Document:

SECURITIES
EXCHANGE AGREEMENT

       

      This
Securities Exchange Agreement (this “Agreement”) is dated
as of October 31, 2009, between Ecotality, Inc., a Nevada corporation (the
“Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

       

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

       

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

       

      ARTICLE
I.

      DEFINITIONS

       

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

       

      “Action” shall have
the meaning ascribed to such term in Section Error! Reference source not
found..

       

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

       

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

       

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

       

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

       

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

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      “Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto and all conditions precedent to (i)
each Purchaser’s obligations to consummate the transactions under the Exchange
Agreement and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

      

       “Commission” means the
Securities and Exchange Commission.

       

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

       

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

       

      “Company Counsel(s)”
means Farella Braun + Martel LLP, with offices located at Russ Building, 235
Montgomery Street, San Francisco, CA 94104, and Gary A. Agron, Esq., 5445 DTC
Parkway, Suite 520, Englewood, CO 80111.

       

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

       

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

       

      “Effective Date” means
the date on which the Underlying Shares may be sold under Rule 144 without the
requirements for the Company to be in compliance with Rule 144(c)(1) and
otherwise without restrictions or limitations pursuant to Rule 144 as determined
by the counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Transfer Agent and the
Purchasers.

       

      “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

       

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

       

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

       

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

       

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

      
        
           

        

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

       

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

       

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

       

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

       

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

       

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

       

      “Preferred Stock”
means the Company’s Series A Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of
Designation, in the form of Exhibit A
hereto.

      

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

       

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

       

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

       

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

       

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

       

      “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise or conversion
in full of all Preferred Stock, ignoring any conversion limits set forth
therein.

       

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

      
        
           

        

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

       

      “Securities” means the
Preferred Stock and the Underlying Shares.

       

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

       

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

       

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

       

       “Trading Day” means a
day on which the New York Stock Exchange is open for trading.

       

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

       

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

       

      “Transfer Agent” means
Corporate Stock Transfer, Inc., the current transfer agent of the Company, whose
mailing address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado
80209, and fax number is (303) 282-5800, and any successor transfer agent of the
Company.

       

       “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Preferred Stock.

       

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

       

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

      
        
           

        

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

       

      ARTICLE
II.

      EXCHANGE

       

      2.1         Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to issue and deliver to each Purchaser, a
certificate evidencing a number of shares of Preferred Stock, as set forth next
to such Purchaser’s name on Schedule 2.1 hereto,
in exchange for the securities of the Company held by such Purchaser as set
forth on Schedule
2.1 hereto.  Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of WS or such other
location as the parties shall mutually agree.

       

      2.2        
Deliveries.

       

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

       

      
        (i)         
this
Agreement duly executed by the Company;

      

       

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

       

      (iii)         a
certificate evidencing a number of shares of Preferred Stock as set forth next
to such Purchaser’s name on Schedule 2.1; and

       

      (iv)         written
evidence of the filing of the Certificate of Designation with the Secretary of
State of Nevada.

       

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

       

      
        (i)          
this
Agreement duly executed by such Purchaser.

      

       

      2.3         Closing
Conditions.

       

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

      
        
           

        

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

       

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

       

      (iii)         the
Company shall have received gross proceeds of at least Fifteen Million
($15,000,000) dollars from an offering of shares of its Common Stock pursuant to
a securities purchase agreement dated on or about the date hereof (the “Equity
Purchase Agreement”), which transaction shall have closed on or before November
20, 2009; and

       

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

       

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

       

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

       

      (ii)         the
Company shall have received gross proceeds of at least Fifteen Million
($15,000,000) dollars from an offering of shares of its Common Stock pursuant to
a securities purchase agreement dated on or about the date hereof, which
transaction shall have closed on or before November 20, 2009;

       

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

       

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

       

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

       

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

      
        
           

        

        
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      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1         Representations and
Warranties of the Company.  Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties
to each Purchaser as of the date hereof and as of the Closing Date:

       

      (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

       

      (b)           Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

      
        
           

        

        
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      (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

       

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

       

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

      
        
           

        

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

       

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

      
        
           

        

        
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      (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing.  Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

       

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

      
        
           

        

        
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      (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) would, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the
Company.  The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

       

      (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which would reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

       

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

      
        
           

        

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

       

      (n)           Title to
Assets.  Except as set forth in the SEC Reports, The Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

       

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

       

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

      
        
           

        

        
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      (q)           Transactions with
Affiliates, Employees and other Security Holders.  Except as
set forth in the SEC Reports or on Schedule 3.1(q), none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company or other security holders of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or other security holder or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee or
security holder has a substantial interest or is an officer, director, trustee
or partner, in each case in excess of $120,000 other than for (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

       

      (r)           Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

      
        
           

        

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

       

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

       

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

       

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

       

      (w)           Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

       

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

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      (y)           Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, nonpublic information.  The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.   The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.  The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

       

      (z)           No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any such
securities under the Securities Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

      
        
           

        

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

       

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

       

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

       

      (dd)           Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

       

      (ee)           Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedule.  To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report on Form 10-K
for the year ending December 31, 2009.

      
        
           

        

        
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      (ff)           [RESERVED].

       

      (gg)           No Disagreements with
Accountants and Lawyers.  To the knowledge of the Company,
except as set forth on Schedule 3.1(gg),
there are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company and the Company is current with respect to
any fees owed to its accountants and lawyers which would reasonably be expected
to affect the Company’s ability to perform any of its obligations under any of
the Transaction Documents.

       

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

       

      (ii)           Acknowledgment Regarding
Purchasers’ Trading Activity.  Notwithstanding anything in this Agreement
or elsewhere herein to the contrary (except for Sections 3.2(f) and 4.15
hereof), it is understood and acknowledged by the Company that (i) none of the
Purchasers has been asked to agree by the Company, nor has any Purchaser agreed,
to desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company or
to hold the Securities for any specified term, (ii) past or future open market
or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (a) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined and (b) such hedging
activities (if any) could reduce the value of the existing stockholders' equity
interests in the Company at and after the time that the hedging activities are
being conducted.  The Company acknowledges that such aforementioned hedging
activities do not constitute a breach of any of the Transaction
Documents.

      
        
           

        

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

       

      (kk)           3(a)(9) Exchange. The
exchange of the securities set forth on Schedule 2.1 hereto (the “Exchanged
Securities”) for the Securities issuable hereunder is being consummated pursuant
to Sections 3(a)(9) and 18(b)(4)(C) of the Securities
Act.  Accordingly, pursuant to Rule 144, the holding period of the
Preferred Stock and the Underlying Shares shall tack back to the original issue
date of the Exchanged Securities (assuming the Exchanged Securities were not
transferred to an Affiliate of the Company after the original issuance and
subsequently transferred back to the Purchaser).

       

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

       

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

       

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

      
        
           

        

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

     

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

     

    (e)           General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

     

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

    
      
         

      

      
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    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1           Transfer
Restrictions.

     

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

     

    (b)                 The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of the following legend on the Preferred Stock:

     

    [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE
UPON [EXERCISE] [CONVERSION] OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

     

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

    
      
         

      

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

    

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

    
      
         

      

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

     

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

     

    4.3           Furnishing of
Information.

     

    
      (a)         
Until the
time that no Purchaser owns Securities, the Company covenants to maintain the
registration of the Common Stock under Section 12(b) or 12(g) of the Exchange
Act and to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act.  As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule
144.  The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.

    

     

    
      
         

      

      
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    (b)           At
any time during the period following the date hereof and ending at such time
that all of the Securities may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
greater of (x) the “Exchanged Value” (as
defined below) of the Preferred Stock then held by such Purchaser on the day of
a Public Information Failure or (y) the VWAP of the Common Stock underlying the
Preferred Stock then held by such Purchaser on the day of a Public Information
Failure, and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Underlying Shares pursuant to Rule 144. The payments to which a
Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to
herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
As used herein, the term “Exchanged Value” means the per share dollar amount set
forth under the column heading “Exchanged Value” on Schedule 2.1
hereto.

     

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

     

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

    
      
         

      

      
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    4.6           Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. (New York City
time) on the second Trading Day immediately following the date hereof, issue a
press release disclosing the material terms of the transactions contemplated
hereby, and by 8:30 a.m. (New York City time) on the second Trading Day
immediately following the date hereof, file a  Current Report on Form
8-K, disclosing the material terms of the transactions contemplated hereby and
including the Transaction Documents as exhibits thereto.  From and
after the issuance of such press release, the Company shall have publicly
disclosed all material, non-public information delivered to any of the
Purchasers by the Company or any of its subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
(A) a registration statement reasonably acceptable in form in substance to the
Purchasers and (B) the filing of final Transaction Documents (including
signature pages thereto) with the Commission and (ii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (ii).

     

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

     

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

     

    4.9           Use of
Proceeds.  Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for (a) the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.

    
      
         

      

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

     

    4.11         Reservation and Listing of
Securities.

     

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

     

    (b)           If,
on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than 130% of (i) the Required Minimum on such
date, minus (ii) the number of shares of Common Stock previously issued pursuant
to the Transaction Documents, then the Board of Directors shall use commercially
reasonable efforts to amend the Company's certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time (minus the number of shares
of Common Stock previously issued pursuant to the Transaction Documents), as
soon as possible and in any event not later than the 75th day after such date;
provided that the Company will not be required at any time to authorize a number
of shares of Common Stock greater than the maximum remaining number of shares of
Common Stock that could possibly be issued after such time pursuant to the
Transaction Documents.

    
      
         

      

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

     

    4.12         [RESERVED]

     

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

     

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

    
      
         

      

      
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    4.15        Short Sales and
Confidentiality After The Date Hereof. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any
Short Sales during the period commencing at the Discussion Time and ending on
the 9-month anniversary of the date of this Agreement.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.  Notwithstanding
the foregoing, no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in Short Sales in the securities of the Company
after the time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 4.6.  Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.

     

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

     

    4.17        Conversion
Limitation.  Each Purchaser, severally, and not jointly with
any other Purchaser, hereby agrees that during the period commencing on the date
hereof and ending on the earlier of (i) the 9-month anniversary of the date of
this Agreement and (ii) the Trading Day that the closing price of the Common
Stock equals or exceeds $0.50 (subject to adjustment for forward and reverse
stock splits, stock dividends and the like, including, without limitation, the
Reverse Stock Split (as defined in the Equity Purchase Agreement), it will not
convert more than 20% of the shares of Preferred Stock issued to it on the
Closing Date into shares of Common Stock.

    
      
         

      

      
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    4.18        Registration.  If,
at any time while the Preferred Stock is outstanding, the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account (a “Qualified Secondary
Offering”) of any of its equity securities, other than on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with the Company’s stock option or other employee benefit plans, then
the Company shall deliver to each Purchaser a written notice of such
determination and, if within fifteen days after the date of the delivery of such
notice, any such Purchaser shall so request in writing, the Company shall
include in such registration statement all or any part of such Purchaser’s
Underlying Shares, in an aggregate amount equal not to exceed 15% of the equity
securities proposed to be sold in the Qualified Secondary Offering (which amount
shall be allocated pro-rata among the Purchasers, based on the Preferred Stock
then held by each Purchaser and the aggregate amount of Preferred Stock
then-outstanding).  Such securities included by any Purchaser in the
Qualified Secondary Offering shall be offered and sold at the same price the
Company proposes to sell securities for its own account thereunder.

     

    4.19        The Exchanged
Securities.    The Purchasers hereby agree,
severally, and not jointly, to use reasonable efforts to surrender the
certificates evidencing the Exchanged Securities within ten Business Days of the
Closing.  Regardless of whether or not the certificates evidencing the
Exchanged Securities are surrendered on or after the Closing Date, the
Purchasers acknowledge and agree, upon the issuance of the Preferred Stock and
the consummation of the transactions contemplated hereby, the Exchanged
Securities shall be deemed cancelled and that the Company is authorized to
update their books and records to reflect such cancellation.  In
addition, all parties hereto acknowledge their rights and obligations under
their existing agreements with each other, including, without limitation, the
agreements and procedures regarding the filing of UCC-3 termination
statements.

     

    ARTICLE
V.

    MISCELLANEOUS

     

    5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser's
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before November 6, 2009;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

     

    5.2           Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

     

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

    
      
         

      

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

     

    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding 75% in interest
of the Securities then outstanding or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought.  No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

     

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

     

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

     

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

    
      
         

      

      
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    5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

     

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

     

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

     

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

     

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

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    5.17        Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

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

     

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

     

    5.20        Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    5.21        Construction. The parties agree that each of them
and/or their respective counsel has reviewed and had an opportunity to revise
the Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments hereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

    
      
         

      

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

     

    (Signature
Page Follows)

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

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

     

    
      
        
          	
                  ECOTALITY,
      INC.

                	 
      	
                  Address for Notice:

                
	 
      	 
      	 
      
	
                  By:

                	 
      	 
      	 
      
	
                       Name:

                	 
      	 
      
	
                       Title:

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

                	 
      	 
      

        

      

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    [PURCHASER
SIGNATURE PAGES TO ETLY SECURITIES EXCHANGE AGREEMENT]

    

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

     

    Name of
Purchaser:  ________________________

     

    Signature of Authorized Signatory of
Purchaser:  ________________________

     

    Name of
Authorized Signatory _______________________________________

     

    Title of
Authorized Signatory: ____________________________

     

    Email
Address of Purchaser: __________________________________

     

    Facsimile
Number of Purchaser: _________________________________________

    

    Address
for Notice of Purchaser:

    

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

    

    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
PAGES CONTINUE]

    
      
         

      

      
        35ECOTALITY,
INC.

    

    CERTIFICATE
OF DESIGNATION OF PREFERENCES,

    RIGHTS
AND LIMITATIONS

    OF

    SERIES
A CONVERTIBLE PREFERRED STOCK

    

    PURSUANT
TO SECTION 78.1955 OF THE

    NEVADA
REVISED STATUTES

    

            The
undersigned, Barry S. Baer, does hereby certify that:

    

                    1.
He is the Chief Financial Officer of Ecotality, Inc., a Nevada corporation (the
“Corporation”).

    

                    2.
The Corporation is authorized to issue Two Hundred Million (200,000,000) shares
of preferred stock, none of which have been issued.

    

                    3.
The following resolutions were duly adopted by the board of directors of the
Corporation (the “Board of
Directors”):

    

            WHEREAS,
the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, consisting of Two Hundred Million
(200,000,000) shares, $0.001 par value per share, issuable from time to time in
one or more series;

    

            WHEREAS,
the Board of Directors is authorized to fix the dividend rights, dividend rate,
voting rights, conversion rights, rights and terms of redemption and liquidation
preferences of any wholly unissued series of preferred stock and the number of
shares constituting any series and the designation thereof, of any of them;
and

    

            WHEREAS,
it is the desire of the Board of Directors, pursuant to its authority as
aforesaid, to fix the rights, preferences, restrictions and other matters
relating to a series of the preferred stock, which shall consist of, except as
otherwise set forth in the Exchange Agreement, up to 10,000,000 shares of the
preferred stock which the Corporation has the authority to issue, as
follows:

    

            NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
the issuance of a series of preferred stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of preferred
stock as follows:

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    TERMS
OF SERIES A CONVERTIBLE PREFERRED STOCK

    

    Section
1.      Definitions. For the
purposes hereof, the following terms shall have the following
meanings:

    

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

    

    “Alternate
Consideration” shall have the meaning set forth in Section
7(e).

    

    “Beneficial Ownership
Limitation” shall have the meaning set forth in Section
6(d).

    

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

    

    “Buy-In” shall have
the meaning set forth in Section 6(c)(iv).

    

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

    

    “Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto and all conditions precedent to (i)
each Holder’s obligations to consummate the transactions under the Exchange
Agreement and (ii) the Corporation’s obligations to deliver the Securities have
been satisfied or waived.

    

    “Commission” means the
United States Securities and Exchange Commission.

    

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

    

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

    

    “Conversion Date”
shall have the meaning set forth in Section 6(a).

    

    “Conversion Ratio”
shall have the meaning set forth in Section 6(b).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    “Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of the
shares of Preferred Stock in accordance with the terms hereof.

    

    “Effective Date” shall
have the meaning ascribed to such term under the Exchange
Agreement.

    

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

    

    “Exchange Agreement”
means the Securities Exchange Agreement, dated on or abut October 31, 2009,
among the Corporation and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.

    

    “Fundamental
Transaction” shall have the meaning set forth in Section
7(e).

    

    “GAAP” means United
States generally accepted accounting principles.

    

    “Holder” shall have
the meaning given such term in Section 2.

    

    “Junior Securities”
means the Common Stock and all other Common Stock Equivalents of the Corporation
other than those securities which are explicitly senior or pari passu to the
Preferred Stock in dividend rights or liquidation preference.

    

    “Liquidation” shall
have the meaning set forth in Section 5.

    

    “New York Courts”
shall have the meaning set forth in Section 8(d).

    

    “Notice of Conversion”
shall have the meaning set forth in Section 6(a).

    

    “Original Issue Date”
means the date of the first issuance of any shares of the Preferred Stock
regardless of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be issued to
evidence such Preferred Stock.

    

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

    

    “Preferred Stock”
shall have the meaning set forth in Section 2.

    

    “Registration
Statement” means a registration statement covering the resale of the
Underlying Shares by each Holder.

    

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

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

    

    “Securities” means the
Preferred Stock and the Underlying Shares.

    

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

    

    “Share Delivery Date”
shall have the meaning set forth in Section 6(c).

    

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

     

    “Successor Entity”
shall have the meaning set forth in Section 7(e).

    

    “Trading Day” means a
day on which the principal Trading Market is open for business.

    

    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

    

    “Transaction
Documents” means this Certificate of Designation, the Exchange Agreement
and, all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated pursuant to
the Exchange Agreement.

     

    “Transfer Agent” means
Corporate Stock Transfer, Inc., the current transfer agent of the Corporation
with a mailing address of 3200 Cherry Creek South Drive Ste 430, Denver,
Colorado 80209 and a facsimile number of (303) 282 4986, and any successor
transfer agent of the Corporation.

     

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

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:15 p.m. (New York City time)), (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board,
(c) if the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holders of a majority in interest of the
Securities then outstanding and reasonably acceptable to the Corporation, the
fees and expenses of which shall be paid by the Corporation.

    

    Section
2.      Designation, Amount and Par
Value. The series of preferred stock shall be designated as its Series A
Convertible Preferred Stock (the “Preferred Stock”) and
the number of shares so designated shall be up to 10,000,000 (which shall not be
subject to increase without the written consent of all of the holders of the
Preferred Stock (each, a “Holder” and
collectively, the “Holders”)). Each
share of Preferred Stock shall have a par value of $0.001 per
share.

    

    Section
3.      Dividends.

    

    a)           The
Preferred Stock shall not bear any mandatory dividend. If the Board of Directors
shall declare a dividend payable upon the then outstanding shares of Common
Stock, the holders of the outstanding shares of Preferred Stock shall be
entitled to the amount of dividends on each share of Preferred Stock, in the
same amount per share of Preferred Stock as would be declared payable on the
number of shares of Common Stock into which each share of Preferred Stock could
then be converted (ignoring for such purpose any conversion limitations herein),
such number to be determined as of the record date for determination of holders
of Common Stock entitled to receive such dividend or, if no such record date is
established, as of the date of such dividend.

    

    b)           Other Securities. So
long as any Preferred Stock shall remain outstanding, neither the Corporation
nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly
or indirectly any Junior Securities. So long as any Preferred Stock shall remain
outstanding, neither the Corporation nor any Subsidiary thereof shall directly
or indirectly pay or declare any dividend or make any distribution upon (other
than a dividend or distribution described in Section 6 or dividends due and paid
in the ordinary course on preferred stock of the Corporation at such times when
the Corporation is in compliance with its payment and other obligations
hereunder), nor shall any distribution be made in respect of, any Junior
Securities as long as any dividends due on the Preferred Stock remain unpaid,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    c)           Special Reserves. The
Corporation acknowledges and agrees that the capital of the Corporation in
respect of the Preferred Stock and any future issuances of the Corporation’s
capital stock shall be equal to the aggregate par value of such Preferred Stock
or capital stock, as the case may be, and that, on or after the date of the
Exchange Agreement, it shall not increase the capital of the Corporation with
respect to any shares of the Corporation’s capital stock issued and outstanding
on such date.

    

    Section
4.      Voting Rights. Except
as otherwise provided herein or as otherwise required by law, the Preferred
Stock shall have no voting rights. However, as long as any shares of Preferred
Stock are outstanding, the Corporation shall not, without the affirmative vote
of the Holders of 75% of the then outstanding shares of the Preferred Stock, (a)
alter or change adversely the powers, preferences or rights given to the
Preferred Stock or alter or amend this Certificate of Designation, (b) authorize
or create any class of stock ranking as to dividends, redemption or distribution
of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise
pari passu with, the
Preferred Stock, (c) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the Holders, (d)
increase the number of authorized shares of Preferred Stock, or (e) enter into
any agreement with respect to any of the foregoing.

    

    Section
5.     Liquidation. Upon any
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary (a “Liquidation”), the
Holders shall be entitled to receive any distributions or payments, pro-rata and
pari-passu with the holders of Common Stock (as if the Preferred Stock had been
converted into shares of Common Stock pursuant to the provisions hereof
immediately prior to such distribution, ignoring for such purpose, any
limitations on conversion hereunder).  The Corporation shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each Holder.

    

    Section
6.      Conversion.

    

    a)           Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible, at any time
and from time to time from and after the Original Issue Date at the option of
the Holder thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d)) equal to the Conversion Ratio. Holders
shall effect conversions by providing the Corporation with the form of
conversion notice attached hereto as Annex A (a “Notice of
Conversion”). Each Notice of Conversion shall specify the number of
shares of Preferred Stock to be converted, the number of shares of Preferred
Stock owned prior to the conversion at issue, the number of shares of Preferred
Stock owned subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to the date the
applicable Holder delivers by facsimile such Notice of Conversion to the
Corporation (such date, the “Conversion Date”). If
no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion to the Corporation is deemed
delivered hereunder. The calculations and entries set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical
error.  To effect conversions of shares of Preferred Stock, a Holder
shall not be required to surrender the certificate(s) representing the shares of
Preferred Stock to the Corporation unless all of the shares of Preferred Stock
represented thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock promptly following
the Conversion Date at issue.  Shares of Preferred Stock converted
into Common Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    b)           Conversion
Ratio.  Each share of Preferred Stock shall initially be
convertible into 60 shares of Common Stock, subject to adjustment herein (the
“Conversion
Ratio”).

    

    
      	
               
      

            	
              c)

            	
              Mechanics of
      Conversion

            

    

    

    i.           Delivery of Certificate Upon
Conversion. Not later than three (3) Trading Days after each Conversion
Date (the “Share
Delivery Date”), the Corporation shall deliver, or cause to be delivered,
to the converting Holder a certificate or certificates representing the
Conversion Shares which, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Exchange
Agreement) representing the number of Conversion Shares being acquired upon the
conversion of the Preferred Stock.  The Corporation shall use its best
efforts to deliver any certificate or certificates required to be delivered by
the Corporation under this Section 6 electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions.

    

    ii.           Failure to Deliver
Certificates.  If, in the case of any Notice of Conversion,
such certificate or certificates are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Corporation at any time on or before its receipt
of such certificate or certificates, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original Preferred Stock
certificate delivered to the Corporation and the Holder shall promptly return to
the Corporation the Common Stock certificates issued to such Holder pursuant to
the rescinded Conversion Notice.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    iii.           Obligation Absolute; Partial
Liquidated Damages.  The Corporation’s obligation to issue and
deliver the Conversion Shares upon conversion of Preferred Stock in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by a Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by such Holder or any other
Person of any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of the
Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such
delivery shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder.  In the event a
Holder shall elect to convert any or all of its Preferred Stock, the Corporation
may not refuse conversion based on any claim that such Holder or any one
associated or affiliated with such Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on
notice to Holder, restraining and/or enjoining conversion of all or part of the
Preferred Stock of such Holder shall have been sought and obtained, and the
Corporation posts a surety bond for the benefit of such Holder in the amount of
150% of the highest VWAP during the period from the applicable Conversion Date
and the date of the applicable injunction multiplied by the number of shares of
Preferred Stock which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment.  In the absence of such injunction, the Corporation
shall issue Conversion Shares and, if applicable, cash, upon a properly noticed
conversion. If the Corporation fails to deliver to a Holder such certificate or
certificates pursuant to Section 6(c)(i) on the second Trading Day after the
Share Delivery Date applicable to such conversion, the Corporation shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, for each
$5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day
(increasing to $100 per Trading Day on the third Trading Day and increasing to
$200 per Trading Day on the sixth Trading Day after such damages begin to
accrue) for each Trading Day after such second Trading Day after the Share
Delivery Date until such certificates are delivered or Holder rescinds such
conversion.  Nothing herein shall limit a Holder’s right to pursue
actual damages or declare a Triggering Event pursuant to Section 10 hereof for
the Corporation’s failure to deliver Conversion Shares within the period
specified herein and such Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.  The exercise
of any such rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.

    
      
         

      

      
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    iv.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Corporation fails for any
reason to deliver to a Holder the applicable certificate or certificates by the
Share Delivery Date pursuant to Section 6(c)(i), and if after such Share
Delivery Date such Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by such
Holder of the Conversion Shares which such Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to any other
remedies available to or elected by such Holder) the amount, if any, by which
(x) such Holder’s total purchase price (including any brokerage commissions) for
the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the shares of Preferred Stock equal to the number of shares of
Preferred Stock submitted for conversion (in which case, such conversion shall
be deemed rescinded) or deliver to such Holder the number of shares of Common
Stock that would have been issued if the Corporation had timely complied with
its delivery requirements under Section 6(c)(i). For example, if a Holder
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of shares of Preferred
Stock with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Corporation shall be required to pay such Holder $1,000. The Holder shall
provide the Corporation written notice indicating the amounts payable to such
Holder in respect of the Buy-In and, upon request of the Corporation, evidence
of the amount of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the shares
of Preferred Stock as required pursuant to the terms hereof.

    

    v.           Reservation of Shares
Issuable Upon Conversion. The Corporation covenants that it will at all
times reserve and keep available out of its authorized and unissued shares of
Common Stock for the sole purpose of issuance upon conversion of the Preferred
Stock as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and the other
holders of the Preferred Stock), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in
the Exchange Agreement) be issuable (taking into account the adjustments and
restrictions of Section 7) upon the conversion of the then outstanding shares of
Preferred Stock.  The Corporation covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly authorized, validly
issued, fully paid and nonassessable and, if a registration statement is then
effective under the Securities Act, shall be registered for public resale in
accordance with such registration statement.

    

    vi.           Fractional Shares. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of the Preferred Stock.   As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the VWAP on such Conversion Date or round up to the next whole
share.

    
      
         

      

      
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    vii.           Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Preferred Stock shall be made without charge to any
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holders of such shares of Preferred
Stock and the Corporation shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been
paid.

    
      
         

      

      
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    d)           Beneficial Ownership
Limitation. The Corporation shall
not effect any conversion of the Preferred Stock, and a Holder shall not have
the right to convert any portion of the Preferred Stock, to the extent that,
after giving effect to the conversion set forth on the applicable Notice of
Conversion, such Holder (together with such Holder’s Affiliates, and any Persons
acting as a group together with such Holder or any of such Holder’s Affiliates)
would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below).  For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by such Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon conversion of
the Preferred Stock with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which are issuable upon (i)
conversion of the remaining, unconverted Stated Value of Preferred Stock
beneficially owned by such Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Corporation  subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, the
Preferred Stock or the Warrants) beneficially owned by such Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 6(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred Stock is
convertible (in relation to other securities owned by such Holder together with
any Affiliates) and of how many shares of Preferred Stock are convertible shall
be in the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder’s determination of whether the
shares of Preferred Stock may be converted (in relation to other securities
owned by such Holder together with any Affiliates) and how many shares of the
Preferred Stock are convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, each Holder
will be deemed to represent to the Corporation each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Corporation shall have no obligation to verify
or confirm the accuracy of such determination.  In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 6(d),
in determining the number of outstanding shares of Common Stock, a Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Corporation’s most recent periodic or annual
report filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written notice by the
Corporation or the Transfer Agent setting forth the number of shares of Common
Stock outstanding.  Upon the written or oral request of a Holder, the
Corporation shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding.  In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Corporation,
including the Preferred Stock, by such Holder or its Affiliates since the date
as of which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of Preferred Stock held by the applicable
Holder.  A Holder, upon not less than 61 days’ prior notice to the
Corporation, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 6(d) applicable to its Preferred Stock provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon conversion of this Preferred Stock held
by the Holder and the provisions of this Section 6(d) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st
day after such notice is delivered to the Corporation and shall only apply to
such Holder and no other Holder.  The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6(d) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this
paragraph shall apply to a successor holder of Preferred
Stock.

    

    Section
7.      Certain
Adjustments.

    

    a)           Stock Dividends and Stock
Splits.  If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions to all holders of Common Stock payable in shares
of Common Stock on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock
issued by the Corporation upon conversion of, or payment of a dividend on, this
Preferred Stock), (ii) subdivides all outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of a reverse stock
split) all outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the Common
Stock, any shares of capital stock of the Corporation in replacement of all
shares of the Common Stock, then the Common Stock portion of the Conversion
Ratio shall be multiplied by a fraction of which the denominator shall be the
number of shares of Common Stock (excluding any treasury shares of the
Corporation) outstanding immediately before such event, and of which the
numerator shall be the number of shares of Common Stock outstanding immediately
after such event.  Any adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

    
      
         

      

      
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    b)           [RESERVED]

    

    c)           Subsequent Rights
Offerings.  If the Corporation, at any time while this
Preferred Stock is outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to the Holders) entitling them to subscribe for
or purchase shares of Common Stock at a price per share that is lower than the
VWAP on the record date referenced below, then the Common Stock portion
Conversion Ratio shall be multiplied by a fraction of which the numerator shall
be the number of shares of the Common Stock outstanding on the date of issuance
of such rights, options or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming
delivery to the Corporation in full of all consideration payable upon exercise
of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants.

    

    d)           Pro Rata
Distributions. If the Corporation, at any time while this Preferred Stock
is outstanding, distributes to all holders of Common Stock (and not to the
Holders) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security
(other than the Common Stock, which shall be subject to Section 7(b)), then in
each such case the Conversion Ratio shall be adjusted by multiplying the Common
Stock portion of the Conversion Ratio in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the VWAP determined
as of the record date mentioned above, and of which the denominator shall be
such VWAP on such record date less the then fair market value at such record
date of the portion of such assets or evidence of indebtedness or rights or
warrants so distributed applicable to one outstanding share of the Common Stock
as determined by the Board of Directors of the Corporation in good
faith.  In either case the adjustments shall be described in a
statement delivered to the Holders describing the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to one
share of Common Stock.  Such adjustment shall be made whenever any
such distribution is made and shall become effective immediately after the
record date mentioned above.

    
      
         

      

      
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    e)           Fundamental
Transaction.  If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation with or into
another Person, (ii) the Corporation, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, (v) the Corporation, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Preferred
Stock, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction (without regard to any limitation in
Section 6(d) on the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the Corporation, if
it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Preferred Stock
is convertible immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 6(d) on the conversion of this Preferred
Stock).  For purposes of any such conversion, the determination of the
Conversion Ratio shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the
Corporation shall apportion Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of this Preferred Stock following such
Fundamental Transaction.  To the extent necessary to effectuate the
foregoing provisions, any successor to the Corporation or surviving entity in
such Fundamental Transaction shall file a new Certificate of Designation with
the same terms and conditions and issue to the Holders new preferred stock
consistent with the foregoing provisions and evidencing the Holders’ right to
convert such preferred stock into Alternate Consideration.  The
Corporation shall cause any successor entity in a Fundamental Transaction in
which the Corporation is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Corporation under this
Certificate of Designation and the other Transaction Documents (as defined in
the Exchange Agreement) in accordance with the provisions of this Section 7(e)
pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the holder of this Preferred
Stock, deliver to the Holder in exchange for this Preferred Stock a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Preferred Stock which is convertible for a
corresponding number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of this Preferred Stock (without regard to any
limitations on the conversion of this Preferred Stock) prior to such Fundamental
Transaction, and with a conversion ratio which applies the conversion ratio
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of capital
stock and such conversion ratio being for the purpose of protecting the economic
value of this Preferred Stock immediately prior to the consummation of such
Fundamental Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Certificate of Designation and the other Transaction Documents referring to
the “Corporation” shall refer instead to the Successor Entity), and may exercise
every right and power of the Corporation and shall assume all of the obligations
of the Corporation under this Certificate of Designation and the other
Transaction Documents with the same effect as if such Successor Entity had been
named as the Corporation herein.

    
      
         

      

      
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    f)           Calculations.  All
calculations under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 7, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Corporation) issued and
outstanding.

    

    g)           Notice to the
Holders.

    

    i.           Adjustment to Conversion
Ratio.  Whenever the Conversion Ratio is adjusted pursuant to
any provision of this Section 7, the Corporation shall promptly deliver to each
Holder a notice setting forth the Conversion Ratio after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.

    
      
         

      

      
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    ii.           Notice to Allow Conversion
by Holder.  If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B) the
Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Corporation is a party, any sale or transfer of all or substantially
all of the assets of the Corporation, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the
Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then, in each case,
the Corporation shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Preferred Stock, and shall cause to be
delivered to each Holder at its last address as it shall appear upon the stock
books of the Corporation, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the
Corporation or any of the Subsidiaries, the Corporation shall simultaneously
file such notice with the Commission pursuant to a Current Report on Form
8-K.  The Holder shall remain entitled to convert its Preferred Stock
(or any part hereof) during the 20-day period commencing on the date of such
notice through the effective date of the event triggering such notice except as
may otherwise be expressly set forth herein.

     

    
      
         

      

      
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    Section
8.      Miscellaneous.

    a)           Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holders hereunder including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Corporation, at the
address set forth above Attention: Chief Executive
Officer, facsimile number (480) 219-5338, or such other facsimile number
or address as the Corporation may specify for such purposes by notice to the
Holders delivered in accordance with this Section 8.  Any and all
notices or other communications or deliveries to be provided by the Corporation
hereunder shall be in writing and delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service addressed to each Holder at
the facsimile number or address of such Holder appearing on the books of the
Corporation, or if no such facsimile number or address appears on the books of
the Corporation, at the principal place of business of such Holder, as set forth
in the Exchange Agreement.  Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth in this Section prior to 5:30 p.m.
(New York City time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.

    

    b)           Absolute Obligation.
Except as expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the Corporation, which is
absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time,
place, and rate, and in the coin or currency, herein prescribed.

    

    c)           Lost or Mutilated Preferred
Stock Certificate.  If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and
deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed
certificate, a new certificate for the shares of Preferred Stock so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft
or destruction of such certificate, and of the ownership hereof reasonably
satisfactory to the Corporation.

    

    d)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Nevada, without regard to the principles of conflict of laws
thereof.  The Corporation and each Holder agrees that all legal
proceedings concerning the interpretation, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “New York
Courts”).  The Corporation and each Holder hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such
proceeding.  The Corporation and each Holder hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of Designation and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing contained herein shall be deemed to limit
in any way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Certificate of
Designation or the transactions contemplated hereby.  If any party
shall commence an action or proceeding to enforce any provisions of this
Certificate of Designation, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.

    
      
         

      

      
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    e)           Waiver.  Any
waiver by the Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Certificate of Designation or a waiver by any other Holders.  The
failure of the Corporation or a Holder to insist upon strict adherence to any
term of this Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designation on any other occasion.  Any waiver by
the Corporation or a Holder must be in writing.

    

    f)         
  Severability.  If
any provision of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall remain in
effect, and if any provision is inapplicable to any Person or circumstance, it
shall nevertheless remain applicable to all other Persons and
circumstances.  If it shall be found that any interest or other amount
deemed interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law.

    

    g)           Next Business
Day.  Whenever any payment or other obligation hereunder shall
be due on a day other than a Trading Day, such payment shall be made on the next
succeeding Trading Day.

    

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

    

    i)        
   Status of Converted or
Redeemed Preferred Stock.  Shares of Preferred Stock may only
be issued pursuant to the Exchange Agreement.  If any shares of
Preferred Stock shall be converted, redeemed or reacquired by the Corporation,
such shares shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series A Convertible
Preferred Stock.

     

    *********************

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    RESOLVED,
FURTHER, that the Chairman, the president or any vice-president, and the
secretary or any assistant secretary, of the Corporation be and they hereby are
authorized and directed to prepare and file this Certificate of Designation of
Preferences, Rights and Limitations in accordance with the foregoing resolution
and the provisions of Nevada law.

    

            IN
WITNESS WHEREOF, the undersigned has executed this Certificate as of October 31,
2009.

    

    
      
        
          	 
      
	
                       Name:  Barry
      S. Baer

                
	
                       Title:  Chief
      Financial Officer

                

        

      

    

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    ANNEX
A

    

    NOTICE OF
CONVERSION

    

    (TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
STOCK)

    

    The
undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below into shares of common stock, par
value $0.001 per share (the “Common Stock”), of
Ecotality, Inc., a Nevada corporation (the “Corporation”),
according to the conditions hereof, as of the date written below. If shares of
Common Stock are to be issued in the name of a Person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as may be
required by the Corporation in accordance with the Exchange Agreement. No fee
will be charged to the Holders for any conversion, except for any such transfer
taxes.

    

    Conversion
calculations:

    

    
      
        
          	
                  Date
      to Effect Conversion:
      _____________________________________________

                
	 
      
	
                  Number
      of shares of Preferred Stock owned prior to Conversion:
      _______________

                
	 
      
	
                  Number
      of shares of Preferred Stock to be Converted:
      ________________________

                
	 
      
	
                  Number
      of shares of Preferred Stock to be Converted:
      ____________________

                
	 
      
	
                  Number
      of shares of Common Stock to be Issued:
      ___________________________

                
	 
      
	
                  Applicable
      Conversion
    Ratio:____________________________________________

                
	 
      
	
                  Number
      of shares of Preferred Stock subsequent to Conversion:
      ________________

                
	 
      
	
                  Address
      for Delivery: ______________________

                  or

                  DWAC
      Instructions:

                  Broker
      no: _________

                  Account
      no: ___________

                

        

      

    

    

    
      
        	 
      	
                [HOLDER]

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              

      

    

     

    
      
         

      

      
        19

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