purchasing the Convertible  Debentures and
is not prohibited from doing so.

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<PAGE>

                  (k) No Legal Advice From the Company. Each Buyer acknowledges,
that it had the  opportunity  to  review  this  Agreement  and the  transactions
contemplated  by this Agreement with his or its own legal counsel and investment
and tax advisors.  Each Buyer is relying solely on such counsel and advisors and
not  on  any  statements  or  representations  of  the  Company  or  any  of its
representatives  or agents for legal,  tax or investment  advice with respect to
this  investment,  the  transactions  contemplated  by  this  Agreement  or  the
securities laws of any jurisdiction.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company  represents and warrants to each of the Buyers that, except
as set forth in the SEC Documents (as defined herein):

                  (a)  Organization  and  Qualification.  The  Company  and  its
subsidiaries  are  corporations  duly  organized  and  validly  existing in good
standing under the laws of the jurisdiction in which they are incorporated,  and
have the requisite corporate power to own their properties and to carry on their
business as now being  conducted.  Each of the Company and its  subsidiaries  is
duly  qualified as a foreign  corporation to do business and is in good standing
in every  jurisdiction in which the nature of the business conducted by it makes
such  qualification  necessary,  except to the extent  that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.

                  (b)   Authorization,   Enforcement,   Compliance   with  Other
Instruments.  (i) The Company has the requisite corporate power and authority to
enter into and perform  this  Agreement,  the Security  Agreement,  the Investor
Registration Rights Agreement,  the Escrow Agreement,  the Irrevocable  Transfer
Agent  Instructions,  and any related  agreements,  and to issue the Convertible
Debentures  and the  Conversion  Shares in accordance  with the terms hereof and
thereof,  (ii) the  execution  and  delivery  of this  Agreement,  the  Security
Agreement, the Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable  Transfer  Agent  Instructions  (as defined  herein) and any related
agreements  by the  Company  and  the  consummation  by it of  the  transactions
contemplated hereby and thereby, including,  without limitation, the issuance of
the  Convertible  Debentures  the  Conversion  Shares  and the  reservation  for
issuance and the issuance of the Conversion  Shares  issuable upon conversion or
exercise thereof,  have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement, the Security Agreement, the
Investor  Registration Rights Agreement,  the Escrow Agreement,  the Irrevocable
Transfer Agent  Instructions and any related  agreements have been duly executed
and delivered by the Company, (iv) this Agreement,  the Security Agreement,  the
Investor  Registration Rights Agreement,  the Escrow Agreement,  the Irrevocable
Transfer Agent Instructions and any related agreements  constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with  their  terms,  except as such  enforceability  may be  limited  by general
principles  of  equity or  applicable  bankruptcy,  insolvency,  reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors'  rights and remedies.  The  authorized  officer of the
Company  executing  this  Agreement,   the  Security  Agreement,   the  Investor

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Registration Rights Agreement,  the Escrow Agreement,  the Irrevocable  Transfer
Agent Instructions and any related agreements knows of no reason why the Company
cannot  file  the   registration   statement  as  required  under  the  Investor
Registration  Rights Agreement or perform any of the Company's other obligations
under such documents.

                  (c)  Capitalization.  As of the date  hereof,  the  authorized
capital stock of the Company consists of 750,000,000 shares of Common Stock, par
value $0.001 per share and 1,000,000  shares of Preferred  Stock. As of the date
hereof,  there were 99,839,628  shares of Common Stock and 0 shares of Preferred
Stock issued and outstanding.  All of such outstanding  shares have been validly
issued  and are fully paid and  nonassessable.  Except as  disclosed  in the SEC
Documents (as defined in Section 3(f)), no shares of Common Stock are subject to
preemptive  rights or any  other  similar  rights  or any liens or  encumbrances
suffered or permitted by the Company.  Except as disclosed in the SEC Documents,
as of the  date  of  this  Agreement,  (i)  there  are no  outstanding  options,
warrants,  scrip,  rights to subscribe to, calls or commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of  the  Company  or  any of  its  subsidiaries,  or  contracts,
commitments,  understandings  or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional  shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,  (ii)  there  are  no  outstanding  debt
securities  and (iii) there are no  agreements or  arrangements  under which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration  Rights
Agreement) and (iv) there are no outstanding  registration  statements and there
are no outstanding  comment letters from the SEC or any other regulatory agency.
There are no  securities  or  instruments  containing  anti-dilution  or similar
provisions that will be triggered by the issuance of the Convertible  Debentures
as described in this Agreement.  The Company has furnished to the Buyer true and
correct copies of the Company's Articles of Incorporation,  as amended and as in
effect on the date hereof (the "Articles of  Incorporation"),  and the Company's
By-laws,  as in effect on the date hereof (the "By-laws"),  and the terms of all
securities  convertible  into or  exercisable  for Common Stock and the material
rights of the holders thereof in respect thereto other than stock options issued
to employees and consultants.

                  (d) Issuance of  Securities.  The  Convertible  Debentures are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued,  fully paid and  nonassessable,  are free from all taxes, liens and
charges with respect to the issue thereof.  The Conversion  Shares issuable upon
conversion of the Convertible  Debentures have been duly authorized and reserved
for issuance.  Upon  conversion or exercise in accordance  with the  Convertible
Debentures  the  Conversion   Shares  will  be  duly  issued,   fully  paid  and
nonassessable.

                  (e) No  Conflicts.  Except as disclosed in the SEC  Documents,
the  execution,  delivery  and  performance  of  this  Agreement,  the  Security
Agreement,  the Investor Registration Rights Agreement, the Escrow Agreement and
the Irrevocable  Transfer Agent Instructions by the Company and the consummation
by the Company of the transactions  contemplated hereby will not (i) result in a

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violation of the Articles of  Incorporation,  any certificate of designations of
any outstanding  series of preferred stock of the Company or the By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse of
time or both  would  become a  default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  subsidiaries  is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree  (including  federal and state  securities  laws and  regulations and the
rules and regulations of The National  Association of Securities  Dealers Inc.'s
OTC  Bulletin  Board on which the  Common  Stock is  quoted)  applicable  to the
Company  or any of its  subsidiaries  or by which any  property  or asset of the
Company or any of its subsidiaries is bound or affected.  Except as disclosed in
the SEC Documents,  neither the Company nor its  subsidiaries is in violation of
any term of or in default  under its  Articles  of  Incorporation  or By-laws or
their organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage,  indebtedness,  indenture,  instrument, judgment, decree or
order or any  statute,  rule or  regulation  applicable  to the  Company  or its
subsidiaries.  The  business of the Company  and its  subsidiaries  is not being
conducted,  and  shall  not be  conducted  in  violation  of any  material  law,
ordinance,  or regulation of any  governmental  entity.  Except as  specifically
contemplated  by this  Agreement  and as  required  under  the  1933 Act and any
applicable  state  securities  laws,  the Company is not  required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute,  deliver or perform any
of its obligations  under or contemplated by this Agreement or the  Registration
Rights  Agreement  in  accordance  with the terms  hereof or thereof.  Except as
disclosed in the SEC Documents,  all consents,  authorizations,  orders, filings
and  registrations  which the  Company is  required  to obtain  pursuant  to the
preceding  sentence  have  been  obtained  or  effected  on or prior to the date
hereof.   The  Company  and  its  subsidiaries  are  unaware  of  any  facts  or
circumstance, which might give rise to any of the foregoing.

                  (f) SEC  Documents:  Financial  Statements.  Since  January 1,
2003, the Company has filed all reports,  schedules, forms, statements and other
documents  required  to be  filed by it with  the SEC  under  of the  Securities
Exchange Act of 1934,  as amended (the "1934 Act") (all of the  foregoing  filed
prior to the date  hereof or  amended  after 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").  The Company has delivered to the Buyers or their  representatives,
or made  available  through the SEC's website at  http://www.sec.gov.,  true and
complete  copies  of the  SEC  Documents.  As of  their  respective  dates,  the
financial  statements  of the  Company  disclosed  in  the  SEC  Documents  (the
"Financial  Statements")  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).   No  other

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information  provided  by or on behalf of the  Company to the Buyer which is not
included  in the  SEC  Documents,  including,  without  limitation,  information
referred to in this Agreement,  contains any untrue statement of a material fact
or omits to state any material  fact  necessary in order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

                  (g)  10(b)-5.  The SEC  Documents  do not  include  any untrue
statements  of  material  fact,  nor do they  omit to state  any  material  fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.

                  (h)  Absence of  Litigation.  Except as  disclosed  in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  material  adverse  effect  on  the  business,   operations,
properties,  financial condition or results of operations of the Company and its
subsidiaries taken as a whole.

                  (i)   Acknowledgment   Regarding   Buyer's   Purchase  of  the
Convertible Debentures. The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length  purchaser with respect to this
Agreement  and  the  transactions   contemplated  hereby.  The  Company  further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar  capacity)  with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective  representatives or agents in connection with this Agreement
and the transactions  contemplated  hereby is merely  incidental to such Buyer's
purchase of the  Convertible  Debentures or the Conversion  Shares.  The Company
further  represents to the Buyer that the Company's  decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.

                  (j) No General  Solicitation.  Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation  D under  the 1933 Act) in  connection  with the offer or sale of the
Convertible Debentures or the Conversion Shares.

                  (k) No Integrated  Offering.  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 require  registration of the
Convertible Debentures or the Conversion Shares under the 1933 Act or cause this
offering of the Convertible Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act.

                                       9
<PAGE>

                  (l)  Employee  Relations.  Neither  the Company nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

                  (m) Intellectual  Property Rights.  Except as disclosed in the
SEC Documents,  the Company and its  subsidiaries own or possess adequate rights
or licenses to use all  trademarks,  trade names,  service  marks,  service mark
registrations,  service names, patents, patent rights,  copyrights,  inventions,
licenses,  approvals,  governmental  authorizations,  trade  secrets  and rights
necessary to conduct their respective  businesses as now conducted.  The Company
and its  subsidiaries  do not  have any  knowledge  of any  infringement  by the
Company or its  subsidiaries of trademark,  trade name rights,  patents,  patent
rights, copyrights,  inventions, licenses, service names, service marks, service
mark registrations,  trade secret or other similar rights of others, and, to the
knowledge of the Company there is no claim,  action or proceeding  being made or
brought against, or to the Company's  knowledge,  being threatened against,  the
Company or its subsidiaries  regarding  trademark,  trade name, patents,  patent
rights,  invention,  copyright,  license,  service names, service marks, service
mark registrations,  trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances  which might give rise to
any of the foregoing.

                  (n)  Environmental  Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign,  federal, state and local
laws and regulations  relating to the protection of human health and safety, the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval.

                  (o) Title.  Any real property and facilities  held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its subsidiaries.

                  (p) Insurance.  The Company and each of its  subsidiaries  are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  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 at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

                                       10
<PAGE>

                  (q)  Regulatory  Permits.  The  Company  and its  subsidiaries
possess all  material  certificates,  authorizations  and permits  issued by the
appropriate  federal,  state or  foreign  regulatory  authorities  necessary  to
conduct  their  respective  businesses,  and  neither  the  Company nor any such
subsidiary has received any notice of proceedings  relating to the revocation or
modification of any such certificate, authorization or permit.

                  (r) Internal Accounting Controls.  The Company and each of its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  and (iii) the recorded  amounts for assets is compared with the
existing  assets at reasonable  intervals and  appropriate  action is taken with
respect to any differences.

                  (s) No Material Adverse Breaches,  etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected  in the future to have a material  adverse  effect on the  business,
properties,  operations, financial condition, results of operations or prospects
of the Company or its  subsidiaries.  Except as set forth in the SEC  Documents,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  material  adverse  effect  on the  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or its subsidiaries.

                  (t) Tax Status. Except as set forth in the SEC Documents,  the
Company  and each of its  subsidiaries  has made and filed all federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (unless and only to the extent that the
Company  and each of its  subsidiaries  has set  aside on its  books  provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provision  reasonably  adequate  for  the  payment  of  all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.

                  (u)  Certain  Transactions.  Except  as set  forth  in the SEC
Documents,  and  except  for arm's  length  transactions  pursuant  to which the
Company  makes  payments in the ordinary  course of business  upon terms no less
favorable  than the Company  could obtain from third  parties and other than the
grant of stock  options  disclosed in the SEC  Documents,  none of the officers,
directors,  or employees of the Company is presently a party to any  transaction
with the Company (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,

                                       11
<PAGE>

director or such employee or, to the knowledge of the Company,  any corporation,
partnership,  trust or other entity in which any officer,  director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

                  (v) Fees and  Rights  of First  Refusal.  The  Company  is not
obligated to offer the securities  offered hereunder on a right of first refusal
basis or otherwise to any third parties  including,  but not limited to, current
or former shareholders of the Company,  underwriters,  brokers,  agents or other
third parties.

         4. COVENANTS.

                  (a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the  conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.

                  (b) Form D. The Company  agrees to file a Form D with  respect
to the Conversion  Shares 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 to qualify the Conversion  Shares, or obtain an exemption
for the Conversion Shares for sale to the Buyers at the Closing pursuant to this
Agreement  under  applicable  securities or "Blue Sky" laws of the states of the
United  States,  and shall  provide  evidence of any such action so taken to the
Buyers on or prior to the Closing Date.

                  (c) Reporting Status.  Until the earlier of (i) the date as of
which the Buyer(s) may sell all of the  Conversion  Shares  without  restriction
pursuant to Rule 144(k)  promulgated under the 1933 Act (or successor  thereto),
or (ii) the date on which (A) the  Buyer(s)  shall have sold all the  Conversion
Shares  and  (B)  none  of  the  Convertible  Debentures  are  outstanding  (the
"Registration  Period"),  the Company  shall file in a timely manner all reports
required to be filed with the SEC  pursuant to the 1934 Act and the  regulations
of the SEC  thereunder,  and the Company  shall not  terminate  its status as an
issuer  required to file reports  under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.

                  (d) Use of Proceeds.  The Company  will use the proceeds  from
the sale of the Convertible Debentures for general corporate and working capital
purposes.

                  (e)  Reservation of Shares.  The Company shall take all action
reasonably  necessary  to at all times have  authorized,  and  reserved  for the
purpose of issuance, such number of shares of Common Stock as shall be necessary
to effect the issuance of the Conversion Shares. If at any time the Company does
not have  available  such  shares of Common  Stock as shall from time to time be
sufficient  to effect  the  conversion  of all of the  Conversion  Shares of the
Company shall call and hold a special meeting of the shareholders  within thirty
(30) days of such  occurrence,  for the sole purpose of increasing the number of
shares authorized.  The Company's management shall recommend to the shareholders
to vote in favor of increasing the number of shares of Common Stock  authorized.
Management  shall also vote all of its shares in favor of increasing  the number
of authorized shares of Common Stock.

                                       12
<PAGE>

                  (f) Listings or Quotation.  The Company shall promptly  secure
the listing or quotation of the Conversion Shares upon each national  securities
exchange,  automated quotation system or The National  Association of Securities
Dealers Inc.'s  Over-The-Counter  Bulletin Board  ("OTCBB") or other market,  if
any,  upon which  shares of Common  Stock are then listed or quoted  (subject to
official notice of issuance) and shall use its best efforts to maintain, so long
as any other  shares of Common  Stock  shall be so listed,  such  listing of all
Conversion  Shares from time to time issuable under the terms of this Agreement.
The Company shall maintain the Common Stock's authorization for quotation on the
OTCBB.

(g) Fees and Expenses.  Each of the Company and the Buyer(s) shall pay all costs
and  expenses  incurred  by such  party  in  connection  with  the  negotiation,
investigation, preparation, execution and delivery of this Agreement, the Escrow
Agreement,  the Investor  Registration Rights Agreement,  the Security Agreement
and the Irrevocable Transfer Agent Instructions.  The Buyer(s) shall be entitled
to a ten percent (10%) discount on the Purchase Price.

                               On the First Closing Date,  the Company shall pay
to the  Buyer  a  structuring  fee  of  $10,000  (the  "Structuring  Fee").  The
Structuring  Fee shall be paid  directly  from the gross  proceeds  of the First
Closing and shall be deemed fully earned on the date hereof.

                  (h)  Corporate  Existence.  So long as any of the  Convertible
Debentures  remain  outstanding,  the Company  shall not directly or  indirectly
consummate  any  merger,  reorganization,  restructuring,  reverse  stock  split
consolidation,  sale of all or substantially  all of the Company's assets or any
similar  transaction  or  related   transactions  (each  such  transaction,   an
"Organizational  Change") unless,  prior to the  consummation an  Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.

                  (i) Transactions  With Affiliates.  So long as any Convertible
Debentures are  outstanding,  the Company shall not, and shall cause each of its
subsidiaries  not to, enter into,  amend,  modify or  supplement,  or permit any
subsidiary  to  enter  into,   amend,   modify  or  supplement   any  agreement,
transaction,  commitment,  or  arrangement  with any of its or any  subsidiary's
officers,  directors,  person who were  officers or directors at any time during
the previous two (2) years,  stockholders who beneficially own five percent (5%)
or more of the  Common  Stock,  or  Affiliates  (as  defined  below) or with any
individual  related by blood,  marriage,  or adoption to any such  individual or
with any entity in which any such entity or individual  owns a five percent (5%)
or more beneficial  interest (each a "Related Party"),  except for (a) customary
employment  arrangements  and benefit  programs  on  reasonable  terms,  (b) any
investment  in an  Affiliate  of the Company,  (c) any  agreement,  transaction,
commitment,  or arrangement  on an arms-length  basis on terms no less favorable
than  terms  which  would  have been  obtainable  from a person  other than such
Related Party, (d) any agreement transaction,  commitment,  or arrangement which
is approved by a majority of the  disinterested  directors of the  Company,  for
purposes  hereof,  any  director  who is also an officer  of the  Company or any
subsidiary of the Company shall not be a disinterested  director with respect to
any such agreement,  transaction,  commitment,  or arrangement.  "Affiliate" for

                                       13
<PAGE>

purposes hereof means,  with respect to any person or entity,  another person or
entity that, directly or indirectly,  (i) has a ten percent (10%) or more equity
interest  in that person or entity,  (ii) has ten  percent  (10%) or more common
ownership with that person or entity,  (iii) controls that person or entity,  or
(iv) shares common  control with that person or entity.  "Control" or "controls"
for  purposes  hereof  means that a person or entity  has the  power,  direct or
indirect, to conduct or govern the policies of another person or entity.

                  (j) Transfer Agent. The Company  covenants and agrees that, in
the event that the Company's agency  relationship with the transfer agent should
be  terminated  for any reason  prior to a date which is two (2) years after the
Closing Date,  the Company shall  immediately  appoint a new transfer  agent and
shall  require that the new transfer  agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined herein).

                  (k)  Restriction on Issuance of the Capital Stock.  So long as
any Convertible  Debentures are outstanding,  the Company shall not, without the
prior written  consent of the Buyer(s),  issue or sell shares of Common Stock or
Preferred Stock (i) without  consideration or for a consideration per share less
than the Bid  Price of the  Common  Stock  determined  immediately  prior to its
issuance,  (ii) any warrant,  option, right,  contract,  call, or other security
instrument  granting  the  holder  thereof,  the right to acquire  Common  Stock
without  consideration or for a consideration  less than such Common Stock's Bid
Price value determined immediately prior to it's issuance,  (iii) enter into any
security  instrument  granting  the  holder a security  interest  in any and all
assets of the Company,  except that the Company may grant a security interest to
a lender that provides  purchase money financing for inventory and equipment and
such  security  interest  relates  solely  to the  inventory  and  equipment  so
purchased,  or (iv) file any registration  statement on Form S-8;  however,  the
Company may issue shares of Common  Stock to Bernard J. Walter,  pursuant to the
terms of his Employment  Agreement of July 1, 2004 and the Company may establish
a Stock Option,  SAR and Stock Bonus Plan (the "Plan") to retain and  compensate
independent Consultants by way of granting (i) non-qualified stock options, (ii)
non-qualified stock options with stock appreciation  rights attached,  and (iii)
Stock bonuses  pursuant to the Power  Technology  2004-B Stock  Option,  SAR and
Stock Bonus Plan and further  provided that the total number of shares of Common
Stock available for grant to participants under the Plan shall not exceed twenty
percent  (20%) of the total  number of issued and  outstanding  shares of Common
Stock upon the establishment of the Plan;  provided that any issuances permitted
hereunder shall only be issued if the recipient enters into a lock-up  agreement
pursuant to which the  recipient  shall not sell,  transfer or assign any shares
for a period  commencing  on the date of issuance  and  expiring  six (6) months
after the date upon which the SEC declares effective the registration  statement
contemplated herein.

                  (l) Post-Closing Conditions. Following the First Closing Date,
the Company  shall use its best efforts to obtain  lock-up  agreements  from all
holders of  warrants,  options or other  rights to acquire  Common  Stock of the
Company  prohibiting  the sale of such  Common  Stock for a  minimum  of six (6)
months following a declaration of effectiveness from the SEC of the registration
statement  pursuant to the Investor  Registration  Rights Agreement of even date
herewith.

                                       14
<PAGE>

         5. TRANSFER AGENT INSTRUCTIONS.

         The Company shall issue the Irrevocable  Transfer Agent Instructions to
its transfer agent  irrevocably  appointing Butler Gonzalez LLP as its agent for
purpose of having certificates issued, registered in the name of the Buyer(s) or
its respective  nominee(s),  for the Conversion Shares representing such amounts
of Convertible  Debentures as specified from time to time by the Buyer(s) to the
Company  upon  conversion  of the  Convertible  Debentures,  for  interest  owed
pursuant to the Convertible  Debenture,  and for any and all Liquidated  Damages
(as this term is defined in the Investor Registration Rights Agreement).  Butler
Gonzalez LLP shall be paid a cash fee of Fifty Dollars ($50) for every  occasion
they act pursuant to the Irrevocable  Transfer Agent  Instructions.  The Company
shall not change its transfer agent without the express  written  consent of the
Buyer(s), which may be withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion  Shares under the 1933 Act, all such certificates
shall bear the restrictive  legend  specified in Section 2(g) of this Agreement.
The Company  warrants that no instruction  other than the  Irrevocable  Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give  effect to Section  2(g)  hereof (in the case of the  Conversion  Shares
prior to  registration  of such shares  under the 1933 Act) will be given by the
Company to its transfer agent and that the Conversion  Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this  Agreement  and the  Investor  Registration  Rights  Agreement.
Nothing in this  Section 5 shall affect in any way the Buyer's  obligations  and
agreement  to  comply  with  all  applicable  securities  laws  upon  resale  of
Conversion  Shares.  If the  Buyer(s)  provides  the Company  with an opinion of
counsel,  in form,  scope and  substance  customary  for  opinions of counsel in
comparable  transactions  to the  effect  that  registration  of a resale by the
Buyer(s) of any of the Conversion Shares is not required under the 1933 Act, the
Company shall within two (2) business days instruct its transfer  agent to issue
one or more certificates in such name and in such  denominations as specified by
the  Buyer.  The  Company  acknowledges  that a breach by it of its  obligations
hereunder will cause  irreparable  harm to the Buyer by vitiating the intent and
purpose  of  the  transaction  contemplated  hereby.  Accordingly,  the  Company
acknowledges  that the remedy at law for a breach of its obligations  under this
Section 5 will be inadequate and agrees,  in the event of a breach or threatened
breach by the Company of the  provisions  of this  Section 5, that the  Buyer(s)
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring  immediate  issuance and transfer,  without
the necessity of showing  economic  loss and without any bond or other  security
being required.

         6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

         The  obligation  of  the  Company  hereunder  to  issue  and  sell  the
Convertible  Debentures  to the  Buyer(s)  at the  Closings  is  subject  to the
satisfaction,  at or  before  the  Closing  Dates,  of  each  of  the  following
conditions,  provided that these  conditions  are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:

                  (a)  Each  Buyer  shall  have  executed  this  Agreement,  the
Security  Agreement,  the Escrow Agreement and the Investor  Registration Rights
Agreement and the Irrevocable Transfer Agent Instructions and delivered the same
to the Company.

                                       15
<PAGE>

                  (b) The Buyer(s)  shall have delivered to the Escrow Agent the
Purchase  Price for  Convertible  Debentures in respective  amounts as set forth
next to each Buyer as  outlined  on  Schedule  I attached  hereto and the Escrow
Agent shall have  delivered  the net proceeds to the Company by wire transfer of
immediately  available U.S. funds pursuant to the wire instructions  provided by
the Company.

                  (c) The  representations  and warranties of the Buyer(s) shall
be true and correct in all material  respects as of the date when made and as of
the Closing  Dates as though made at that time (except for  representations  and
warranties  that  speak as of a  specific  date),  and the  Buyer(s)  shall have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Buyer(s) at or prior to the Closing Dates.

                  (d) The  Company  shall have filed a form UCC-1 with regard to
the  Pledged  Property  and  Pledged  Collateral  as  detailed  in the  Security
Agreement  dated  the date  hereof  and  provided  proof of such  filing  to the
Buyer(s).

7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

         The  obligation of the Buyer(s)  hereunder to purchase the  Convertible
Debentures  at the  Closing  is subject  to the  satisfaction,  at or before the
Closing Date, of each of the following conditions:

                  (a) The  Company  shall  have  executed  this  Agreement,  the
Security  Agreement,  the  Convertible  Debenture,  the  Escrow  Agreement,  the
Irrevocable   Transfer   Instructions  and  the  Investor   Registration  Rights
Agreement, and delivered the same to the Buyer(s).

                  (b) The Common Stock shall be authorized  for quotation on the
OTCBB,  trading in the Common Stock shall not have been suspended for any reason
and all of the Conversion  Shares  issuable upon  conversion of the  Convertible
Debentures shall be approved the OTCBB.

                  (c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such  representations  and warranties  shall be true and
correct  without further  qualification)  as of the date when made and as of the
Closing  Dates as  though  made at that time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing  Dates.  If requested
by the Buyer,  the Buyer  shall have  received a  certificate,  executed  by the
President of the Company, dated as of the Closing Dates, to the foregoing effect
and as to  such  other  matters  as may be  reasonably  requested  by the  Buyer
including,  without  limitation an update as of the Closing Dates  regarding the
representation contained in Section 3(c) above.

                                       16
<PAGE>

                  (d) The  Company  shall have  executed  and  delivered  to the
Buyer(s) the Convertible Debentures in the respective amounts set forth opposite
each Buyer(s) name on Schedule I attached hereto.

                  (e) The  Buyer(s)  shall have  received  an opinion of counsel
from the Company's counsel in a form satisfactory to the Buyer(s).

                  (f)  The  Company  shall  have  provided  to  the  Buyer(s)  a
certificate of good standing from the secretary of state from the state in which
the company is incorporated.

                  (g) As of the Closing  Date,  the Company  shall have reserved
out of its  authorized  and  unissued  Common  Stock,  solely for the purpose of
effecting the conversion of the Convertible  Debentures,  shares of Common Stock
to effect the conversion of all of the Conversion Shares then outstanding.

                  (h) The Irrevocable  Transfer Agent Instructions,  in form and
substance   satisfactory  to  the  Buyer,  shall  have  been  delivered  to  and
acknowledged in writing by the Company's transfer agent.

                  (i)  The  Company   shall  have   provided  to  the  Buyer  an
acknowledgement,  to the satisfaction of the Buyer from Beckstead and Watts, LLP
as to  its  ability  to  provide  all  consents  required  in  order  to  file a
registration statement in connection with this transaction.

                  (j) The  Company  shall  have filed a form UCC-1 or such other
forms as may be required to perfect the Buyer's interest in the Pledged Property
and Pledged  Collateral  as detailed in the  Security  Agreement  dated the date
hereof and provided proof of such filing to the Buyer(s).

                  (k) With respect to the Second Closing, the Company shall have
filed a registration statement with the SEC.

         8. INDEMNIFICATION.

                  (a) In consideration of the Buyer's  execution and delivery of
this  Agreement and  acquiring the  Convertible  Debentures  and the  Conversion
Shares  hereunder,  and in addition to all of the  Company's  other  obligations
under this  Agreement,  the Company  shall defend,  protect,  indemnify and hold
harmless the Buyer(s) and each other holder of the  Convertible  Debentures  and
the  Conversion  Shares,  and all of their  officers,  directors,  employees and
agents  (including,  without  limitation,  those retained in connection with the
transactions   contemplated  by  this  Agreement)   (collectively,   the  "Buyer
Indemnitees")  from and against any and all  actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection  therewith  (irrespective  of whether any such Buyer  Indemnitee is a
party  to the  action  for  which  indemnification  hereunder  is  sought),  and
including  reasonable   attorneys'  fees  and  disbursements  (the  "Indemnified
Liabilities"),  incurred by the Buyer Indemnitees or any of them as a result of,
or arising  out of, or relating  to (a) any  misrepresentation  or breach of any
representation  or  warranty  made  by  the  Company  in  this  Agreement,   the

                                       17
<PAGE>

Convertible  Debentures  or the Investor  Registration  Rights  Agreement or any
other certificate,  instrument or document  contemplated hereby or thereby,  (b)
any breach of any covenant,  agreement or obligation of the Company contained in
this  Agreement,  or the  Investor  Registration  Rights  Agreement or any other
certificate,  instrument or document  contemplated hereby or thereby, or (c) any
cause of action,  suit or claim  brought or made  against  such  Indemnitee  and
arising  out of or  resulting  from  the  execution,  delivery,  performance  or
enforcement  of this  Agreement or any other  instrument,  document or agreement
executed pursuant hereto by any of the Indemnities,  any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Convertible  Debentures or the status of the Buyer or holder
of the Convertible  Debentures the Conversion  Shares, as a Buyer of Convertible
Debentures in the Company.  To the extent that the foregoing  undertaking by the
Company may be unenforceable for any reason,  the Company shall make the maximum
contribution  to the  payment  and  satisfaction  of  each  of  the  Indemnified
Liabilities, which is permissible under applicable law.

                  (b) In consideration  of the Company's  execution and delivery
of this Agreement, and in addition to all of the Buyer's other obligations under
this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers,  directors,  employees  and agents  (including,
without   limitation,   those  retained  in  connection  with  the  transactions
contemplated by this Agreement)  (collectively,  the "Company Indemnitees") from
and against any and all Indemnified  Liabilities  incurred by the Indemnitees or
any of  them  as a  result  of,  or  arising  out  of,  or  relating  to (a) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Buyer(s) in this  Agreement,  ,  instrument or document  contemplated  hereby or
thereby  executed by the Buyer,  (b) any breach of any  covenant,  agreement  or
obligation  of  the  Buyer(s)   contained  in  this   Agreement,   the  Investor
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby  or  thereby  executed  by the  Buyer,  or (c) any cause of
action,  suit or claim brought or made against such Company  Indemnitee based on
material  misrepresentations  or due to a material  breach and arising out of or
resulting  from the  execution,  delivery,  performance  or  enforcement of this
Agreement,  the Investor  Registration Rights Agreement or any other instrument,
document  or  agreement   executed   pursuant  hereto  by  any  of  the  Company
Indemnities.  To the extent that the foregoing  undertaking by each Buyer may be
unenforceable for any reason, each Buyer shall make the maximum  contribution to
the payment and  satisfaction of each of the Indemnified  Liabilities,  which is
permissible under applicable law.

         9. GOVERNING LAW: MISCELLANEOUS.

                  (a)  Governing  Law. This  Agreement  shall be governed by and
interpreted  in  accordance  with the laws of the  State of New  Jersey  without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Hudson County,  New Jersey,  and expressly
consent  to the  jurisdiction  and venue of the  Superior  Court of New  Jersey,
sitting in Hudson County and the United States  District  Court for the District
of New Jersey sitting in Newark,  New Jersey for the  adjudication  of any civil
action asserted pursuant to this Paragraph.

                                       18
<PAGE>

                  (b)  Counterparts.  This  Agreement  may be executed in two or
more identical  counterparts,  all of which 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.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof.

                  (c)  Headings.   The  headings  of  this   Agreement  are  for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation of, this Agreement.

                  (d) Severability.  If any provision of this Agreement shall be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability of any provision of this Agreement in any other jurisdiction.

                  (e) Entire Agreement,  Amendments.  This Agreement  supersedes
all other prior oral or written  agreements  between the Buyer(s),  the Company,
their  affiliates and persons acting on their behalf with respect to the matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor any Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

                  (f)  Notices.  Any  notices,   consents,   waivers,  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by  facsimile;  (iii)  three (3) days after being sent by U.S.  certified  mail,
return  receipt  requested,  or (iv) one (1) day after deposit with a nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be:

                                       19
<PAGE>

If to the Company, to:             Power Technology, Inc.
                                   1770 St. James Place, Suite 115
                                   Houston, Texas 77056
                                   Attention:    Bernard J. Walter
                                   Telephone:    (281) 804-8854
                                   Facsimile:    (713) 426-5953

With a copy to:                    Stephen A. Zrenda, Jr., P.C.
                                   100 N. Broadway, Suite 2440
                                   Oklahoma City, OK 73102
                                   Attention:    Stephen A. Zrenda, Jr.
                                   Telephone:    (405) 235-2111
                                   Facsimile:    (405) 235-2157

If to the Transfer Agent, to:      Pacific Stock Transfer Company
                                   500 E Warm Springs Rd., Suite 240
                                   Las Vegas, NV 89119
                                   Telephone:    (702) 361-3033
                                   Facsimile:    (702) 433-1979

         If to the Buyer(s),  to its address and facsimile number on Schedule I,
with copies to the Buyer's  counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written  notice to the other party of any change in
address or facsimile number.

                  (g)  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns.  Neither the Company nor any Buyer shall  assign this  Agreement or any
rights or obligations  hereunder  without the prior written consent of the other
party hereto.

                  (h) No Third Party  Beneficiaries.  This Agreement is intended
for the benefit of the parties hereto and their respective  permitted successors
and  assigns,  and is not for the  benefit of, nor may any  provision  hereof be
enforced by, any other person.

                  (i)  Survival.  Unless  this  Agreement  is  terminated  under
Section 9(l), the representations and warranties of the Company and the Buyer(s)
contained  in  Sections  2 and 3, the  agreements  and  covenants  set  forth in
Sections 4, 5 and 9, and the indemnification  provisions set forth in Section 8,
shall  survive the Closing for a period of two (2) years  following  the date on
which the  Convertible  Debentures  are converted in full. The Buyer(s) shall be
responsible  only  for  its  own  representations,  warranties,  agreements  and
covenants hereunder.

                  (j)  Publicity.  The Company and the  Buyer(s)  shall have the
right to  approve,  before  issuance  any  press  release  or any  other  public
statement  with  respect to the  transactions  contemplated  hereby  made by any
party; provided,  however, that the Company shall be entitled, without the prior
approval of the Buyer(s),  to issue any press release or other public disclosure

                                       20
<PAGE>

with respect to such transactions  required under applicable securities or other
laws or  regulations  (the  Company  shall use its best  efforts to consult  the
Buyer(s) in connection  with any such press  release or other public  disclosure
prior to its release and  Buyer(s)  shall be provided  with a copy  thereof upon
release thereof).

                  (k) Further  Assurances.  Each party shall do and perform,  or
cause to be done and  performed,  all such  further  acts and things,  and shall
execute and deliver all such other  agreements,  certificates,  instruments  and
documents,  as the other party may reasonably  request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  (l) Termination.  In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date  hereof  due to the  Company's  or  the  Buyer's  failure  to  satisfy  the
conditions  set forth in Sections 6 and 7 above (and the  non-breaching  party's
failure to waive such unsatisfied  condition(s)),  the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of  business  on such date  without  liability  of any party to any
other party;  provided,  however,  that if this  Agreement is  terminated by the
Company  pursuant to this Section 9(l),  the Company  shall remain  obligated to
reimburse the Buyer(s) for the fees and expenses of Butler Gonzalez described in
Section 4(g) above.

                  (m)  No  Strict  Construction.   The  language  used  in  this
Agreement  will be deemed to be the  language  chosen by the  parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.

                           [SIGNATURE PAGE TO FOLLOW]

                                       21
<PAGE>

         IN WITNESS  WHEREOF,  the  Buyers  and the  Company  have  caused  this
Securities  Purchase  Agreement to be duly executed as of the date first written
above.

                                         COMPANY:
                                         POWER TECHNOLOGY, INC.

                                         By:
                                             ---------------------------
                                         Name     Bernard J. Walter
                                         Title:   President

                                       22
<PAGE>

                                                                       EXHIBIT A

                 FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT

<PAGE>

                     INVESTOR REGISTRATION RIGHTS AGREEMENT

         THIS  REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement")  dated as of
August 27, 2004, by and among POWER TECHNOLOGY,  INC., a Nevada corporation (the
"Company"), and the undersigned investors (each, an "Investor" and collectively,
the "Investors").

         WHEREAS:

         A. In connection  with the Securities  Purchase  Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase  Agreement"),
the  Company has agreed,  upon the terms and  subject to the  conditions  of the
Securities  Purchase  Agreement,  to  issue  and sell to the  Investors  secured
convertible debentures (the "Convertible Debentures") which shall be convertible
into that number of shares of the Company's  common stock,  par value $0.001 per
share (the "Common  Stock"),  pursuant to the terms of the  Securities  Purchase
Agreement for an aggregate  purchase price of up Five Hundred  Thousand  Dollars
($500,000). Capitalized terms not defined herein shall have the meaning ascribed
to them in the Securities Purchase Agreement.

         B. To induce  the  Investors  to execute  and  deliver  the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  there under, or any similar successor  statute  (collectively,  the
"1933 Act"), and applicable state securities laws.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Investors hereby agree as follows:

         1.  DEFINITIONS.

         As used in this Agreement, the following terms shall have the following
meanings:

                  (a) "Person" means a corporation, a limited liability company,
an association,  a partnership,  an organization,  a business, an individual,  a
governmental or political subdivision thereof or a governmental agency.

                  (b) "Register,"  "registered," and  "registration"  refer to a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements  (as defined  below) in compliance  with the 1933 Act and pursuant to
Rule 415  under  the 1933  Act or any  successor  rule  providing  for  offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange SEC (the "SEC").

                  (c) "Registrable  Securities" means the shares of Common Stock
issuable to Investors upon conversion of the Convertible  Debentures pursuant to

                                       24
<PAGE>

the Securities  Purchase  Agreement and the Investor's  Shares,  as this term is
defined in the Standby Equity Distribution Agreement dated the date hereof.

                  (d)  "Registration  Statement" means a registration  statement
under the 1933 Act which covers the Registrable Securities.

         2. REGISTRATION.

                  (a) Subject to the terms and conditions of this Agreement, the
Company shall prepare and file, no later than forty five (45) days from the date
hereof (the "Scheduled Filing Deadline"),  with the SEC a registration statement
on Form S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) under the
1933 Act (the "Initial  Registration  Statement") for the  registration  for the
resale by all  Investors who purchased  Convertible  Debentures  pursuant to the
Securities  Purchase  Agreement  130,208,333 shares of Common Stock to be issued
upon conversion of the Convertible  Debentures issued pursuant to the Securities
Purchase  Agreement  and the  Investor's  Shares.  The  Company  shall cause the
Registration  Statement  to  remain  effective  until  all  of  the  Registrable
Securities  have been sold.  Prior to the filing of the  Registration  Statement
with the SEC,  the  Company  shall  furnish a copy of the  Initial  Registration
Statement to the Investors and Butler Gonzalez LLP for their review and comment.
The  Investors  and Butler  Gonzalez LLP shall  furnish  comments on the Initial
Registration  Statement  to the  Company  within  twenty-four  (24) hours of the
receipt thereof from the Company.

                  (b) Effectiveness of the Initial Registration  Statement.  The
Company  shall  use its  best  efforts  (i) to  have  the  Initial  Registration
Statement  declared  effective by the SEC no later than one hundred twenty (120)
days after the date  hereof (the  "Scheduled  Effective  Deadline")  and (ii) to
insure that the Initial Registration  Statement and any subsequent  Registration
Statement  remains in effect until all of the  Registrable  Securities have been
sold, subject to the terms and conditions of this Agreement.

                  (c)   Failure   to  File  or  Obtain   Effectiveness   of  the
Registration  Statement. In the event the Registration Statement is not filed by
the  Scheduled  Filing  Deadline or is not  declared  effective by the SEC on or
before the Scheduled Effective Date, or if after the Registration  Statement has
been  declared  effective  by the SEC,  sales  cannot  be made  pursuant  to the
Registration  Statement  (whether  because of a failure to keep the Registration
Statement  effective,  failure to disclose such  information as is necessary for
sales to be made  pursuant to the  Registration  Statement,  failure to register
sufficient  shares of Common Stock or otherwise  then as partial  relief for the
damages to any holder of  Registrable  Securities by reason of any such delay in
or reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive  of any other  remedies at law or in equity),  the
Company will pay as liquidated damages (the "Liquidated Damages") to the holder,
at the holder's  option,  either a cash amount or shares of the Company's Common
Stock within  three (3) business  days,  after  demand  therefore,  equal to two
percent (2%) of the liquidated value of the Convertible  Debentures  outstanding
as Liquidated Damages for each thirty (30) day period after the Scheduled Filing
Deadline or the Scheduled Effective Date as the case may be.

                                       25
<PAGE>

                  (d) Liquidated  Damages.  The Company and the Investor  hereto
acknowledge  and agree that the sums payable under  subsection  2(c) above shall
constitute liquidated damages and not penalties and are in addition to all other
rights of the  Investor,  including  the right to call a  default.  The  parties
further acknowledge that (i) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely  estimate,  (ii) the amounts specified
in such  subsections  bear a reasonable  relationship to, and are not plainly or
grossly  disproportionate  to,  the  probable  loss  likely  to be  incurred  in
connection   with  any  failure  by  the  Company  to  obtain  or  maintain  the
effectiveness  of a  Registration  Statement,  (iii) one of the  reasons for the
Company  and the  Investor  reaching  an  agreement  as to such  amounts was the
uncertainty and cost of litigation regarding the question of actual damages, and
(iv) the Company and the Investor are  sophisticated  business  parties and have
been  represented by  sophisticated  and able legal counsel and negotiated  this
Agreement at arm's length.

         3. RELATED OBLIGATIONS.

                  (a)  The  Company  shall  keep  the   Registration   Statement
effective pursuant to Rule 415 at all times until the date on which the Investor
shall have sold all the  Registrable  Securities  covered  by such  Registration
Statement (the "Registration  Period"),  which Registration Statement (including
any amendments or supplements thereto and prospectuses  contained therein) shall
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.

                  (b) The  Company  shall  prepare  and  file  with the SEC such
amendments   (including   post-effective   amendments)   and  supplements  to  a
Registration   Statement  and  the  prospectus  used  in  connection  with  such
Registration  Statement,  which  prospectus is to be filed  pursuant to Rule 424
promulgated  under the 1933 Act, as may be necessary  to keep such  Registration
Statement  effective at all times during the  Registration  Period,  and, during
such  period,  comply with the  provisions  of the 1933 Act with  respect to the
disposition  of all  Registrable  Securities  of the  Company  covered  by  such
Registration  Statement  until such time as all of such  Registrable  Securities
shall  have  been  disposed  of in  accordance  with  the  intended  methods  of
disposition by the seller or sellers  thereof as set forth in such  Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section  3(b)) by reason of the  Company's  filing a report on Form 10-KSB,
Form 10-QSB or Form 8-K or any analogous  report under the  Securities  Exchange
Act of 1934,  as amended (the "1934 Act"),  the Company shall  incorporate  such
report by reference into the  Registration  Statement,  if applicable,  or shall
file such  amendments or  supplements  with the SEC on the same day on which the
1934 Act report is filed which created the  requirement for the Company to amend
or supplement the Registration Statement.

                  (c)  The  Company  shall   furnish  to  each  Investor   whose
Registrable  Securities  are  included in any  Registration  Statement,  without
charge,  (i) at least one (1) copy of such  Registration  Statement  as declared
effective  by  the  SEC  and  any  amendment(s)  thereto,   including  financial
statements and schedules,  all documents incorporated therein by reference,  all
exhibits  and each  preliminary  prospectus,  (ii) ten (10)  copies of the final
prospectus  included  in such  Registration  Statement  and all  amendments  and
supplements  thereto  (or such  other  number  of copies  as such  Investor  may

                                       26
<PAGE>

reasonably  request)  and  (iii)  such  other  documents  as such  Investor  may
reasonably  request from time to time in order to facilitate the  disposition of
the Registrable Securities owned by such Investor.

                  (d) The Company shall use its best efforts to (i) register and
qualify the  Registrable  Securities  covered by a Registration  Statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as any  Investor  reasonably  requests,  (ii)  prepare  and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (w) make any change to its certificate of  incorporation  or by-laws,
(x) qualify to do business in any  jurisdiction  where it would not otherwise be
required to qualify but for this  Section  3(d),  (y) subject  itself to general
taxation in any such  jurisdiction,  or (z) file a general consent to service of
process  in any such  jurisdiction.  The  Company  shall  promptly  notify  each
Investor who holds  Registrable  Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.

                  (e) As promptly as  practicable  after  becoming aware of such
event or  development,  the Company shall notify each Investor in writing of the
happening  of any  event  as a result  of which  the  prospectus  included  in a
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were  made,  not  misleading  (provided  that in no event  shall such
notice  contain any material,  nonpublic  information),  and promptly  prepare a
supplement  or amendment to such  Registration  Statement to correct such untrue
statement  or  omission,  and  deliver  ten (10)  copies of such  supplement  or
amendment to each Investor. The Company shall also promptly notify each Investor
in writing (i) when a prospectus or any prospectus  supplement or post-effective
amendment   has  been  filed,   and  when  a   Registration   Statement  or  any
post-effective   amendment   has   become   effective   (notification   of  such
effectiveness  shall be delivered to each  Investor by facsimile on the same day
of such  effectiveness),  (ii) of any  request  by the  SEC  for  amendments  or
supplements  to a  Registration  Statement  or  related  prospectus  or  related
information,  and  (iii)  of  the  Company's  reasonable  determination  that  a
post-effective amendment to a Registration Statement would be appropriate.

                  (f) The  Company  shall use its best  efforts to  prevent  the
issuance  of  any  stop  order  or  other   suspension  of  effectiveness  of  a
Registration  Statement,  or the suspension of the  qualification  of any of the
Registrable  Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued,  to obtain the withdrawal
of such order or suspension at the earliest  possible  moment and to notify each
Investor  who holds  Registrable  Securities  being sold of the issuance of such
order  and the  resolution  thereof  or its  receipt  of  actual  notice  of the
initiation or threat of any proceeding for such purpose.

                                       27
<PAGE>

                  (g) At the  reasonable  request of any  Investor,  the Company
shall  furnish  to  such  Investor,  on the  date  of the  effectiveness  of the
Registration  Statement  and  thereafter  from time to time on such  dates as an
Investor  may  reasonably  request  (i) a  letter,  dated  such  date,  from the
Company's  independent  certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering,  and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form,  scope and substance as is  customarily  given in an  underwritten  public
offering, addressed to the Investors.

                  (h) The Company shall make available for inspection by (i) any
Investor and (ii) one (1) firm of  accountants  or other agents  retained by the
Investors  (collectively,  the "Inspectors")  all pertinent  financial and other
records,  and  pertinent  corporate  documents  and  properties  of the  Company
(collectively,  the "Records"),  as shall be reasonably deemed necessary by each
Inspector,  and cause the Company's officers,  directors and employees to supply
all information which any Inspector may reasonably request;  provided,  however,
that each Inspector  shall agree,  and each Investor  hereby agrees,  to hold in
strict  confidence and shall not make any disclosure  (except to an Investor) or
use any Record or other information  which the Company  determines in good faith
to be confidential,  and of which  determination the Inspectors are so notified,
unless (a) the  disclosure  of such  Records is  necessary to avoid or correct a
misstatement or omission in any Registration  Statement or is otherwise required
under the 1933 Act,  (b) the  release of such  Records is ordered  pursuant to a
final,  non-appealable  subpoena  or order  from a court or  government  body of
competent  jurisdiction,  or (c) the  information  in such Records has been made
generally  available to the public other than by disclosure in violation of this
or any other  agreement of which the Inspector  and the Investor has  knowledge.
Each  Investor  agrees that it shall,  upon  learning  that  disclosure  of such
Records  is  sought  in  or  by  a  court  or  governmental  body  of  competent
jurisdiction or through other means, give prompt notice to the Company and allow
the  Company,  at its  expense,  to  undertake  appropriate  action  to  prevent
disclosure  of,  or to  obtain  a  protective  order  for,  the  Records  deemed
confidential.

                  (i) The  Company  shall  hold in  confidence  and not make any
disclosure of information  concerning an Investor provided to the Company unless
(i) disclosure of such  information is necessary to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant to a subpoena or other final,
non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement.  The Company agrees that it shall,  upon learning that  disclosure of
such  information  concerning  an  Investor  is  sought  in  or  by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
written  notice to such  Investor  and allow such  Investor,  at the  Investor's
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

                  (j) The Company shall use its best efforts either to cause all
the Registrable  Securities covered by a Registration Statement (i) to be listed
on each  securities  exchange  on which  securities  of the same class or series
issued  by the  Company  are  then  listed,  if  any,  if the  listing  of  such
Registrable  Securities  is then  permitted  under the rules of such exchange or

                                       28
<PAGE>

(ii) the  inclusion  for  quotation on the National  Association  of  Securities
Dealers,  Inc. OTC Bulletin Board for such Registrable  Securities.  The Company
shall pay all fees and expenses in connection  with  satisfying  its  obligation
under this Section 3(j).

                  (k) The Company  shall  cooperate  with the Investors who hold
Registrable  Securities  being  offered  and,  to  the  extent  applicable,   to
facilitate the timely  preparation and delivery of certificates (not bearing any
restrictive  legend)  representing  the  Registrable  Securities  to be  offered
pursuant to a Registration  Statement and enable such certificates to be in such
denominations  or amounts,  as the case may be, as the Investors may  reasonably
request and registered in such names as the Investors may request.

                  (l) The  Company  shall  use its best  efforts  to  cause  the
Registrable  Securities covered by the applicable  Registration  Statement to be
registered with or approved by such other  governmental  agencies or authorities
as  may  be  necessary  to  consummate  the  disposition  of  such   Registrable
Securities.

                  (m) The Company shall make generally available to its security
holders  as soon as  practical,  but not later than  ninety  (90) days after the
close of the period covered  thereby,  an earnings  statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve (12) month
period  beginning not later than the first day of the Company's  fiscal  quarter
next following the effective date of the Registration Statement.

                  (n) The Company shall otherwise use its best efforts to comply
with all  applicable  rules and  regulations  of the SEC in connection  with any
registration hereunder.

                  (o)  Within  two  (2)  business  days  after  a   Registration
Statement which covers Registrable  Securities is declared effective by the SEC,
the Company  shall  deliver,  and shall  cause legal  counsel for the Company to
deliver,  to the transfer agent for such Registrable  Securities (with copies to
the Investors  whose  Registrable  Securities are included in such  Registration
Statement)  confirmation  that such  Registration  Statement  has been  declared
effective by the SEC in the form attached hereto as Exhibit A.

                  (p) The  Company  shall  take  all  other  reasonable  actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

         4. OBLIGATIONS OF THE INVESTORS.

         Each Investor  agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e),  such Investor will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  such  Investor's  receipt  of the  copies of the
supplemented  or amended  prospectus  contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required.  Notwithstanding anything to
the contrary,  the Company shall cause its transfer agent to deliver  unlegended
certificates  for  shares of Common  Stock to a  transferee  of an  Investor  in
accordance  with the terms of the  Securities  Purchase  Agreement in connection
with any sale of  Registrable  Securities  with respect to which an Investor has
entered  into a contract  for sale prior to the  Investor's  receipt of a notice
from the Company of the happening of any event of the kind  described in Section

                                       29
<PAGE>

3(f) or the  first  sentence  of 3(e) and for  which  the  Investor  has not yet
settled.

         5. EXPENSES OF REGISTRATION.

         All expenses  incurred in  connection  with  registrations,  filings or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualifications fees,  printers,  legal and accounting
fees shall be paid by the Company.

         6. INDEMNIFICATION.

         With  respect  to  Registrable  Securities  which  are  included  in  a
Registration Statement under this Agreement:

                  (a) To the fullest extent  permitted by law, the Company will,
and hereby  does,  indemnify,  hold  harmless  and  defend  each  Investor,  the
directors,  officers, partners, employees, agents,  representatives of, and each
Person,  if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each,  an  "Indemnified  Person"),  against  any  losses,  claims,
damages,  liabilities,  judgments, fines, penalties,  charges, costs, reasonable
attorneys'  fees,  amounts  paid in  settlement  or  expenses,  joint or several
(collectively,  "Claims") incurred in investigating,  preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing  by or  before  any  court or  governmental,  administrative  or other
regulatory  agency,  body or the SEC, whether pending or threatened,  whether or
not an indemnified party is or may be a party thereto  ("Indemnified  Damages"),
to which any of them may become  subject  insofar as such  Claims (or actions or
proceedings,  whether commenced or threatened,  in respect thereof) arise out of
or are based upon:  (i) any untrue  statement or alleged  untrue  statement of a
material  fact  in a  Registration  Statement  or any  post-effective  amendment
thereto  or in any  filing  made in  connection  with the  qualification  of the
offering  under the securities or other "blue sky" laws of any  jurisdiction  in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged  omission  to state a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein  not  misleading;  (ii)  any  untrue
statement or alleged untrue  statement of a material fact contained in any final
prospectus  (as  amended or  supplemented,  if the Company  files any  amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state  securities  law, or any rule or  regulation  there under  relating to the
offer or sale of the Registrable Securities pursuant to a Registration Statement
(the matters in the  foregoing  clauses (i) through  (iii) being,  collectively,
"Violations").   The  Company  shall  reimburse  the  Investors  and  each  such
controlling  person  promptly  as such  expenses  are  incurred  and are due and
payable,  for any  legal  fees or  disbursements  or other  reasonable  expenses
incurred by them in connection with  investigating  or defending any such Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 6(a):  (x) shall not apply to a Claim by an
Indemnified  Person  arising  out of or based upon a Violation  which  occurs in
reliance upon and in  conformity  with  information  furnished in writing to the

                                       30
<PAGE>

Company by such  Indemnified  Person  expressly for use in  connection  with the
preparation  of the  Registration  Statement  or any such  amendment  thereof or
supplement thereto; (y) shall not be available to the extent such Claim is based
on a  failure  of the  Investor  to  deliver  or to  cause to be  delivered  the
prospectus  made  available by the Company,  if such  prospectus was timely made
available by the Company  pursuant to Section  3(c);  and (z) shall not apply to
amounts paid in settlement of any Claim if such  settlement is effected  without
the  prior  written  consent  of  the  Company,   which  consent  shall  not  be
unreasonably  withheld.  Such  indemnity  shall  remain in full force and effect
regardless of any investigation  made by or on behalf of the Indemnified  Person
and shall  survive the transfer of the  Registrable  Securities by the Investors
pursuant to Section 9 hereof.

                  (b) In connection with a Registration Statement, each Investor
agrees to severally and not jointly indemnify,  hold harmless and defend, to the
same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its  directors,  each of its officers,  employees,  representatives,  or
agents and each Person,  if any, who controls the Company  within the meaning of
the 1933 Act or the 1934 Act (each an "Indemnified Party"), against any Claim or
Indemnified Damages to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise,  insofar as such Claim or  Indemnified  Damages arise
out of or is based upon any Violation,  in each case to the extent,  and only to
the extent,  that such Violation  occurs in reliance upon and in conformity with
written information  furnished to the Company by such Investor expressly for use
in connection with such  Registration  Statement;  and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses  reasonably incurred by
them in connection  with  investigating  or defending any such Claim;  provided,
however,  that the  indemnity  agreement  contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such  settlement is effected  without
the  prior  written  consent  of  such  Investor,  which  consent  shall  not be
unreasonably withheld;  provided,  further,  however, that the Investor shall be
liable under this  Section  6(b) for only that amount of a Claim or  Indemnified
Damages as does not exceed the net proceeds to such  Investor as a result of the
sale of Registrable  Securities  pursuant to such Registration  Statement.  Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the   Registrable   Securities   by  the   Investors   pursuant  to  Section  9.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 6(b) with respect to any  prospectus  shall
not inure to the benefit of any  Indemnified  Party if the untrue  statement  or
omission of material fact contained in the prospectus was corrected and such new
prospectus  was delivered to each Investor  prior to such  Investor's use of the
prospectus to which the Claim relates.

                  (c)  Promptly  after  receipt  by  an  Indemnified  Person  or
Indemnified  Party  under this  Section 6 of notice of the  commencement  of any
action or proceeding (including any governmental action or proceeding) involving
a Claim,  such  Indemnified  Person or  Indemnified  Party shall,  if a Claim in
respect thereof is to be made against any indemnifying  party under this Section
6,  deliver  to the  indemnifying  party a written  notice  of the  commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the  extent  the  indemnifying  party so  desires,  jointly  with  any  other
indemnifying party similarly  noticed,  to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided,  however, that an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees and  expenses  of not more than one (1)  counsel for such

                                       31
<PAGE>

Indemnified  Person or Indemnified  Party to be paid by the indemnifying  party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding effected without its prior written consent;  provided,  however, that
the indemnifying party shall not unreasonably  withhold,  delay or condition its
consent.  No indemnifying party shall,  without the prior written consent of the
Indemnified  Party or  Indemnified  Person,  consent to entry of any judgment or
enter into any  settlement  or other  compromise  which  does not  include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party or  Indemnified  Person of a release  from all  liability  in
respect to such claim or litigation.  Following  indemnification as provided for
hereunder,  the  indemnifying  party  shall be  subrogated  to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations  relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party under this Section 6, except to the extent that the indemnifying  party is
prejudiced in its ability to defend such action.

                  (d) The  indemnification  required by this  Section 6 shall be
made by  periodic  payments  of the  amount  thereof  during  the  course of the
investigation or defense,  as and when bills are received or Indemnified Damages
are incurred.

                  (e) The  indemnity  agreements  contained  herein  shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified  Person  against  the  indemnifying  party or  others,  and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7. CONTRIBUTION.

         To  the  extent  any   indemnification  by  an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within  the  meaning of Section  11(f) of the 1933 Act)  shall be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

                                       32
<PAGE>

         8. REPORTS UNDER THE 1934 ACT.

         With a view to making  available to the  Investors the benefits of Rule
144 promulgated  under the 1933 Act or any similar rule or regulation of the SEC
that may at any time permit the  Investors to sell  securities of the Company to
the public without registration ("Rule 144") the Company agrees to:

                  (a) make and keep public information available, as those terms
are understood and defined in Rule 144;

                  (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company  remains  subject to such  requirements  (it being  understood  that
nothing herein shall limit the Company's  obligations  under Section 4(c) of the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents as are required by the applicable provisions of Rule 144; and

                  (c)  furnish to each  Investor so long as such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
1933 Act and the 1934 Act,  (ii) a copy of the most recent  annual or  quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested to
permit  the  Investors  to sell such  securities  pursuant  to Rule 144  without
registration.

         9. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance  thereof
may  be  waived  (either  generally  or  in a  particular  instance  and  either
retroactively  or  prospectively),  only with the written consent of the Company
and  Investors  who then  hold at  least  two-thirds  (2/3)  of the  Registrable
Securities.  Any amendment or waiver  effected in accordance with this Section 9
shall be binding upon each Investor and the Company.  No such amendment shall be
effective  to the extent that it applies to fewer than all of the holders of the
Registrable Securities.  No consideration shall be offered or paid to any Person
to amend or consent to a waiver or  modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

         10. MISCELLANEOUS.

                  (a)  A  Person  is  deemed  to  be  a  holder  of  Registrable
Securities  whenever  such  Person  owns  or is  deemed  to own of  record  such
Registrable  Securities.  If  the  Company  receives  conflicting  instructions,
notices  or  elections  from two (2) or more  Persons  with  respect to the same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

                  (b) Any  notices,  consents,  waivers or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one (1) business day after deposit
with a nationally  recognized  overnight delivery service, in each case properly

                                       33
<PAGE>

addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:

If to the Company, to:          Power Technology, Inc.
                                1770 St. James Place, Suite 115
                                Houston, Texas 77056
                                Attention:   Bernard J. Walter
                                Telephone:   (281) 804-8854
                                Facsimile:   (713) 426-5953

With a copy to:                 Stephen A. Zrenda, Jr., P.C.
                                100 N. Broadway, Suite 2440
                                Oklahoma City, OK 73102
                                Attention:   Stephen A. Zrenda, Jr.
                                Telephone:   (405) 235-2111
                                Facsimile:   (405) 235-2157

If to an  Investor,  to its  address  and  facsimile  number on the  Schedule of
Investors attached hereto, with copies to such Investor's representatives as set
forth on the  Schedule of Investors or to such other  address  and/or  facsimile
number and/or to the  attention of such other person as the recipient  party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written  confirmation of receipt (A) given by the
recipient  of  such  notice,  consent,   waiver  or  other  communication,   (B)
mechanically  or  electronically  generated  by the sender's  facsimile  machine
containing the time, date,  recipient facsimile number and an image of the first
page of such  transmission  or (C)  provided by a courier or  overnight  courier
service shall be rebuttable  evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

                  (c) Failure of any party to exercise any right or remedy under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy, shall not operate as a waiver thereof.

                  (d)  All  questions  concerning  the  construction,  validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by the
internal laws of the State of New Jersey, without giving effect to any choice of
law or conflict of law  provision or rule (whether of the State of New Jersey or
any other  jurisdiction)  that would  cause the  application  of the laws of any
jurisdiction  other than the State of New Jersey.  Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the Superior Courts of the State of
New Jersey,  sitting in Hudson  County,  New Jersey and  federal  courts for the
District of New Jersey sitting Newark,  New Jersey,  for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein,  and hereby  irrevocably  waives,  and agrees not to
assert in any suit,  action or  proceeding,  any claim that it is not personally
subject  to the  jurisdiction  of any such  court,  that  such  suit,  action or
proceeding is brought in an  inconvenient  forum or that the venue of such suit,
action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding  by mailing a copy  thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute

                                       34
<PAGE>

good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner  permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other  jurisdiction.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

                  (e)   This   Agreement,   the   Irrevocable   Transfer   Agent
Instructions,  the Securities Purchase Agreement and related documents including
the Convertible  Debenture and the Escrow Agreement dated the date hereof by and
among the Company, the Investors set forth on the Schedule of Investors attached
hereto,  and Butler  Gonzalez  LLP (the  "Escrow  Agreement")  and the  Security
Agreement dated the date hereof (the "Security Agreement") constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions,  promises, warranties or undertakings, other
than those set forth or  referred to herein and  therein.  This  Agreement,  the
Irrevocable  Transfer Agent Instructions,  the Securities Purchase Agreement and
related documents including the Convertible Debenture,  the Escrow Agreement and
the Security Agreement  supersede all prior agreements and understandings  among
the parties hereto with respect to the subject matter hereof and thereof.

                  (f)  This  Agreement  shall  inure  to the  benefit  of and be
binding upon the permitted successors and assigns of each of the parties hereto.

                  (g) The  headings in this  Agreement  are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

                  (h) This Agreement may be executed in identical  counterparts,
each of which shall be deemed an original but all of which shall  constitute one
and the same  agreement.  This  Agreement,  once  executed  by a  party,  may be
delivered to the other party hereto by facsimile  transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

                  (i) Each party shall do and  perform,  or cause to be done and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

The language used in this Agreement will be deemed to be the language  chosen by
the parties to express their mutual  intent and no rules of strict  construction
will be applied against any party.

                                       35
<PAGE>

                  (j) This  Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                           [SIGNATURE PAGE TO FOLLOW]

                                       36
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Investor  Registration
Rights Agreement to be duly executed as of day and year first above written.

                                              COMPANY:
                                              POWER TECHNOLOGY, INC.

                                              By:
                                                  ------------------------
                                              Name:    Bernard J. Walter
                                              Title:   President

                                       37
<PAGE>

                                   SCHEDULE I

                              SCHEDULE OF INVESTORS

<TABLE>
<CAPTION>
                                                                               ADDRESS/FACSIMILE
              NAME                           SIGNATURE                          NUMBER OF BUYER
-----------------------------    ------------------------------------    -------------------------------
<S>                              <C>                                     <C>
Cornell Capital Partners, LP     By:    Yorkville Advisors, LLC          101 Hudson Street - Suite 3700
                                 Its:   General Partner                  Jersey City, NJ  07303
                                                                         Facsimile:  (201) 985-8266

                                 By:                                     With a copy to:
                                    -------------------------------      Troy J. Rillo
                                 Name:  Mark A. Angelo                   101 Hudson Street - Suite 3700
                                 Its:   Portfolio Manager                Jersey City, NJ  07303
                                                                         Facsimile:  (201) 985-8266
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[Insert address]

Attention:

         Re:  POWER TECHNOLOGY, INC.

Ladies and Gentlemen:

         We are counsel to Power  Technology,  Inc., a Nevada  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Securities Purchase Agreement (the "Securities Purchase Agreement") entered into
by and among the Company and the  investors  named  therein  (collectively,  the
"Investors") pursuant to which the Company issued to the Investors shares of its
Common Stock, par value $0.001 per share (the "Common  Stock").  Pursuant to the
Purchase  Agreement,  the Company  also has entered into a  Registration  Rights
Agreement  with the Investors  (the "Investor  Registration  Rights  Agreement")
pursuant  to which the  Company  agreed,  among other  things,  to register  the
Registrable  Securities (as defined in the Registration  Rights Agreement) under
the Securities Act of 1933, as amended (the "1933 Act").  In connection with the
Company's  obligations under the Registration Rights Agreement,  on ____________
____,  the Company filed a  Registration  Statement on Form  ________  (File No.
333-_____________)  (the  "Registration  Statement")  with  the  Securities  and
Exchange SEC (the "SEC") relating to the Registrable Securities which names each
of the Investors as a selling stockholder there under.

         In connection  with the  foregoing,  we advise you that a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF  EFFECTIVENESS]  on [ENTER DATE OF  EFFECTIVENESS]  and we have no knowledge,
after  telephonic  inquiry of a member of the SEC's  staff,  that any stop order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration Statement.

                                                  Very truly yours,

                                                  [SECURITIES LAW FIRM]

                                                  By:
                                                     -------------------------
cc:  [LIST NAMES OF INVESTORS]

                                       1

<PAGE>

                                                                       EXHIBIT B

                            FORM OF ESCROW AGREEMENT

                                       2
<PAGE>

                                ESCROW AGREEMENT

         THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
August 27, 2004 by and among POWER TECHNOLOGY,  INC., a Nevada  corporation (the
"Company");  the Buyer(s) listed on the Securities Purchase Agreement, dated the
date hereof (also referred to as the "Investor(s)"),  and BUTLER GONZALEZ,  LLP,
as Escrow Agent hereunder (the "Escrow Agent").

                                   BACKGROUND

         WHEREAS, the Company and the Investor(s) have entered into a Securities
Purchase Agreement (the "Securities Purchase  Agreement"),  dated as of the date
hereof,  pursuant to which the  Company  proposes  to sell  secured  convertible
debentures (the  "Convertible  Debentures")  which shall be convertible into the
Company's Common Stock,  par value $0.001 per share (the "Common  Stock"),  at a
price per share  equal to the  Purchase  Price,  as that term is  defined in the
Securities Purchase  Agreement.  The Securities Purchase Agreement provides that
the Investor(s) shall deposit the purchase amount in a segregated escrow account
to be held by Escrow Agent in order to effectuate a disbursement  to the Company
at a closing to be held as set forth in the Securities  Purchase  Agreement (the
"Closing").

         WHEREAS,  the  Company  intends  to sell  Convertible  Securities  (the
"Offering").

         WHEREAS,  Escrow  Agent has agreed to accept,  hold,  and  disburse the
funds deposited with it in accordance with the terms of this Agreement.

         WHEREAS,  in order to  establish  the escrow of funds and to effect the
provisions of the Securities Purchase Agreement, the parties hereto have entered
into this Agreement.

         NOW THEREFORE,  in consideration of the foregoing,  it is hereby agreed
as follows:

         11. DEFINITIONS.  The following terms shall have the following meanings
when used herein:

                  (a) "Escrow Funds" shall mean the funds  deposited with Escrow
Agent pursuant to this Agreement.

                  (b) "Joint Written  Direction" shall mean a written  direction
executed by the Investor(s) and the Company  directing  Escrow Agent to disburse
all or a portion  of the  Escrow  Funds or to take or  refrain  from  taking any
action pursuant to this Agreement.

                  (c) "Escrow  Period" shall begin with the  commencement of the
Offering and shall terminate upon the earlier to occur of the following dates:

                           (i) The date upon which Escrow Agent confirms that it
has  received  in the  Escrow  Account  all of the  proceeds  of the sale of the
Convertible Debentures;

<PAGE>

                           (ii) The expiration of twenty (20) days from the date
of commencement  of the Offering  (unless  extended by mutual written  agreement
between the Company and the Investor(s)  with a copy of such extension to Escrow
Agent); or

                           (iii) The date upon which a determination  is made by
the Company and the  Investor(s)  to terminate the Offering prior to the sale of
all the Convertible Debentures.

         During the Escrow  Period,  the Company and the  Investor(s)  are aware
that they are not  entitled  to any funds  received  into  escrow and no amounts
deposited in the Escrow  Account shall become the property of the Company or the
Investor(s)  or any other  entity,  or be subject to the debts of the Company or
the Investor(s) or any other entity.

         12.  APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. The Investor(s) and
the Company  hereby  appoint  Escrow Agent to serve as Escrow  Agent  hereunder.
Escrow Agent hereby accepts such  appointment and, upon receipt by wire transfer
of the Escrow Funds in accordance with Section 3 below,  agrees to hold,  invest
and disburse the Escrow Funds in accordance with this Agreement.

                  (a) The Company hereby  acknowledges  that the Escrow Agent is
counsel to the Investor(s) in connection with the transactions  contemplated and
referred herein.  The Company agrees that in the event of any dispute arising in
connection  with this Escrow  Agreement  or  otherwise  in  connection  with any
transaction  or agreement  contemplated  and referred  herein,  the Escrow Agent
shall be permitted to continue to represent the Investor(s) and the Company will
not seek to disqualify such counsel.

         13.  CREATION  OF  ESCROW  FUNDS.  On or  prior  to  the  date  of  the
commencement of the Offering, the parties shall establish an escrow account with
the Escrow  Agent,  which  escrow  account  shall be entitled as follows:  Power
Technology,  Inc./Cornell Capital Partners, LP Escrow Account for the deposit of
the Escrow Funds. The Investor(s) will instruct subscribers to wire funds to the
account of the Escrow Agent as follows:

BANK:                        Wachovia Bank, N.A.
ROUTING #:                   031201467
ACCOUNT #:                   2030000803055
NAME ON ACCOUNT:             Butler Gonzalez LLP as Escrow Agent
NAME ON SUB-ACCOUNT:         Power Technology, Inc./Cornell Capital
                             Partners, LP Escrow account

         14. DEPOSITS INTO THE ESCROW ACCOUNT.  The Investor(s) agrees that they
shall promptly  deliver funds for the payment of the  Convertible  Debentures to
Escrow Agent for deposit in the Escrow Account.

<PAGE>

         15. DISBURSEMENTS FROM THE ESCROW ACCOUNT.

                  (a) The Escrow  Agent will  continue  to hold such funds until
Cornell Capital Partners,  LP on behalf of the Investor(s) and Company execute a
Joint Written Direction  directing the Escrow Agent to disburse the Escrow Funds
pursuant to Joint Written  Direction  signed by the Company and the Investor(s).
In  disbursing  such funds,  Escrow Agent is  authorized to rely upon such Joint
Written  Direction  from the  Company  and the  Investor(s)  and may  accept any
signatory  from the Company  listed on the signature  page to this Agreement and
any signature from the Investor(s) that the Escrow Agent already has on file.

                  (b) In the event  Escrow  Agent does not receive the amount of
the Escrow Funds from the Investor(s), Escrow Agent shall notify the Company and
the Investor(s).  Upon receipt of payment instructions from the Company,  Escrow
Agent shall refund to each subscriber  without interest the amount received from
each Investor(s),  without deduction, penalty, or expense to the subscriber. The
purchase  money returned to each  subscriber  shall be free and clear of any and
all claims of the Company, the Investor(s) or any of their creditors.

                  (c) In the event  Escrow  Agent does receive the amount of the
Escrow  Funds prior to  expiration  of the Escrow  Period,  in no event will the
Escrow Funds be released to the Company  until such amount is received by Escrow
Agent in collected  funds.  For purposes of this Agreement,  the term "collected
funds" shall mean all funds  received by Escrow Agent which have cleared  normal
banking channels and are in the form of cash.

         16. COLLECTION PROCEDURE.  Escrow Agent is hereby authorized to deposit
the proceeds of each wire in the Escrow Account.

         17. SUSPENSION OF PERFORMANCE: DISBURSEMENT INTO COURT. If at any time,
there  shall exist any dispute  between  the  Company and the  Investor(s)  with
respect to  holding or  disposition  of any  portion of the Escrow  Funds or any
other  obligations of Escrow Agent hereunder,  or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if the parties have not within thirty (30) days
of the furnishing by Escrow Agent of a notice of resignation pursuant to Section
9 hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following actions:

                  (a)  suspend  the   performance  of  any  of  its  obligations
(including  without  limitation any disbursement  obligations) under this Escrow
Agreement  until  such  dispute or  uncertainty  shall be  resolved  to the sole
satisfaction  of  Escrow  Agent  or  until a  successor  Escrow  Agent  shall be
appointed (as the case may be); provided however, Escrow Agent shall continue to
invest the Escrow Funds in accordance with Section 8 hereof; and/or

                  (b) petition (by means of an interpleader  action or any other
appropriate method) any court of competent  jurisdiction in any venue convenient
to Escrow Agent, for  instructions  with respect to such dispute or uncertainty,
and to the  extent  required  by law,  pay into  such  court,  for  holding  and
disposition in accordance with the instructions of such court, all funds held by
it in the Escrow Funds,  after deduction and payment to Escrow Agent of all fees
and expenses  (including  court costs and attorneys'  fees) payable to, incurred

<PAGE>

by, or expected to be incurred by Escrow Agent in connection with performance of
its duties and the exercise of its rights hereunder.

                  (c) Escrow Agent shall have no  liability to the Company,  the
Investor(s), or any person with respect to any such suspension of performance or
disbursement  into  court,  specifically  including  any  liability  or  claimed
liability that may arise, or be alleged to have arisen, out of or as a result of
any delay in the  disbursement of funds held in the Escrow Funds or any delay in
with respect to any other action required or requested of Escrow Agent.

         18.  INVESTMENT OF ESCROW FUNDS.  Escrow Agent shall deposit the Escrow
Funds in a non-interest bearing account.

         If Escrow Agent has not received a Joint Written  Direction at any time
that an investment decision must be made, Escrow Agent shall maintain the Escrow
Funds, or such portion thereof,  as to which no Joint Written Direction has been
received, in a non-interest bearing account.

         19.  RESIGNATION  AND REMOVAL OF ESCROW AGENT.  Escrow Agent may resign
from the  performance of its duties  hereunder at any time by giving thirty (30)
days' prior  written  notice to the  parties or may be removed,  with or without
cause, by the parties,  acting jointly,  by furnishing a Joint Written Direction
to Escrow  Agent,  at any time by the  giving of ten (10)  days'  prior  written
notice  to  Escrow  Agent as  provided  herein  below.  Upon any such  notice of
resignation or removal,  the  representatives of the Investor(s) and the Company
identified  in Sections  13a.(iv) and 13b.(iv),  below,  jointly shall appoint a
successor  Escrow  Agent  hereunder,  which shall be a  commercial  bank,  trust
company or other financial  institution  with a combined  capital and surplus in
excess of US$10,000,000.00. Upon the acceptance in writing of any appointment of
Escrow Agent hereunder by a successor Escrow Agent,  such successor Escrow Agent
shall  thereupon  succeed  to and become  vested  with all the  rights,  powers,
privileges  and duties of the retiring  Escrow  Agent,  and the retiring  Escrow
Agent  shall be  discharged  from its duties and  obligations  under this Escrow
Agreement,  but shall not be discharged  from any liability for actions taken as
Escrow Agent  hereunder  prior to such  succession.  After any  retiring  Escrow
Agent's  resignation or removal,  the provisions of this Escrow  Agreement shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrow Funds and shall pay all funds held
by it in the Escrow Funds to the successor Escrow Agent,  after making copies of
such records as the retiring  Escrow Agent deems  advisable and after  deduction
and payment to the retiring  Escrow  Agent of all fees and  expenses  (including
court costs and  attorneys'  fees)  payable to,  incurred  by, or expected to be
incurred by the retiring  Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.

         20. LIABILITY OF ESCROW AGENT.

                  (a) Escrow Agent shall have no liability  or  obligation  with
respect to the Escrow  Funds except for Escrow  Agent's  willful  misconduct  or
gross  negligence.   Escrow  Agent's  sole  responsibility   shall  be  for  the
safekeeping, investment, and disbursement of the Escrow Funds in accordance with
the terms of this  Agreement.  Escrow  Agent  shall  have no  implied  duties or
obligations  and shall not be charged  with  knowledge  or notice or any fact or
circumstance not  specifically set forth herein.  Escrow Agent may rely upon any
instrument,  not only as to its due execution,  validity and effectiveness,  but

<PAGE>

also as to the truth and accuracy of any  information  contained  herein,  which
Escrow Agent shall in good faith  believe to be genuine,  to have been signed or
presented  by the person or parties  purporting  to sign the same and conform to
the provisions of this  Agreement.  In no event shall Escrow Agent be liable for
incidental,  indirect,  special,  and consequential or punitive damages.  Escrow
Agent shall not be obligated to take any legal action or commence any proceeding
in  connection  with the Escrow  Funds,  any account in which  Escrow  Funds are
deposited,  this Agreement or the Purchase Agreement, or to appear in, prosecute
or defend any such legal action or  proceeding.  Escrow Agent may consult  legal
counsel  selected  by  it  in  any  event  of  any  dispute  or  question  as to
construction  of any of the provisions  hereof or of any other  agreement or its
duties  hereunder,  or relating to any dispute  involving any party hereto,  and
shall  incur no  liability  and shall be fully  indemnified  from any  liability
whatsoever  in acting in  accordance  with the opinion or  instructions  of such
counsel.  The Company and the  Investor(s)  jointly and severally shall promptly
pay, upon demand, the reasonable fees and expenses of any such counsel.

                  (b) Escrow Agent is hereby authorized, in its sole discretion,
to comply with orders issued or process entered by any court with respect to the
Escrow Funds, without determination by Escrow Agent of such court's jurisdiction
in the  matter.  If any  portion  of the Escrow  Funds is at any time  attached,
garnished  or  levied  upon  under  any  court  order,  or in case the  payment,
assignment,  transfer,  conveyance  or  delivery of any such  property  shall be
stayed or  enjoined  by any court  order,  or in any case any order  judgment or
decree shall be made or entered by any court affecting such property or any part
thereof,  then and in any such event,  Escrow Agent is  authorized,  in its sole
discretion, to rely upon and comply with any such order, writ judgment or decree
which it is advised by legal counsel  selected by it,  binding upon it,  without
the need for appeal or other action;  and if Escrow Agent complies with any such
order,  writ,  judgment or decree,  it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such compliance even though
such order,  writ  judgment or decree may be  subsequently  reversed,  modified,
annulled, set aside or vacated.

         21.  INDEMNIFICATION  OF ESCROW AGENT.  From and at all times after the
date of this Agreement, the parties jointly and severally, shall, to the fullest
extent  permitted by law and to the extent provided  herein,  indemnify and hold
harmless Escrow Agent and each director, officer, employee,  attorney, agent and
affiliate of Escrow Agent (collectively,  the "Indemnified Parties") against any
and all actions,  claims (whether or not valid), losses,  damages,  liabilities,
costs  and  expenses  of  any  kind  or  nature  whatsoever  (including  without
limitation  reasonable  attorney's  fees,  costs and  expenses)  incurred  by or
asserted against any of the Indemnified  Parties from and after the date hereof,
whether direct, indirect or consequential,  as a result of or arising from or in
any way relating to any claim,  demand,  suit, action, or proceeding  (including
any inquiry or  investigation) by any person,  including without  limitation the
parties to this Agreement,  whether  threatened or initiated,  asserting a claim
for any legal or  equitable  remedy  against  any  person  under any  statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or  equitable  cause or  otherwise,  arising  from or in
connection with the negotiation,  preparation, execution, performance or failure
of performance of this Agreement or any transaction contemplated herein, whether
or not any such  Indemnified  Party is a party to any such action or proceeding,
suit or the target of any such inquiry or investigation; provided, however, that
no  Indemnified  Party  shall  have the right to be  indemnified  hereunder  for
liability finally determined by a court of competent jurisdiction, subject to no

<PAGE>

further appeal, to have resulted from the gross negligence or willful misconduct
of such  Indemnified  Party.  If any such  action or claim  shall be  brought or
asserted against any Indemnified  Party,  such Indemnified  Party shall promptly
notify the Company and the Investor(s) hereunder in writing, and the Investor(s)
and the Company shall assume the defense  thereof,  including the  employment of
counsel and the payment of all expenses.  Such  Indemnified  Party shall, in its
sole discretion,  have the right to employ separate counsel (who may be selected
by such  Indemnified  Party in its sole  discretion)  in any such  action and to
participate and to participate in the defense thereof, and the fees and expenses
of such  counsel  shall  be paid by such  Indemnified  Party,  except  that  the
Investor(s) and/or the Company shall be required to pay such fees and expense if
(a) the  Investor(s) or the Company agree to pay such fees and expenses,  or (b)
the  Investor(s)  and/or the  Company  shall fail to assume the  defense of such
action or proceeding or shall fail, in the sole  discretion of such  Indemnified
Party, to employ counsel reasonably satisfactory to the Indemnified Party in any
such action or proceeding, (c) the Investor(s) and the Company are the plaintiff
in any such action or  proceeding  or (d) the named or potential  parties to any
such action or proceeding  (including any potentially impleaded parties) include
both  the  Indemnified  Party,  the  Company  and/or  the  Investor(s)  and  the
Indemnified  Party shall have been  advised by counsel  that there may be one or
more legal  defenses  available to it which are different  from or additional to
those  available  to the Company or the  Investor(s).  The  Investor(s)  and the
Company  shall be  jointly  and  severally  liable to pay fees and  expenses  of
counsel  pursuant to the preceding  sentence,  except that any obligation to pay
under  clause (a) shall apply only to the party so  agreeing.  All such fees and
expenses payable by the Company and/or the Investor(s) pursuant to the foregoing
sentence  shall be paid from time to time as  incurred,  both in  advance of and
after the final  disposition  of such action or claim.  The  obligations  of the
parties under this section shall survive any termination of this Agreement,  and
resignation  or  removal  of  the  Escrow  Agent  shall  be  independent  of any
obligation of Escrow Agent.

         The  parties  agree  that  neither   payment  by  the  Company  or  the
Investor(s)  of any claim by Escrow Agent for  indemnification  hereunder  shall
impair,  limit,  modify,  or affect, as between the Investor(s) and the Company,
the respective  rights and obligations of Investor(s),  on the one hand, and the
Company, on the other hand.

         22.  EXPENSES  OF ESCROW  AGENT.  Except as set forth in Section 11 the
Company shall  reimburse  Escrow Agent for all of its  reasonable  out-of-pocket
expenses,  including  attorneys' fees, travel expenses,  telephone and facsimile
transmission  costs,  postage  (including  express mail and  overnight  delivery
charges),   copying  charges  and  the  like.  All  of  the   compensation   and
reimbursement  obligations  set forth in this  Section  shall be  payable by the
Company,  upon demand by Escrow Agent. The obligations of the Company under this
Section shall survive any  termination of this Agreement and the  resignation or
removal of Escrow Agent.

         23. WARRANTIES.

                  (a) The Investor(s)  makes the following  representations  and
warranties to Escrow Agent:

                           (i) The  Investor(s)  has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.

<PAGE>

                           (ii) This  Agreement  has been duly  approved  by all
necessary  action of the  Investor(s),  including any necessary  approval of the
limited  partner  of  the  Investor(s)  or  necessary  corporate  approval,   as
applicable,  has been executed by duly authorized  officers of the  Investor(s),
enforceable in accordance with its terms.

                           (iii) The execution, delivery, and performance of the
Investor(s)  of this  Agreement  will not  violate,  conflict  with,  or cause a
default  under any  agreement  of  limited  partnership  of  Investor(s)  or the
certificate of incorporation  or bylaws of the Investor(s) (as applicable),  any
applicable law or regulation, any court order or administrative ruling or degree
to which the  Investor(s)  is a party or any of its property is subject,  or any
agreement, contract, indenture, or other binding arrangement.

                           (iv) Mark  Angelo has been duly  appointed  to act as
the representative of the Investor(s) hereunder and has full power and authority
to execute,  deliver, and perform this Escrow Agreement,  to execute and deliver
any Joint Written  Direction,  to amend,  modify, or waive any provision of this
Agreement,  and  to  take  any  and  all  other  actions  as  the  Investor(s)'s
representative  under this  Agreement,  all without further consent or direction
form, or notice to, the Investor(s) or any other party.

                           (v) No party  other than the  parties  hereto and the
Investor(s)s  have, or shall have, any lien,  claim or security  interest in the
Escrow  Funds or any part  thereof.  No  financing  statement  under the Uniform
Commercial Code is on file in any jurisdiction  claiming a security  interest in
or describing  (whether  specifically or generally) the Escrow Funds or any part
thereof.

                           (vi) All of the representations and warranties of the
Investor(s)  contained  herein are true and  complete  as of the date hereof and
will be true and complete at the time of any disbursement from the Escrow Funds.

                  (b)  The  Company  makes  the  following  representations  and
warranties to the Escrow Agent:

                           (i) The  Company  is a  corporation  duly  organized,
validly existing, and in good standing under the laws of the State of Nevada and
has full power and  authority  to execute  and  deliver  this  Agreement  and to
perform its obligations hereunder.

                           (ii) This  Agreement  has been duly  approved  by all
necessary corporate action of the Company,  including any necessary  shareholder
approval,  has  been  executed  by  duly  authorized  officers  of the  Company,
enforceable in accordance with its terms.

                           (iii) The execution, delivery, and performance by the
Company  of  this  Agreement  is in  accordance  with  the  Securities  Purchase
Agreement  and will not violate,  conflict  with,  or cause a default  under the
certificate of incorporation  (or articles of  incorporation,  as applicable) or
bylaws of the Company,  any  applicable  law or  regulation,  any court order or
administrative  ruling or decree to which the  Company  is a party or any of its
property is subject,  or any agreement,  contract,  indenture,  or other binding
arrangement,  including without limitation to the Securities Purchase Agreement,
to which the Company is a party.

<PAGE>

                           (iv) Bernard J. Walter has been duly appointed to act
as the  representative of the Company hereunder and has full power and authority
to execute,  deliver,  and perform  this  Agreement,  to execute and deliver any
Joint  Written  Direction,  to  amend,  modify or waive  any  provision  of this
Agreement and to take all other actions as the  Company's  Representative  under
this Agreement, all without further consent or direction from, or notice to, the
Company or any other party.

                           (v) No party  other than the  parties  hereto and the
Investor(s)s  have, or shall have, any lien,  claim or security  interest in the
Escrow  Funds or any part  thereof.  No  financing  statement  under the Uniform
Commercial Code is on file in any jurisdiction  claiming a security  interest in
or describing  (whether  specifically or generally) the Escrow Funds or any part
thereof.

                           (vi) All of the representations and warranties of the
Company contained herein are true and complete as of the date hereof and will be
true and complete at the time of any disbursement from the Escrow Funds.

         24.  CONSENT TO  JURISDICTION  AND  VENUE.  In the event that any party
hereto commences a lawsuit or other proceeding  relating to or arising from this
Agreement,  the parties  hereto agree that the United States  District Court for
the District of New Jersey shall have the sole and exclusive  jurisdiction  over
any  such   proceeding.   If  all  such  courts  lack  federal   subject  matter
jurisdiction,  the parties agree that the Superior Court Division of New Jersey,
Chancery  Division of Hudson County shall have sole and exclusive  jurisdiction.
Any of these  courts  shall be proper  venue for any such  lawsuit  or  judicial
proceeding and the parties hereto waive any objection to such venue. The parties
hereto consent to and agree to submit to the  jurisdiction  of any of the courts
specified  herein  and agree to accept the  service of process to vest  personal
jurisdiction over them in any of these courts.

         25. NOTICE. All notices and other communications  hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered five
(5) days after deposit in the United States mails, by certified mail with return
receipt requested and postage prepaid,  when delivered  personally,  one (1) day
delivered  to  any  overnight   courier,   or  when   transmitted  by  facsimile
transmission  and upon  confirmation of receipt and addressed to the party to be
notified as follows:

If to Investor(s), to:            Cornell Capital Partners, LP
                                  101 Hudson Street - Suite 3700
                                  Jersey City, NJ 07302
                                  Attention:  Mark A. Angelo
                                              Portfolio Manager
                                  Telephone:  (201) 985-8300
                                  Facsimile:  (201) 985-8266

<PAGE>

If to Escrow Agent, to:           Butler Gonzalez LLP
                                  1416 Morris Avenue, Suite 207
                                  Union, NJ 07083
                                  Attention:  David Gonzalez, Esq.
                                  Telephone:  (908) 810-8588
                                  Facsimile:  (908) 810-0973

If to the Company, to:            Power Technology, Inc.
                                  1770 St. James Place, Suite 115
                                  Houston, Texas 77056
                                  Attention:  Bernard J. Walter
                                  Telephone:  (281) 804-8854
                                  Facsimile:  (713) 426-5953

With a copy to:                   Stephen A. Zrenda, Jr., P.C.
                                  100 N. Broadway, Suite 2440
                                  Oklahoma City, OK 73102
                                  Attention:   Stephen A. Zrenda, Jr.
                                  Telephone:  (405) 235-2111
                                  Facsimile:  (405) 235-2157

Or to such other address as each party may designate for itself by like notice.

         26.  AMENDMENTS  OR WAIVER.  This  Agreement  may be  changed,  waived,
discharged  or terminated  only by a writing  signed by the parties  hereto.  No
delay or omission by any party in exercising any right with respect hereto shall
operate as waiver.  A waiver on any one occasion shall not be construed as a bar
to, or waiver of, any right or remedy on any future occasion.

         27.  SEVERABILITY.  To the extent any  provision  of this  Agreement is
prohibited  by  or  invalid  under  applicable  law,  such  provision  shall  be
ineffective  to  the  extent  of  such  prohibition,   or  invalidity,   without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

         28. GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance  with the  internal  laws of the State of New Jersey  without  giving
effect to the conflict of laws principles thereof.

         29. ENTIRE AGREEMENT.  This Agreement  constitutes the entire Agreement
between the parties relating to the holding, investment, and disbursement of the
Escrow Funds and sets forth in their entirety the  obligations and duties of the
Escrow Agent with respect to the Escrow Funds.

         30. BINDING EFFECT. All of the terms of this Agreement, as amended from
time to time,  shall be binding upon, inure to the benefit of and be enforceable
by the respective heirs, successors and assigns of the Investor(s), the Company,
or the Escrow Agent.

<PAGE>

         31.  EXECUTION OF  COUNTERPARTS.  This  Agreement and any Joint Written
Direction  may be  executed  in  counter  parts,  which when so  executed  shall
constitute one and same agreement or direction.

         32.  TERMINATION.  Upon the first to occur of the  disbursement  of all
amounts  in the  Escrow  Funds  pursuant  to  Joint  Written  Directions  or the
disbursement of all amounts in the Escrow Funds into court pursuant to Section 7
hereof,  this Agreement  shall  terminate and Escrow Agent shall have no further
obligation or liability  whatsoever with respect to this Agreement or the Escrow
Funds.

                           [SIGNATURE PAGE TO FOLLOW]

<PAGE>

         IN WITNESS  WHEREOF the parties have hereunto set their hands and seals
the day and year above set forth.

                                           POWER TECHNOLOGY, INC.

                                           By:
                                               ------------------------------
                                           Name:    Bernard J. Walter
                                           Title:   President

                                           CORNELL CAPITAL PARTNERS, LP

                                           BY:      YORKVILLE ADVISORS, LLC
                                           ITS:     GENERAL PARTNER

                                           By:
                                               ------------------------------
                                           Name:    Mark Angelo
                                           Title:   Portfolio Manager

                                           BUTLER GONZALEZ LLP

                                           By:
                                               ------------------------------
                                           Name:    David Gonzalez, Esq.
                                           Title:   Partner

<PAGE>

                                                                       EXHIBIT C

                           TRANSFER AGENT INSTRUCTIONS

<PAGE>

                     IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

August 27, 2004

Pacific Stock Transfer Company
500 E Warm Springs Rd., Suite 240
Las Vegas,  NV 89119

Attention:

         RE:  POWER TECHNOLOGY, INC

Ladies and Gentlemen:

         Reference is made to that certain  Securities  Purchase  Agreement (the
"Securities  Purchase  Agreement")  of even date  herewith by and between  Power
Technology, Inc., a Nevada corporation (the "Company"), and the Buyers set forth
on Schedule I attached thereto (collectively the "Buyer"), pursuant to which the
Company shall sell to the Buyer up to Five Hundred Thousand  Dollars  ($500,000)
of the Company's secured convertible debentures, which shall be convertible into
shares of the Company's  common  stock,  par value $0.001 per share (the "Common
Stock").  The shares of Common Stock to be issued upon a periodic  conversion (a
"Conversion")  of  the  secured  convertible  debentures   (including,   without
limitation,  principal,  interest and liquidated damages) are referred to herein
as  the  "Conversion  Shares."  This  letter  shall  serve  as  our  irrevocable
authorization  and direction to you (provided that you are the transfer agent of
the Company at such time) to issue the Conversion  Shares to the Buyer from time
to time in the event of a Conversion  upon your receipt of a properly  completed
and duly executed  Conversion  Notice, in the form attached hereto as Exhibit I,
delivered on behalf of the Company by David Gonzalez, Esq.

         Specifically,  upon  receipt  by David  Gonzalez,  Esq.  of a copy of a
Conversion Notice, David Gonzalez, Esq., on behalf of the Company, shall as soon
as  practicable,  but in no event  later than one (1)  Trading  Day (as  defined
below)  after  receipt  of  such  Conversion  Notice,  send,  via  facsimile,  a
Conversion Notice,  which shall constitute an irrevocable  instruction to you to
process  such   Conversion   Notice  in  accordance  with  the  terms  of  these
instructions. Upon your receipt of a copy of the executed Conversion Notice, you
shall use your best efforts to, within three (3) Trading Days following the date
of receipt of the Conversion Notice, (A) issue and surrender to a common carrier
for overnight  delivery to the address as specified in the Conversion  Notice, a
certificate, registered in the name of the Buyer or its designee, for the number
of shares of Common  Stock to which the Buyer  shall be entitled as set forth in
the Conversion  Notice or (B) provided you are  participating  in The Depository
Trust Company  ("DTC") Fast  Automated  Securities  Transfer  Program,  upon the
request of the Buyer,  credit such aggregate number of shares of Common Stock to
which the Buyer  shall be  entitled  to the  Buyer's or its  designee's  balance
account with DTC through its Deposit  Withdrawal  At Custodian  ("DWAC")  system
provided the Buyer  causes its bank or broker to initiate the DWAC  transaction.

                                       2
<PAGE>

("Trading  Day"  shall  mean  any day on which  the  Nasdaq  Market  is open for
customary trading.) .) Notwithstanding  anything to the contrary herein, you are
under no obligation to process such Conversion  Notice unless it is delivered by
Butler Gonzales, LLP.

         The  Company  hereby  confirms  to you and the Buyer that  certificates
representing the Conversion Shares,  the Interest Shares,  and/or the Liquidated
Damages Shares shall not bear any legend restricting  transfer of the Conversion
Shares thereby and should not be subject to any  stop-transfer  restrictions and
shall  otherwise be freely  transferable on the books and records of the Company
provided that the Company counsel delivers (i) the Notice of  Effectiveness  set
forth in Exhibit II  attached  hereto and (ii) an opinion of counsel in the form
set forth in Exhibit III attached hereto, and that if the Conversion Shares, the
Interest  Shares,  and/or the  Liquidated  Damages Shares are not registered for
sale under the Securities Act of 1933, as amended, then the certificates for the
Conversion Shares shall bear the following legend:

             "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
             REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
             APPLICABLE  STATE  SECURITIES  LAWS. THE SECURITIES  HAVE BEEN
             ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
             TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE
             REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
             ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES LAWS,
             OR AN OPINION OF COUNSEL,  IN A FORM REASONABLY  ACCEPTABLE TO
             THE COMPANY,  THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
             OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
             RULE 144 UNDER SAID ACT."

         The  Company  hereby  confirms  that  in the  event  that a stop  order
suspending the  effectiveness of the  Registration  Statement has been issued by
the SEC or any  proceeding for that purpose is threatened by the SEC you will be
notified by us  immediately  of such order or notice.  In addition,  the Company
shall promptly inform Pacific Stock Transfer of any voluntary  suspension of the
effectiveness  of the  Registration  Statement  upon  inquiry by  Pacific  Stock
Transfer.

         The  Company  hereby  confirms  and  Pacific  Stock  Transfer   Company
acknowledges  that in the event Counsel to the Company does not issue an opinion
of counsel as required to issue the Conversion Shares free of legend the Company
authorizes and Pacific Stock Transfer  Company will accept an opinion of Counsel
from Butler Gonzalez LLP.

         The Company hereby  confirms to you and the Buyer that no  instructions
other  than as  contemplated  herein  will be given to you by the  Company  with
respect to the  Conversion  Shares.  The Company hereby agrees that it shall not

                                       3
<PAGE>

replace Pacific Stock Transfer  Company as the Company's  transfer agent without
the prior written consent of the Buyer.

         Any attempt by you to resign as transfer agent  hereunder  shall not be
effective  until such time as the Company  provides to you written notice that a
suitable  replacement  has agreed to serve as transfer  agent and to be bound by
the terms and  conditions  of these  Irrevocable  Transfer  Agent  Instructions.
Notwithstanding  the  foregoing,  if the Company has not paid fees in accordance
with the agreed upon fee  schedule for a period of sixty (60) days from the date
of any  invoice  and notice has been given to the  Company and the Buyer of such
non-payment  and the  non-payment has not been cured within fifteen (15) days of
the  notice,  the  preceding  sentences  shall be  deemed  null and void and any
resignation by you will be effective upon receipt.

         The Company and Pacific Stock Transfer  Company hereby  acknowledge and
confirm that  complying  with the terms of this Agreement does not and shall not
prohibit  Pacific Stock Transfer  Company from  satisfying any and all fiduciary
responsibilities and duties it may owe to the Company.

         The Company and Pacific Stock  Transfer  Company  acknowledge  that the
Buyer is relying on the  representations  and covenants  made by the Company and
Pacific Stock Transfer  Company  hereunder and are a material  inducement to the
Buyer purchasing convertible debentures under the Securities Purchase Agreement.
The Company and Pacific Stock Transfer Company further  acknowledge that without
such  representations  and covenants of the Company and Pacific  Stock  Transfer
Company made hereunder,  the Buyer would not enter into the Securities  Purchase
Agreement and purchase convertible debentures pursuant thereto.

         Each party  hereto  specifically  acknowledges  and agrees  that in the
event of a breach  or  threatened  breach  by a party  hereto  of any  provision
hereof,  the Buyer will be irreparably  damaged and that damages at law would be
an inadequate remedy if these Irrevocable  Transfer Agent  Instructions were not
specifically enforced.  Therefore, in the event of a breach or threatened breach
by a party hereto, including,  without limitation,  the attempted termination of
the agency relationship created by this instrument, the Buyer shall be entitled,
in addition to all other rights or remedies,  to an injunction  restraining such
breach,  without being required to show any actual damage or to post any bond or
other security, and/or to a decree for specific performance of the provisions of
these Irrevocable Transfer Agent Instructions.

                                    * * * * *

                                       4
<PAGE>

         IN WITNESS  WHEREOF,  the parties  have  caused  this letter  agreement
regarding  Irrevocable  Transfer  Agent  Instructions  to be duly  executed  and
delivered as of the date first written above.

                                          COMPANY:
                                          (i) POWER TECHNOLOGY, INC.

                                          By:
                                              -------------------------------
                                          Name:  Bernard J. Walter
                                          Title: President

                                          -----------------------------------
                                          David Gonzalez, Esq.

                                          (ii)

                                          (iii)

                                          (iv)

                                          (1) PACIFIC STOCK TRANSFER COMPANY

                                          By:
                                             --------------------------------
                                          Name:
                                               ------------------------------
                                          Title:
                                                -----------------------------

                                       5
<PAGE>

                                   SCHEDULE I

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
                                                                       ADDRESS/FACSIMILE
NAME                              SIGNATURE                            NUMBER OF BUYER
-----------------------------     ---------------------------------    -------------------------------
<S>                               <C>                                  <C>
Cornell Capital Partners, LP      By:    Yorkville Advisors, LLC       101 Hudson Street - Suite 3700
                                  Its:   General Partner               Jersey City, NJ  07303
                                                                       Facsimile:  (201) 985-8266

                                  By:                                  With a copy to:
                                     ----------------------------
                                  Name:  Mark A. Angelo                Troy J. Rillo
                                  Its:   Portfolio Manager             101 Hudson Street - Suite 3700
                                                                       Jersey City, NJ  07303
                                                                       Facsimile:  (201) 985-8266
</TABLE>

                                  SCHEDULE I-1

<PAGE>

                                    EXHIBIT I

                   TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

                            FORM OF CONVERSION NOTICE

         Reference is made to the Securities Purchase Agreement (the "Securities
Purchase  Agreement")  between Power  Technology,  Inc.,  (the  "Company"),  and
Cornell Capital  Partners,  LP, dated as of August ____ 2004. In accordance with
and pursuant to the Securities Purchase Agreement, the undersigned hereby elects
to convert convertible  debentures into shares of common stock, no par value per
share (the "Common Stock"),  of the Company for the amount indicated below as of
the date specified below.

Conversion Date:                                       _________________________

Amount to be converted:                                $ _______________________

Conversion Price:                                      $ _______________________

Shares of Common Stock Issuable:                       _________________________

Amount of Debenture unconverted:                       $ _______________________

Amount of Interest Converted:                          $ _______________________

Conversion Price of Interest:                          $ _______________________

Shares of Common Stock Issuable:                       _________________________

Amount of Liquidated Damages:                          $ _______________________

Conversion Price of Liquidated Damages:                $ _______________________

Shares of Common Stock Issuable:                       _________________________

Total Number of shares of Common Stock to be issued:   _________________________

                                   EXHIBIT I-1
<PAGE>

Please  issue  the  shares  of  Common  Stock in the  following  name and to the
following address:

Issue to:                                       ________________________________

Authorized Signature:                           ________________________________

Name:                                           ________________________________

Title:                                          ________________________________

Phone #:                                        ________________________________

Broker DTC Participant Code:                    ________________________________

Account Number*:                                ________________________________

     * NOTE THAT RECEIVING BROKER MUST INITIATE TRANSACTION ON DWAC SYSTEM.

<PAGE>

                                   EXHIBIT II

                   TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

_________________, 2004

                                [Insert address]

Attention:

         RE:  POWER TECHNOLOGY, INC

Ladies and Gentlemen:

         We are  counsel to Power  Technology,  Inc, a Nevada  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Securities  Purchase  Agreement,  dated as of August __,  2004 (the  "Securities
Purchase  Agreement"),  entered into by and among the Company and the Buyers set
forth on Schedule I attached  thereto  (collectively  the  "Buyer")  pursuant to
which the  Company has agreed to sell to the Buyer up to Five  Hundred  Thousand
Dollars ($500,000) of secured convertible debentures, which shall be convertible
into shares (the  "Conversion  Shares") of the Company's  common  stock,  no par
value  per share  (the  "Common  Stock"),  in  accordance  with the terms of the
Securities  Purchase  Agreement.  Pursuant to the Securities Purchase Agreement,
the Company also has entered into a Registration  Rights Agreement,  dated as of
August __, 2004, with the Buyer (the "Investor  Registration  Rights Agreement")
pursuant  to which the  Company  agreed,  among other  things,  to register  the
Conversion Shares under the Securities Act of 1933, as amended (the "1933 Act").
In  connection  with the Company's  obligations  under the  Securities  Purchase
Agreement and the Registration Rights Agreement,  on _______,  2004, the Company
filed a  Registration  Statement  (File No.  ___-_________)  (the  "Registration
Statement") with the Securities and Exchange  Commission (the "SEC") relating to
the sale of the Conversion Shares.

         In connection  with the  foregoing,  we advise you that a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the Registration  Statement  effective under the 1933 Act at ____ P.M.
on  __________,  2004 and we have no knowledge,  after  telephonic  inquiry of a
member of the SEC's staff,  that any stop order suspending its effectiveness has
been issued or that any  proceedings  for that  purpose are pending  before,  or
threatened  by, the SEC and the  Conversion  Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.

                                  EXHIBIT II-1
<PAGE>

         The Buyer has  confirmed it shall comply with all  securities  laws and
regulations   applicable  to  it  including   applicable   prospectus   delivery
requirements upon sale of the Conversion Shares.

                                             Very truly yours,

                                             [SECURITIES LAW FIRM]

                                             By:
                                                -----------------------------

<PAGE>

                                   EXHIBIT III

                   TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

                                 FORM OF OPINION

________________ 2004

VIA FACSIMILE AND REGULAR MAIL

[Insert address]

Attention:  _____________________

         RE:  POWER TECHNOLOGY, INC

Ladies and Gentlemen:

         We have  acted  as  special  counsel  to  Power  Technology,  Inc  (the
"Company"),  in  connection  with the  registration  of  ___________shares  (the
"Shares") of its common stock with the Securities and Exchange  Commission  (the
"SEC"). We have not acted as your counsel.  This opinion is given at the request
and with the consent of the Company.

         In  rendering  this  opinion  we have  relied  on the  accuracy  of the
Company's  Registration  Statement on Form SB-2,  as amended (the  "Registration
Statement"),  filed by the Company  with the SEC on  _________  ___,  2004.  The
Company  filed  the   Registration   Statement  on  behalf  of  certain  selling
stockholders  (the "Selling  Stockholders").  This opinion relates solely to the
Selling Shareholders listed on Exhibit "A" hereto and number of Shares set forth
opposite such Selling  Stockholders'  names.  The SEC declared the  Registration
Statement effective on __________ ___, 2004.

         We understand  that the Selling  Stockholders  acquired the Shares in a
private offering exempt from  registration  under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Shareholders
is  contained  under the  heading  "Selling  Stockholders"  in the  Registration
Statement,  which information is incorporated herein by reference.  This opinion
does not relate to the issuance of the Shares to the Selling  Stockholders.  The
opinions set forth herein  relate  solely to the sale or transfer by the Selling
Stockholders  pursuant to the  Registration  Statement under the Federal laws of
the United States of America.  We do not express any opinion  concerning any law
of any state or other jurisdiction.

         In  rendering  this  opinion we have  relied  upon the  accuracy of the
foregoing statements.

         Based on the  foregoing,  it is our  opinion  that the Shares have been
registered with the Securities and Exchange  Commission under the Securities Act

                                  EXHIBIT III-1

<PAGE>

of 1933,  as  amended,  and that  _______  may  remove the  restrictive  legends
contained on the Shares. This opinion relates solely to the number of Shares set
forth opposite the Selling Stockholders listed on Exhibit "A" hereto.

         This opinion is furnished to you  specifically  in connection  with the
issuance of the Shares, and solely for your information and benefit. This letter
may not be relied upon by you in any other connection,  and it may not be relied
upon by any other  person or entity for any purpose  without  our prior  written
consent.  This  opinion may not be  assigned,  quoted or used  without our prior
written  consent.  The  opinions  set forth  herein are  rendered as of the date
hereof and we will not  supplement  this  opinion with respect to changes in the
law or factual matters subsequent to the date hereof.

Very truly yours,

[SECURITIES LAW FIRM]

                                   EXHIBIT "A"

                         (LIST OF SELLING STOCKHOLDERS)

NAME:                                                  NO. OF SHARES:
---------------------------------------------          -------------------------

<PAGE>

                                   SCHEDULE I

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
                                                                          ADDRESS/FACSIMILE             AMOUNT OF
             NAME                           SIGNATURE                      NUMBER OF BUYER            SUBSCRIPTION
-----------------------------    ------------------------------    ------------------------------     ------------
<S>                              <C>                               <C>                                   <C>
Cornell Capital Partners, LP     By:   Yorkville Advisors, LLC     101 Hudson Street - Suite 3700        $500,000
                                 Its:  General Partner             Jersey City, NJ  07302
                                                                   Facsimile:   (201) 985-8266

                                 By:                               With a copy to:
                                    ------------------------
                                 Name: Mark A. Angelo              Troy J. Rillo
                                 Its:  Portfolio Manager           101 Hudson Street - Suite 3700
                                                                   Jersey City, NJ  07302
                                                                   Facsimile:   (201) 985-8266
</TABLE>Exhibit 10.2

THIS  SECURED  DEBENTURE,  AND  THE  SECURITIES  INTO  WHICH  IT IS  CONVERTIBLE
(COLLECTIVELY,  THE  "SECURITIES"),  HAVE NOT BEEN  REGISTERED  WITH THE  UNITED
STATES  SECURITIES AND EXCHANGE  COMMISSION OR THE SECURITIES  COMMISSION OF ANY
STATE.  THE  SECURITIES  ARE  BEING  OFFERED  PURSUANT  TO A  SAFE  HARBOR  FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT").  THE SECURITIES ARE  "RESTRICTED" AND MAY NOT BE OFFERED OR
SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,  PURSUANT TO REGULATION
D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION  REQUIREMENTS OF THE
ACT AND THE  COMPANY  WILL BE  PROVIDED  WITH  OPINION  OF COUNSEL OR OTHER SUCH
INFORMATION  AS IT MAY  REASONABLY  REQUIRE TO CONFIRM THAT SUCH  EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE
EXCEPT IN COMPLIANCE WITH THE ACT.

                             POWER TECHNOLOGY, INC.

                        5% Secured Convertible Debenture

                                 August 27, 2006

--------------------------------------------------------------------------------
No. CCP-1                                                               $250,000
--------------------------------------------------------------------------------

         This Secured Debenture (the "Debenture") is issued by POWER TECHNOLOGY,
INC., a Nevada  corporation (the  "Company"),  to CORNELL CAPITAL  PARTNERS,  LP
(together with its permitted  successors and assigns,  the "Holder") pursuant to
exemptions from registration under the Securities Act of 1933, as amended.

<PAGE>

                                   ARTICLE 1.

ARTICLE 1.1 Principal and Interest.  For value received, on August 27, 2004 (the
            ----------------------
"Closing  Date"),  the Company hereby promises to pay to the order of the Holder
on August  27,  2006 in lawful  money of the  United  States of  America  and in
immediately  available  funds the principal  sum of Two Hundred  Fifty  Thousand
Dollars  ($250,000),  together  with  interest on the unpaid  principal  of this
Debenture at the rate of five percent (5%) per year  (computed on the basis of a
365-day year and the actual days elapsed) from the date of this Debenture  until
paid.  At the  Company's  option,  the entire  principal  amount and all accrued
interest shall be either (a) paid to the Holder on the second (2nd)  anniversary
from the date hereof or (b)  converted  in  accordance  with Section 1.02 herein
provided, however, that in no event shall the Holder be entitled to convert this
Debenture  for a number of shares  of Common  Stock in excess of that  number of
shares of Common Stock which, upon giving effect to such conversion, would cause
the aggregate number of shares of Common Stock  beneficially owned by the Holder
and its affiliates to exceed 4.99% of the outstanding shares of the Common Stock
following such conversion.

ARTICLE 1.2  Optional  Conversion.  The Holder is  entitled,  at its option,  to
             --------------------
convert,  and sell on the same  day,  at any time and from  time to time,  until
payment in full of this  Debenture,  all or any part of the principal  amount of
the Debenture  into shares (the  "Conversion  Shares") of the  Company's  common
stock, par value $0.001 per share ("Common Stock"),  at the price per share (the
"Conversion  Price")  equal to the lesser of (a) an amount  equal to one hundred
twenty  percent (120%) of the closing bid price of the Common Stock as listed on
a Principal Market (as defined herein),  as quoted by Bloomberg L.P. (the "Fixed
Price") as of the Closing Date, or (b) an amount equal to 100% of the average of
the three lowest Closing Bid Prices (the "Closing Bid Price")  Stock,  as quoted
by  Bloomberg,  LP, for the thirty (30) trading days  immediately  preceding the
Conversion  Date  (as  defined  herein).  Subparagraphs  (a) and (b)  above  are
individually  referred to as a "Conversion  Price".  As used herein,  "Principal
Market"  shall  mean The  National  Association  of  Securities  Dealers  Inc.'s
Over-The-Counter  Bulletin  Board,  Nasdaq  SmallCap  Market,  or American Stock
Exchange.  If the Common Stock is not traded on a Principal Market,  the Closing
Bid Price shall mean,  the reported  Closing Bid Price for the Common Stock,  as
furnished by the National  Association  of  Securities  Dealers,  Inc.,  for the
applicable  periods.  No fraction of shares or scrip  representing  fractions of
shares will be issued on conversion,  but the number of shares issuable shall be
rounded to the nearest whole share. To convert this Debenture, the Holder hereof
shall deliver written notice thereof,  substantially  in the form of Exhibit "A"
to this Debenture, with appropriate insertions (the "Conversion Notice"), to the
Company at its address as set forth herein.  The date upon which the  conversion
shall be effective  (the  "Conversion  Date") shall be deemed to be the date set
forth in the Conversion Notice.

ARTICLE 1.3  Reservation  of Common  Stock.  The Company  shall reserve and keep
             -----------------------------
available out of its authorized but unissued shares of Common Stock,  solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of  Common  Stock  as shall  from  time to time be  sufficient  to  effect  such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
Company shall call and hold a special meeting of its stockholders  within thirty
(30)  days of that  time  for the sole  purpose  of  increasing  the  number  of
authorized shares of Common Stock.

                                       2
<PAGE>

ARTICLE 1.4 Right of Redemption.  The Company at its option shall have the right
            -------------------
to redeem,  with three (3) business days advance written notice (the "Redemption
Notice"), a portion, or all, of the outstanding Debenture.  The redemption price
shall be one hundred twenty  percent (120%) of the amount  redeemed plus accrued
interest.

         In the event the  Company  exercises  a  redemption  of either all or a
portion the  Debenture,  the Holder shall  receive a warrant to purchase  50,000
shares of the Company's Common Stock for every One Hundred Thousand U.S. Dollars
(US$100,000)  redeemed,   pro  rata  (the  "Warrant").   The  Warrant  shall  be
exercisable  on a "cash  basis" and have an  exercise  price of one  hundred and
twenty percent (120%) of the Closing Bid Price of the Company's  Common Stock on
the Closing Date. The Warrant shall have  "piggy-back"  and demand  registration
rights and shall survive for two (2) years from the Closing Date.

ARTICLE 1.5 Registration Rights. The Company is obligated to register the resale
            -------------------
of the Conversion Shares under the Securities Act of 1933, as amended,  pursuant
to the terms of a  Registration  Rights  Agreement,  between the Company and the
Holder of even date herewith (the "Investor Registration Rights Agreement").

ARTICLE 1.6 Interest Payments.  The interest so payable will be paid at the time
            -----------------
of maturity, redemption or conversion to the person in whose name this Debenture
is registered.  At the time such interest is payable,  the Company,  in its sole
discretion,  may  elect  to pay the  interest  in cash  (via  wire  transfer  or
certified  funds) or in the form of Common  Stock.  In the event of default,  as
described in Article III Section 3.01  hereunder,  the Holder may elect that the
interest be paid in cash (via wire  transfer or certified  funds) or in the form
of Common Stock. If paid in the form of Common Stock,  the amount of stock to be
issued  will be  calculated  as  follows:  the value of the  stock  shall be the
Closing Bid Price on: (i) the date the  interest  payment is due; or (ii) if the
interest  payment is not made when due, the date the interest payment is made. A
number of shares of Common  Stock with a value  equal to the amount of  interest
due shall be issued.  No  fractional  shares will be issued;  therefore,  in the
event  that the value of the  Common  Stock  per share  does not equal the total
interest due, the Company will pay the balance in cash.

ARTICLE 1.7 Paying  Agent and  Registrar.  Initially,  the  Company  will act as
            ----------------------------
paying agent and registrar.  The Company may change any paying agent, registrar,
or  Company-registrar by giving the Holder not less than ten (10) business days'
written notice of its election to do so, specifying the name, address, telephone
number and facsimile  number of the paying agent or  registrar.  The Company may
act in any such capacity.

ARTICLE 1.8 Secured Nature of Debenture. This Debenture is secured by all of the
            ---------------------------
assets and property of the Company and its wholly owned subsidiary,  all as more
particularly  described in those two Security  Agreements  of even date herewith
(collectively, the "Security Agreements").

                                       3
<PAGE>

                                   ARTICLE 2.

ARTICLE 2.1 Amendments and Waiver of Default.  The Debenture may not be amended.
            --------------------------------
Notwithstanding the above,  without the consent of the Holder, the Debenture may
be amended to cure any  ambiguity,  defect or  inconsistency,  or to provide for
assumption of the Company obligations to the Holder.

                                   ARTICLE 3.

ARTICLE  3.1 Events of Default.  An Event of Default is defined as follows:  (a)
             -----------------
failure by the Company to pay amounts due hereunder  within fifteen (15) days of
the date of  maturity  of this  Debenture;  (b) failure by the Company to comply
with the terms of the Irrevocable  Transfer Agent  Instructions  attached to the
Securities  Purchase  Agreement;  (c) failure by the Company's transfer agent to
issue freely  tradeable Common Stock to the Holder within five (5) business days
of the Company's  receipt of the attached Notice of Conversion from Holder;  (d)
failure by the Company for ten (10)  business  days after notice to it to comply
with any of its other  agreements in the Debenture;  (e) events of bankruptcy or
insolvency;  (f) a breach by the Company of its obligations under the Securities
Purchase  Agreement or the Investor  Registration  Rights Agreement which is not
cured by the  Company  within ten (10)  business  days after  receipt of written
notice thereof.  Upon the occurrence of an Event of Default,  the Holder may, in
its sole discretion, accelerate full repayment of all Debentures outstanding and
accrued interest thereon or may,  notwithstanding  any limitations  contained in
this Debenture  and/or the Securities  Purchase  Agreement dated the date hereof
between the Company and Cornell Capital Partners, L.P. (the "Securities Purchase
Agreement"),  convert all Debentures  outstanding and accrued  interest  thereon
into shares of Common Stock pursuant to Section 1.02 herein.

ARTICLE 3.2 Failure to Issue Unrestricted  Common Stock. As indicated in Article
            -------------------------------------------
III Section 3.01, a breach by the Company of its obligations  under the Investor
Registration Rights Agreement shall be deemed an Event of Default,  which if not
cured within ten (10) business days, shall entitle the Holder to accelerate full
repayment  of all  Debentures  outstanding  and  accrued  interest  thereon  or,
notwithstanding   any  limitations   contained  in  this  Debenture  and/or  the
Securities Purchase Agreement, to convert all Debentures outstanding and accrued
interest  thereon into shares of Common  Stock  pursuant to Section 1.02 herein.
The Company  acknowledges  that  failure to honor a Notice of  Conversion  shall
cause irreparable harm to the Holder.

                                   ARTICLE 4.

ARTICLE 4.1 Rights and Terms of Conversion. This Debenture, in whole or in part,
            ------------------------------
may be converted at any time  following the Closing Date,  into shares of Common
Stock at a price equal to the  Conversion  Price as  described  in Section  1.02
above.

                                       4
<PAGE>

ARTICLE 4.2  Re-issuance of Debenture.  When the Holder elects to convert a part
             ------------------------
of the  Debenture or the Company  redeems a portion of the  Debenture,  then the
Company  shall  reissue a new  Debenture  in the same form as this  Debenture to
reflect the new principal amount.

ARTICLE 4.3 Termination of Conversion  Rights. The Holder's right to convert the
            ---------------------------------
Debenture  into the  Common  Stock  in  accordance  with  paragraph  4.01  shall
terminate on the date that is the second (2nd)  anniversary from the date hereof
and this Debenture shall be  automatically  converted on that date in accordance
with the formula set forth in Section 4.01 hereof, and the appropriate shares of
Common Stock and amount of interest shall be issued to the Holder.

                                   ARTICLE 5.

ARTICLE  5.1  Anti-dilution.  In the event  that the  Company  shall at any time
              -------------
subdivide  the  outstanding  shares  of  Common  Stock,  or shall  issue a stock
dividend  on the  outstanding  Common  Stock,  the  Conversion  Price in  effect
immediately  prior to such subdivision or the issuance of such dividend shall be
proportionately  decreased,  and in the event that the Company shall at any time
combine the outstanding  shares of Common Stock,  the Conversion Price in effect
immediately  prior  to such  combination  shall  be  proportionately  increased,
effective at the close of business on the date of such subdivision,  dividend or
combination as the case may be.

ARTICLE 5.2 Consent of Holder to Sell Capital Stock or Grant Security Interests.
            -------------------------------------------------------------------
Except for the  Standby  Equity  Distribution  Agreement  dated the date  hereof
between  the Company and  Cornell  Capital  Partners,  LP, so long as any of the
principal of or interest on this Debenture  remains unpaid and unconverted,  the
Company shall not,  without the prior  consent of the Holder,  issue or sell (i)
any Common Stock or Preferred Stock without consideration or for a consideration
per share less than its fair market value  determined  immediately  prior to its
issuance,  (ii)  issue or sell any  Preferred  Stock,  warrant,  option,  right,
contract,  call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without  consideration or for a consideration  per
share less than such Common  Stock's  fair market value  determined  immediately
prior to its  issuance,  (iii) enter into any security  instrument  granting the
holder a security interest in any of the assets of the Company,  except that the
Company may grant a security  interest to a lender that provides  purchase money
financing for inventory and equipment and such security  interest relates solely
to the  inventory  and  equipment so  purchased,  or (iv) file any  registration
statement on Form S-8.

                                       5
<PAGE>

                                   ARTICLE 6.

ARTICLE  6.1  Notice.  Notices  regarding  this  Debenture  shall be sent to the
parties at the following  addresses,  unless a party notifies the other parties,
in writing, of a change of address:

If to the Company, to:        Power Technology, Inc.
                              1770 St. James Place, Suite 115
                              Houston, Texas 77056
                              Attention: Bernard J. Walter
                              Telephone: (281) 804-8854
                              Facsimile: (713) 426-5953

With a copy to:               Stephen A. Zrenda, Jr., P.C.
                              100 N. Broadway, Suite 2440
                              Oklahoma City, OK 73102
                              Attention: Stephen A. Zrenda, Jr.
                              Telephone: (405) 235-2111
                              Facsimile: (405) 235-2157

If to the Holder:             Cornell Capital Partners, LP
                              101 Hudson Street - Suite 3700
                              Jersey City, NJ 07302
                              Attention: Mark A. Angelo
                                         Portfolio Manager
                              Telephone: (201) 985-8300
                              Facsimile: (201) 985-8266

With a copy to:               Cornell Capital Partners, LP
                              101 Hudson Street - Suite 3700
                              Jersey City, NJ 07302
                              Attention: Troy J. Rillo
                                         Senior Vice President
                              Telephone: (201) 985-8300
                              Facsimile: (201) 985-8266

ARTICLE 6.2 Governing Law. This  Debenture  shall be deemed to be made under and
            -------------
shall be  construed  in  accordance  with the  laws of the  State of New  Jersey
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the  jurisdiction of the U.S.  District Court sitting in the
District  of the State of New  Jersey  or the  state  courts of the State of New
Jersey  sitting in Hudson  County,  New Jersey in  connection  with any  dispute
arising under this Debenture and hereby waives,  to the maximum extent permitted
by law, any objection,  including any objection based on forum non conveniens to
the bringing of any such proceeding in such jurisdictions.

                                       6
<PAGE>

ARTICLE  6.3  Severability.  The  invalidity  of any of the  provisions  of this
              ------------
Debenture shall not invalidate or otherwise  affect any of the other  provisions
of this Debenture, which shall remain in full force and effect.

ARTICLE 6.4 Entire  Agreement and  Amendments.  This  Debenture  represents  the
            ---------------------------------
entire  agreement  between the parties hereto with respect to the subject matter
hereof and there are no  representations,  warranties or commitments,  except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.

ARTICLE  6.5   Counterparts.   This   Debenture  may  be  executed  in  multiple
               ------------
counterparts,  each of which  shall be an  original,  but all of which  shall be
deemed to constitute on instrument.

         IN WITNESS  WHEREOF,  with the intent to be legally bound  hereby,  the
Company as executed this Debenture as of the date first written above.

                                POWER TECHNOLOGY, INC.

                                By:
                                   ----------------------------------------
                                Name: Bernard J. Walter
                                Title: President

                                       7
<PAGE>

                                   EXHIBIT "A"

                              NOTICE OF CONVERSION

        (To be executed by the Holder in order to Convert the Debenture)

TO:

      The    undersigned    hereby    irrevocably    elects   to    convert   US
$__________________  of the principal  amount of the above Debenture into Shares
of Common Stock of Power  Technology,  Inc.,  according to the conditions stated
therein, as of the Conversion Date written below.

Conversion Date:
                                  ----------------------------------------------
Applicable Conversion Price:
                                  ----------------------------------------------
Signature:
                                  ----------------------------------------------
Name:
                                  ----------------------------------------------
Address:
                                  ----------------------------------------------
Amount to be converted:           US$
                                  ----------------------------------------------
Amount of Debenture unconverted:  US$
                                  ----------------------------------------------
Conversion Price per share:       US$
                                  ----------------------------------------------
Number of shares of Common Stock
to be issued:
                                  ----------------------------------------------
Please issue the shares of
Common Stock in the following
name and to the following
address:
                                  ----------------------------------------------
Issue to:
                                  ----------------------------------------------
Authorized Signature:
                                  ----------------------------------------------
Name:
                                  ----------------------------------------------
Title:
                                  ----------------------------------------------
Phone Number:
                                  ----------------------------------------------
Broker DTC Participant Code:
                                  ----------------------------------------------
Account Number:
                                  ----------------------------------------------

                                       1

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