Document:

EX 10.2

     

     

    EXHIBIT
      B

    

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
      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 CONVERSION OF THIS SECURITY MAY BE PLEDGED
      IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    Original
      Issue Date: June
      ___, 2008

    Original
      Conversion Price (subject to adjustment herein): $0.35

    

    $_______________

    

    

    ORIGINAL
      ISSUE DISCOUNT

    VARIABLE
      RATE SELF-LIQUIDATING 

    SENIOR
      SECURED CONVERTIBLE DEBENTURE

    DUE
      OCTOBER 1, 2009

    

    THIS
      ORIGINAL ISSUE DISCOUNT VARIABLE RATE SELF-LIQUIDATING SENIOR SECURED
      CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued
      Original Issue Discount Variable Rate Self-Liquidating Senior Secured
      Convertible Debentures of Solomon Technologies, Inc., a Delaware corporation
      (the “Company”),
      having its principal place of business at 14 Commerce Drive, Danbury, CT 06810,
      designated as its Original Issue Discount Variable Rate Self-Liquidating Senior
      Secured Convertible Debenture due October 1, 2009 (this debenture, the
“Debenture”
and,
      collectively with the other such series of debentures, the “Debentures”).
      This
      Debenture was issued for an original issue discount. 

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to ________ or its registered assigns
      (the
“Holder”),
      or
      shall have paid pursuant to the terms hereunder, the principal sum of $_____
      on
      October 1, 2009 (the “Maturity
      Date”)
      or
      such earlier date as this Debenture is required or permitted to be repaid as
      provided hereunder, and to pay interest to the Holder on the aggregate
      unconverted and then outstanding principal amount of this Debenture in
      accordance with the provisions hereof. This Debenture is subject to the
      following additional provisions:

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Section
      1. Definitions.
      For the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture,
      (a) capitalized terms not otherwise defined herein shall have the meanings
      set
      forth in the Purchase Agreement and (b) the following terms shall have the
      following meanings:

    

    “Alternate
      Consideration”
shall
      have the meaning set forth in Section 5(e).

    

    “Bankruptcy
      Event”
means
      any of the following events: (a) the Company or any Significant Subsidiary
      (as
      such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a
      case
      or other proceeding under any bankruptcy, reorganization, arrangement,
      adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
      or
      similar law of any jurisdiction relating to the Company or any Significant
      Subsidiary thereof, (b) there is commenced against the Company or any
      Significant Subsidiary thereof any such case or proceeding that is not dismissed
      within 60 days after commencement, (c) the Company or any Significant Subsidiary
      thereof is adjudicated insolvent or bankrupt or any order of relief or other
      order approving any such case or proceeding is entered, (d) the Company or
      any
      Significant Subsidiary thereof suffers any appointment of any custodian or
      the
      like for it or any substantial part of its property that is not discharged
      or
      stayed within 60 calendar days after such appointment, (e) the Company or any
      Significant Subsidiary thereof makes a general assignment for the benefit of
      creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting
      of its creditors with a view to arranging a composition, adjustment or
      restructuring of its debts or (g) the Company or any Significant Subsidiary
      thereof, by any act or failure to act, expressly indicates its consent to,
      approval of or acquiescence in any of the foregoing or takes any corporate
      or
      other action for the purpose of effecting any of the foregoing.

    

    “Beneficial
      Ownership Limitation”
shall
      have the meaning set forth in Section 4(c). 

    

    “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.

    

    “Buy-In”
shall
      have the meaning set forth in Section 4(d)(v).

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition after the
      date
      hereof by an individual or legal entity or “group” (as described in Rule
      13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Company, by
      contract or otherwise) of in excess of 33% of the voting securities of the
      Company (other than by means of conversion or exercise of the Debentures and
      the
      Securities issued together with the Debentures), or (ii) the Company merges
      into
      or consolidates with any other Person, or any Person merges into or consolidates
      with the Company and, after giving effect to such transaction, the stockholders
      of the Company immediately prior to such transaction own less than 66% of the
      aggregate voting power of the

    
      
         

      

      
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    Company
      or the successor entity of such transaction, or (iii) the Company sells or
      transfers all or substantially all of its assets to another Person and the
      stockholders of the Company immediately prior to such transaction own less
      than
      66% of the aggregate voting power of the acquiring entity immediately after
      the
      transaction, or (iv) a replacement at one time or within a three year period
      of
      more than one-half of the members of the Board of Directors which is not
      approved by a majority of those individuals who are members of the Board of
      Directors on the date hereof (or by those individuals who are serving as members
      of the Board of Directors on any date whose nomination to the Board of Directors
      was approved by a majority of the members of the Board of Directors who are
      members on the date hereof), or (v) the execution by the Company of an agreement
      to which the Company is a party or by which it is bound, providing for any
      of
      the events set forth in clauses (i) through (iv) above.

    

    “Conversion”
shall
      have the meaning ascribed to such term in Section 4. 

    

    “Conversion
      Date”
shall
      have the meaning set forth in Section 4(a).

    

    “Conversion
      Price”
shall
      have the meaning set forth in Section 4(b).

    

    “Conversion
      Schedule”
means
      the Conversion Schedule in the form of Schedule
      1
      attached
      hereto. 

    

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

    

    “Debenture
      Register”
shall
      have the meaning set forth in Section 2(c).

    

    “Equity
      Conditions”
means,
      during the period in question, (i) the Company shall have duly honored all
      conversions and redemptions scheduled to occur or occurring by virtue of one
      or
      more Notices of Conversion of the Holder, if any, (ii) the Company shall have
      paid all liquidated damages and other amounts owing to the Holder in respect
      of
      this Debenture, (iii)(a) there is an effective Registration Statement pursuant
      to which the Holder is permitted to utilize the prospectus thereunder to resell
      all of the shares of Common Stock issuable pursuant to the Transaction Documents
      (and the Company believes, in good faith, that such effectiveness will continue
      uninterrupted for the foreseeable future) or (b) all of the Conversion Shares
      issuable pursuant to the Transaction Documents may be resold pursuant to Rule
      144 without volume or manner-of-sale restrictions or current public information
      requirements as determined by the counsel to the Company pursuant to a written
      opinion letter to such effect, addressed and acceptable to the Transfer Agent
      and the Holder, (iv) the Common Stock is trading on a Trading Market and all
      of
      the shares issuable pursuant to the Transaction Documents are listed or quoted
      for trading on such Trading Market (and the Company believes, in good faith,
      that trading of the Common Stock on a Trading Market will continue uninterrupted
      for the foreseeable future), (v) there is a sufficient number of authorized
      but
      unissued and otherwise unreserved shares of Common Stock for the issuance of
      all
      of the shares issuable pursuant to the Transaction Documents, (vi) there is
      no
      existing Event of Default

    
      
         

      

      
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    or
      no
      existing event which, with the passage of time or the giving of notice, would
      constitute an Event of Default, (vii) the issuance of the shares in question
      (or, in the case of an Optional Redemption or Monthly Redemption, the shares
      issuable upon conversion in full of the Optional Redemption Amount or Monthly
      Redemption Amount) to the Holder would not violate the limitations set forth
      in
      Section 4(c) herein, (viii) there has been no public announcement of a pending
      or proposed Fundamental Transaction or Change of Control Transaction that has
      not been consummated, (ix) the Holder is not in possession of any information
      provided by the Company that constitutes, or may constitute, material non-public
      information and (x)
      for
      each Trading Day in a period of 30 consecutive Trading Days prior to the
      applicable date in question, the daily trading volume for the Common Stock
      on
      the principal Trading Market exceeds 100,000 shares per Trading Day (subject
      to
      adjustment for forward and reverse stock splits and the like).

    

    “Event
      of Default”
shall
      have the meaning set forth in Section 8.

    

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

    

    “Fundamental
      Transaction”
shall
      have the meaning set forth in Section 5(e).

     

    “Interest
      Conversion Rate”
means
      95% of the lesser of (a) the average of the VWAPs for the 5 consecutive Trading
      Days ending on the Trading Day that is immediately prior to the applicable
      Interest Payment Date or (b) the average of the VWAPs for the 5 consecutive
      Trading Days ending on the Trading Day that is immediately prior to the date
      the
      applicable Interest Conversion Shares are issued and delivered if after the
      Interest Payment Date.

    

    “Interest
      Conversion Shares”
shall
      have the meaning set forth in Section 2(a).

    

    “Interest
      Notice Period”
shall
      have the meaning set forth in Section 2(a).

     

    “Interest
      Payment Date”
shall
      have the meaning set forth in Section 2(a).

    

    “Interest
      Period”
means,
      initially, the period beginning on and including the Original Issue Date and
      ending on and including June 30, 2008 and each successive period as follows:
      the
      period beginning on and including July 1 and ending on and including September
      30; the period beginning on and including October 1 and ending on and including
      December 31; the
      period beginning on and including January 1 and ending on and including March
      31; the period beginning on and including March 31 and ending on and including
      June 30; and the period beginning on and including June 30 and ending on and
      including September 30.

    

    “Interest
      Share Amount”
shall
      have the meaning set forth in Section 2(a).

    

    “Late
      Fees”
shall
      have the meaning set forth in Section 2(d).

    
      
         

      

      
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    “LIBOR”
means,
      for each Interest Period (i) the six-month London Interbank Offered Rate for
      deposits in U.S. dollars, as shown on the Trading Day immediately prior to
      the
      beginning of such Interest Period in The Wall Street Journal (Eastern Edition)
      under the caption "Money Rates - London Interbank Offered Rates (LIBOR)"; or
      (ii) if The Wall Street Journal does not publish such rate, the offered
      one-month rate for deposits in U.S. dollars which appears on the Reuters Screen
      LIBO Page as of 10:00 a.m., New York time, on the Trading Day immediately prior
      to the beginning of such Interest Period, provided that if at least two rates
      appear on the Reuters Screen LIBO Page on any such Trading Day, the "LIBOR"
      for
      such day shall be the arithmetic mean of such rates.

    

    “Mandatory
      Default Amount”
means
      the sum of (i) the greater of (A) 130% of the outstanding principal amount
      of
      this Debenture, plus all accrued and unpaid interest hereon, or (B) the
      outstanding principal amount of this Debenture, plus all accrued and unpaid
      interest hereon, divided by the Conversion Price on the date the Mandatory
      Default Amount is either (a) demanded (if demand or notice is required to create
      an Event of Default) or otherwise due or (b) paid in full, whichever has a
      lower
      Conversion Price, multiplied by the VWAP on the date the Mandatory Default
      Amount is either (x) demanded or otherwise due or (y) paid in full, whichever
      has a higher VWAP, and (ii) all other amounts, costs, expenses and liquidated
      damages due in respect of this Debenture. Notwithstanding anything herein to
      the
      contrary, if at the applicable time the Holder is able to and there are no
      impediments to convert and immediately resell the Conversion Shares to the
      public pursuant to a Registration Statement or under Rule 144, without (i)
      the
      requirement for the Company to be in compliance with the current public
      information required under Rule 144 and (ii) volume or manner-of-sale
      restrictions, the Mandatory Default Amount shall mean (y) the sum of 130% of
      the
      outstanding principal amount of this Debenture, plus all accrued and unpaid
      interest hereon, and (z) all other amounts, costs, expenses and liquidated
      damages due in respect of this Debenture.

     

    “Monthly
      Redemption”
means
      the redemption of this Debenture pursuant to Section 6(a) hereof. 

     

    “Monthly
      Redemption Amount”
means,
      as to a Monthly Redemption, $______1,
      plus
      accrued but unpaid interest, liquidated damages and any other amounts then
      owing
      to the Holder in respect of this Debenture.

    

    “Monthly
      Redemption Date” means
      the
      1st of each month, commencing on January 1, 2009 and ending upon the full
      redemption of this Debenture.

    

    “Monthly
      Redemption Notice”
shall
      have the meaning set forth in Section 6(a) hereof.

    

    “Monthly
      Redemption Period”
shall
      have the meaning set forth in Section 6(a) hereof.

     

     

     

      
        

      

    

    
      	1	
              1/10
                of the original principal amount.

            

    

    
 

    
      
         

      

      
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    “Monthly
      Redemption Price”
shall
      have the meaning set forth in Section 6(a) hereof. 

    

    “Monthly
      Redemption Share Amount”
shall
      have the meaning set forth in Section 6(a) hereof. 

    

    “Notice
      of Conversion”
shall
      have the meaning set forth in Section 4(a).

    

    “Optional
      Redemption”
shall
      have the meaning set forth in Section 6(b).

    

    “Optional
      Redemption Amount”
means
      the sum of (i) 115% of the principal amount of the Debenture then outstanding
      and subject to redemption, (ii) accrued but unpaid interest on the redeemed
      principal and (iii) all liquidated damages and other amounts due in respect
      of
      the principal amount being redeemed.

    

    “Optional
      Redemption Date”
shall
      have the meaning set forth in Section 6(b).

    

    “Optional
      Redemption Notice”
shall
      have the meaning set forth in Section 6(b).

    

    “Optional
      Redemption Notice Date”
shall
      have the meaning set forth in Section 6(b).

    

    “Original
      Issue Date”
means
      the date of the first issuance of this Debenture, regardless of any transfers
      of
      any portion of this Debenture and regardless of the number of instruments which
      may be issued to evidence this Debenture.

    

    “Permitted
      Indebtedness”
      means (a)
      the
      indebtedness evidenced by the Debentures, (b) the Indebtedness existing on
      the
      Original Issue Date and set forth on Schedule
      3.1(aa)
      attached
      to the Purchase Agreement and any refinancing thereof, (b) lease obligations
      and
      purchase money indebtedness of up to $100,000, in the aggregate, incurred in
      connection with the acquisition of capital assets and lease obligations with
      respect to newly acquired or leased assets, and (c) indebtedness that (i) is
      expressly subordinate to the Debentures pursuant to a written subordination
      agreement with the Purchasers that is acceptable to each Purchaser in its sole
      and absolute discretion and (ii) matures at a date later than the Maturity
      Date.

    

    “Permitted
      Lien”
means
      the individual and collective reference to the following: (a) Liens for taxes,
      assessments and other governmental charges or levies not yet due or Liens for
      taxes, assessments and other governmental charges or levies being contested
      in
      good faith and by appropriate proceedings for which adequate reserves (in the
      good faith judgment of the management of the Company) have been established
      in
      accordance with GAAP; (b) Liens imposed by law which were incurred in the
      ordinary course of the Company’s business, such as carriers’, warehousemen’s and
      mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
      the ordinary course of the Company’s business, and which (x) do not individually
      or in the aggregate materially detract from the value of such property or assets
      or materially impair the use thereof in the operation of

     

    
      
         

      

      
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    the
      business of the Company and its consolidated Subsidiaries or (y) are being
      contested in good faith by appropriate proceedings, which proceedings have
      the
      effect of preventing for the foreseeable future the forfeiture or sale of the
      property or asset subject to such Lien; (c) Liens incurred in connection with
      Permitted Indebtedness under clause (a) or (d) of the definition thereof; and
      (d) Liens incurred in connection with Permitted Indebtedness under clause (b)
      thereunder, provided that such Liens are not secured by assets of the Company
      or
      its Subsidiaries other than the assets so acquired or leased.

     

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

    

    “Pre-Redemption
      Conversion Shares”
shall
      have the meaning set forth in Section 6(a) hereof. 

    

    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of June ___, 2008, among the Company
      and the original Holders, as amended, modified or supplemented from time to
      time
      in accordance with its terms.

    

    “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 4(d).

    

    “Subsidiary”
shall
      have the meaning set forth in the Purchase Agreement.

    

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

    

    “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”
shall
      have the meaning set forth in the Purchase Agreement.

    

    “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 for trading 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
      quoted for trading on the OTC Bulletin Board and if

    
      
         

      

      
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    prices
      for the Common Stock are then reported in the “Pink Sheets” published by Pink
      Sheets, LLC (or a similar organization or agency succeeding to its functions
      of
      reporting prices), the most recent bid price per share of the Common Stock
      so
      reported; or (d) in all other cases, the fair market value of a share of
      Common Stock as determined by an independent appraiser selected in good faith
      by
      the Holder and reasonably acceptable to the Company.

    

    Section
      2. Interest.

     

    a) Payment
      of Interest in Cash or Kind.
      The
      Company shall pay interest to the Holder on the aggregate unconverted and then
      outstanding principal amount of this Debenture at a rate of interest per annum
      equal to the higher of (a) 8.0% or (b) LIBOR during the applicable Interest
      Period plus 2%, payable quarterly on January 1, April 1, July 1 and October
      1,
      beginning on the first such date after the Original Issue Date, on each Monthly
      Redemption Date (as to that principal amount then being redeemed), on each
      Optional Redemption Date (as to that principal amount then being redeemed),
      on
      each Conversion Date (as to that principal amount then being converted) and
      on
      the Maturity Date (each such date, an “Interest
      Payment Date”)
      (if
      any Interest Payment Date is not a Business Day, then the applicable payment
      shall be due on the next succeeding Business Day), in cash or, at the Company’s
      option, in duly authorized, validly issued, fully paid and non-assessable shares
      of Common Stock at the Interest Conversion Rate (the amount in U.S. dollars
      to
      be paid in shares, the “Interest
      Share Amount”)
      or a
      combination thereof; provided,
      however,
      that
      payment in shares of Common Stock may only occur if (i) all of the Equity
      Conditions have been met (unless waived by the Holder in writing) during the
      5
      Trading Days immediately prior to the applicable Interest Payment Date (the
      “Interest
      Notice Period”)
      and
      through and including the date such shares of Common Stock are issued to the
      Holder, (ii) the Company shall have given the Holder notice in accordance with
      the notice requirements set forth below and (iii) as to such Interest Payment
      Date, prior to such Interest Notice Period (but not more than 5 Trading Days
      prior to the commencement of such Interest Notice Period), the Company shall
      have delivered to the Holder’s account with The Depository Trust Company a
      number of shares of Common Stock to be applied against such Interest Share
      Amount equal to the quotient of (x) the applicable Interest Share Amount divided
      by (y) the then Conversion Price (the “Interest
      Conversion Shares”).

     

    b) Company’s
      Election to Pay Interest in Cash or Shares of Common Stock.
      Subject
      to the terms and conditions herein, the decision whether to pay interest
      hereunder in cash, shares of Common Stock or a combination thereof shall be
      at
      the sole discretion of the Company. Prior to the commencement of any Interest
      Notice Period, the Company shall deliver to the Holder a written notice of
      its
      election to pay interest hereunder on the applicable Interest Payment Date
      either in cash, shares of Common Stock or a combination thereof and the Interest
      Share Amount as to the applicable Interest Payment Date, provided that the
      Company may indicate in such notice that the election contained in such notice
      shall apply to future Interest Payment Dates until revised by a subsequent
      notice. During any Interest Notice Period, the Company’s election (whether
      specific to an Interest Payment Date or continuous) shall be irrevocable as
      to
      such Interest Payment

    
      
         

      

      
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    Date.
      Subject to the aforementioned conditions, failure to timely deliver such written
      notice to the Holder shall be deemed an election by the Company to pay the
      interest on such Interest Payment Date in cash. At any time the Company delivers
      a notice to the Holder of its election to pay the interest in shares of Common
      Stock, the Company shall timely file a prospectus supplement pursuant to Rule
      424 disclosing such election. The aggregate number of shares of Common Stock
      otherwise issuable to the Holder on an Interest Payment Date shall be reduced
      by
      the number of Interest Conversion Shares previously issued to the Holder in
      connection with such Interest Payment Date.

    

    c) Interest
      Calculations.
      Interest shall be calculated on the basis of a 360-day year, consisting of
      twelve 30 calendar day periods, and shall accrue daily commencing on the
      Original Issue Date until payment in full of the outstanding principal, together
      with all accrued and unpaid interest, liquidated damages and other amounts
      which
      may become due hereunder, has been made. Payment of interest in shares of Common
      Stock (other than the Interest Conversion Shares issued prior to an Interest
      Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein and,
      solely for purposes of the payment of interest in shares, the Interest Payment
      Date shall be deemed the Conversion Date. Interest shall cease to accrue with
      respect to any principal amount converted, provided that the Company actually
      delivers the Conversion Shares within the time period required by Section
      4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name
      this Debenture is registered on the records of the Company regarding
      registration and transfers of this Debenture (the “Debenture
      Register”).
      Except as otherwise provided herein, if at any time the Company pays interest
      partially in cash and partially in shares of Common Stock to the holders of
      the
      Debentures, then such payment of cash shall be distributed ratably among the
      holders of the then-outstanding Debentures based on their (or their
      predecessor’s) initial purchases of Debentures pursuant to the Purchase
      Agreement.

    

    d) Late
      Fee.
      All
      overdue accrued and unpaid interest to be paid hereunder shall entail a late
      fee
      at an interest rate equal to the lesser of 15% per annum or the maximum rate
      permitted by applicable law (“Late
      Fees”)
      which
      shall accrue daily from the date such interest is due hereunder through and
      including the date of actual payment in full. Notwithstanding anything to the
      contrary contained herein, if on any Interest Payment Date the Company has
      elected to pay accrued interest in the form of Common Stock but the Company
      is
      not permitted to pay accrued interest in Common Stock because it fails to
      satisfy the conditions for payment in Common Stock set forth in Section 2(a)
      herein, then, at
      the
      option of the Holder, the
      Company shall pay the regularly scheduled interest payment in cash. If any
      Interest Conversion Shares are issued to the Holder in connection with an
      Interest Payment Date and are not applied against an Interest Share Amount,
      then
      the Holder shall promptly return such excess shares to the Company.

     

    e) Prepayment.
      Except
      as otherwise set forth in this Debenture, the Company may not prepay any portion
      of the principal amount of this Debenture without the prior written consent
      of
      the Holder. 

    
      
         

      

      
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    Section
      3.  Registration
      of Transfers and Exchanges.
      

     

    a) Different
      Denominations.
      This
      Debenture is exchangeable for an equal aggregate principal amount of Debentures
      of different authorized denominations, as requested by the Holder surrendering
      the same. No service charge will be payable for such registration of transfer
      or
      exchange.

     

    b) Investment
      Representations.
      This
      Debenture has been issued subject to certain investment representations of
      the
      original Holder set forth in the Purchase Agreement and may be transferred
      or
      exchanged only in compliance with the Purchase Agreement and applicable federal
      and state securities laws and regulations. 

    

    c) Reliance
      on Debenture Register.
      Prior
      to due presentment for transfer to the Company of this Debenture, the Company
      and any agent of the Company may treat the Person in whose name this Debenture
      is duly registered on the Debenture Register as the owner hereof for the purpose
      of receiving payment as herein provided and for all other purposes, whether
      or
      not this Debenture is overdue, and neither the Company nor any such agent shall
      be affected by notice to the contrary.

    

    Section
      4.  Conversion.

     

    a) Voluntary
      Conversion.
      At any
      time after the Original Issue Date until this Debenture is no longer
      outstanding, this Debenture shall be convertible, in whole or in part, into
      shares of Common Stock at the option of the Holder, at any time and from time
      to
      time (subject to the conversion limitations set forth in Section 4(c)
      hereof). The Holder shall effect conversions by delivering to the Company a
      Notice of Conversion, the form of which is attached hereto as Annex
      A
      (a
“Notice
      of Conversion”),
      specifying therein the principal amount of this Debenture to be converted and
      the date on which such conversion shall be effected (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 is deemed delivered hereunder.
      To effect conversions hereunder, the Holder shall not be required to physically
      surrender this Debenture to the Company unless the entire principal amount
      of
      this Debenture, plus all accrued and unpaid interest thereon, has been so
      converted. Conversions hereunder shall have the effect of lowering the
      outstanding principal amount of this Debenture in an amount equal to the
      applicable conversion. The Holder and the Company shall maintain records showing
      the principal amount(s) converted and the date of such conversion(s). The
      Company shall deliver an objection to any Notice of Conversion within 1 Business
      Day of delivery of such Notice of Conversion. In the event of any dispute or
      discrepancy, the records of the Company shall be controlling and determinative
      in the absence of manifest error; provided,
      however,
      in the
      event of a dispute the Company shall deliver Conversion Shares to the extent
      that no dispute exists and in the event that the Company is later proved to
      be
      in error the Holder shall have the right to seek all remedies hereunder
      retroactive to the Conversion Date. The
      Holder, and any assignee by acceptance of this Debenture, acknowledge and agree
      that, by reason of the provisions of this

    
      
         

      

      
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    paragraph,
      following conversion of a portion of this Debenture, the unpaid and unconverted
      principal amount of this Debenture may be less than the amount stated on the
      face hereof.

     

    b) Conversion
      Price.
      The
      conversion price in effect on any Conversion Date shall be equal to $0.35
      subject
      to adjustment herein (the “Conversion
      Price”).

    

    c) Holder’s
      Restriction on Conversion.
      The
      Company shall not effect any conversion of this Debenture, and a Holder shall
      not have the right to convert any portion of this Debenture, to the extent
      that
      after giving effect to the conversion set forth on the applicable Notice of
      Conversion, the Holder (together with the Holder’s Affiliates, and any other
      person or entity acting as a group together with the Holder or any of the
      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 the Holder and its
      Affiliates shall include the number of shares of Common Stock issuable upon
      conversion of this Debenture with respect to which such determination is being
      made, but shall exclude the number of shares of Common Stock which are issuable
      upon (A) conversion of the remaining, unconverted principal amount of this
      Debenture beneficially owned by the Holder or any of its Affiliates and (B)
      exercise or conversion of the unexercised or unconverted portion of any other
      securities of the Company subject to a limitation on conversion or exercise
      analogous to the limitation contained herein (including, without limitation,
      any
      other Debentures or the Certificate of Designation) beneficially owned by the
      Holder or any of its Affiliates. Except as set forth in the preceding sentence,
      for purposes of this Section 4(c)(ii), 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 4(c)(ii) applies, the determination of whether this Debenture
      is
      convertible (in relation to other securities owned by the Holder together with
      any Affiliates) and of which principal amount of this Debenture is convertible
      shall be in the sole discretion of the Holder, and the submission of a Notice
      of
      Conversion shall be deemed to be the Holder’s determination of whether this
      Debenture may be converted (in relation to other securities owned by the Holder
      together with any Affiliates) and which principal amount of this Debenture
      is
      convertible, in each case subject to the Beneficial Ownership Limitation. To
      ensure compliance with this restriction, the Holder will be deemed to represent
      to the Company 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
      Company 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 4(c)(ii), in determining the number of outstanding shares of
      Common Stock, the Holder may rely on the number of outstanding shares of Common
      Stock as stated in the most recent of the following: (A) the Company’s most
      recent periodic or annual report, as the case may be; (B) a more recent public
      announcement by the Company; or (C) a more recent notice by the Company or
      the
      Company’s transfer agent setting forth the number of shares of Common Stock
      outstanding. Upon the written or oral request of

    
      
         

      

      
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    a
      Holder,
      the Company shall within two Trading Days confirm orally and in writing to
      the
      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 Company, including
      this Debenture, by the 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 4.99% 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 this Debenture held by the Holder. The Holder, upon not less
      than
      61 days’ prior notice to the Company, may increase or decrease the Beneficial
      Ownership Limitation provisions of this Section 4(c)(ii), 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 Debenture held by
      the
      Holder and the Beneficial Ownership Limitation provisions of this Section
      4(c)(ii) shall continue to apply. Any such increase or decrease will not be
      effective until the 61st day after such notice is delivered to the Company.
      The
      Beneficial Ownership Limitation provisions of this paragraph shall be construed
      and implemented in a manner otherwise than in strict conformity with the terms
      of this Section 4(c)(ii) 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 this
      Debenture.

     

    d) Mechanics
      of Conversion.

     

    i. Conversion
      Shares Issuable Upon Conversion of Principal Amount.
      The
      number of Conversion Shares issuable upon a conversion hereunder shall be
      determined by the quotient obtained by dividing (x) the outstanding principal
      amount of this Debenture to be converted by (y) the Conversion
      Price.

     

    ii. Delivery
      of Certificate Upon Conversion.
      Not
      later than three Trading Days after each Conversion Date (the “Share
      Delivery Date”),
      the
      Company shall deliver, or cause to be delivered, to the Holder (A) a certificate
      or certificates representing the Conversion Shares which, on or after the
      earlier of (i) the six month anniversary of the Original Issue Date or (ii)
      the
      Effective Date, shall be free of restrictive legends and trading restrictions
      (other than those which may then be required by the Purchase Agreement)
      representing the number of Conversion Shares being acquired upon the conversion
      of this Debenture (including, if the Company has given continuous notice
      pursuant to Section 2(b) for payment of interest in shares of Common Stock
      at
      least 5 Trading Days prior to the date on which the Notice of Conversion is
      delivered to the Company, shares of Common Stock representing the payment of
      accrued interest otherwise determined pursuant to Section 2(a) but assuming
      that
      the Interest Notice Period

     

     

     

    
 

    
      
         

      

      
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    is
      the 5
      Trading Days period immediately prior to the date on which the Notice of
      Conversion is delivered to the Company and excluding for such issuance the
      condition that the Company deliver Interest Conversion Shares as to such
      interest payment) and (B) a Company check or wire transfer of immediately
      available funds in the amount of accrued and unpaid interest (if the Company
      has
      elected or is required to pay accrued interest in cash). On or after the earlier
      of (i) the six month anniversary of the Original Issue Date or (ii) the
      Effective Date, the Company shall use its best efforts to deliver any
      certificate or certificates required to be delivered by the Company under this
      Section 4 electronically through the Depository Trust Company or another
      established clearing corporation performing similar functions. 

     

    iii. 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 2nd
      Trading
      Day immediately following the Shares Delivery Date, the Holder shall be entitled
      to elect by written notice to the Company at any time on or before its receipt
      of such certificate or certificates, to rescind such Conversion, in which event
      the Company shall promptly return to the Holder any original Debenture delivered
      to the Company and the Holder shall promptly return to the Company the Common
      Stock certificates representing the principal amount of this Debenture
      unsuccessfully tendered for conversion to the Company. 

     

    iv. Obligation
      Absolute; Partial Liquidated Damages.
      The
      Company’s obligations to issue and deliver the Conversion Shares upon conversion
      of this Debenture in accordance with the terms hereof are absolute and
      unconditional, irrespective of any action or inaction by the 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 the Holder or any other Person of any obligation
      to
      the Company or any violation or alleged violation of law by the Holder or any
      other Person, and irrespective of any other circumstance which might otherwise
      limit such obligation of the Company to the Holder in connection with the
      issuance of such Conversion Shares; provided,
      however,
      that
      such delivery shall not operate as a waiver by the Company of any such action
      the Company may have against the Holder. In the event the Holder of this
      Debenture shall elect to convert any or all of the outstanding principal amount
      hereof, the Company may not refuse conversion based on any claim that the Holder
      or anyone associated or affiliated with the 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 this Debenture shall have been sought and obtained, and the Company
      posts a surety bond for the benefit of the Holder in the amount of 150% of
      the
      outstanding principal amount of this Debenture, which is subject to the
      injunction, which bond shall remain in effect until the

    
      
         

      

      
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    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 Company shall issue Conversion Shares or, if
      applicable, cash, upon a properly noticed conversion. If the Company fails
      for
      any reason to deliver to the Holder such certificate or certificates pursuant
      to
      Section 4(d)(ii) by the fifth Trading Day after the Conversion Date, the Company
      shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
      for each $1000 of principal amount being converted, $10 per Trading Day
      (increasing to $20 per Trading Day on the fifth Trading Day after such
      liquidated damages begin to accrue) for each Trading Day after the 2nd
      Trading
      Day immediately following the Shares Delivery Date until such certificates
      are
      delivered. Nothing herein shall limit a Holder’s right to pursue actual damages
      or declare an Event of Default pursuant to Section 8 hereof for the Company’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
      the
      Holder from seeking to enforce damages pursuant to any other Section hereof
      or
      under applicable law.

     

    v. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion.
      In
      addition to any other rights available to the Holder, if the Company fails
      for
      any reason to deliver to the Holder such certificate or certificates by the
      2nd
      Trading
      Day immediately following the Share Delivery Date pursuant to Section 4(d)(ii),
      and if after such Share Delivery Date the 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 the Holder
      was entitled to receive upon the conversion relating to such Share Delivery
      Date
      (a “Buy-In”),
      then
      the Company shall (A) pay in cash to the Holder (in addition to any other
      remedies available to or elected by the Holder) the amount by which (x) the
      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 the Holder, either reissue
      (if
      surrendered) this Debenture in a principal amount equal to the principal amount
      of the attempted conversion or deliver to the Holder the number of shares of
      Common Stock that would have been issued if the Company had timely complied
      with
      its delivery requirements under Section 4(d)(ii). For example, if the Holder
      purchases Common Stock having a total purchase price of $11,000 to cover a
      Buy-In with respect to an attempted conversion of this Debenture with respect
      to
      which the actual sale price of the Conversion Shares (including any brokerage
      commissions) giving rise to such

    
      
         

      

      
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    purchase
      obligation was a total of $10,000 under clause (A) of the immediately preceding
      sentence, the Company shall be required to pay the Holder $1,000. The Holder
      shall provide the Company written notice indicating the amounts payable to
      the
      Holder in respect of the Buy-In and, upon request of the Company, 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 Company’s failure to timely deliver certificates
      representing shares of Common Stock upon conversion of this Debenture as
      required pursuant to the terms hereof.

     

    vi. Reservation
      of Shares Issuable Upon Conversion.
      The
      Company 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 this Debenture and payment of interest on this
      Debenture, each 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 Debentures), not less than such aggregate number of shares
      of the Common Stock as shall (subject to the terms and conditions set forth
      in
      the Purchase Agreement) be issuable (taking into account the adjustments and
      restrictions of Section 5) upon the conversion of the outstanding principal
      amount of this Debenture and payment of interest hereunder. The Company
      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 sale in accordance with such Registration
      Statement.

    

    vii. Fractional
      Shares.
      Upon a
      conversion hereunder the Company shall not be required to issue stock
      certificates representing fractions of shares of Common Stock, but shall instead
      round the fraction to the nearest whole share.

    

    viii. Transfer
      Taxes.
      The
      issuance of certificates for shares of the Common Stock on conversion of this
      Debenture shall be made without charge to the Holder hereof for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificates, provided that the Company 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 Holder of this Debenture so converted and the Company 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 Company the amount of
      such tax or shall have established to the satisfaction of the Company that
      such
      tax has been paid.

    

    Section
      5. Certain
      Adjustments.

     

    
      
         

      

      
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    a) Stock
      Dividends and Stock Splits.
      If the
      Company, at any time while this Debenture is outstanding: (A) pays a stock
      dividend or otherwise makes a distribution or distributions payable in shares
      of
      Common Stock on shares of Common Stock or any Common Stock Equivalents (which,
      for avoidance of doubt, shall not include any shares of Common Stock issued
      by
      the Company upon conversion of, or payment of interest on, the Debentures);
      (B)
      subdivides outstanding shares of Common Stock into a larger number of shares;
      (C) combines (including by way of a reverse stock split) outstanding shares
      of
      Common Stock into a smaller number of shares; or (D) issues, in the event of
      a
      reclassification of shares of the Common Stock, any shares of capital stock
      of
      the Company, then the Conversion Price shall be multiplied by a fraction of
      which the numerator shall be the number of shares of Common Stock (excluding
      any
      treasury shares of the Company) outstanding immediately before such event and
      of
      which the denominator shall be the number of shares of Common Stock outstanding
      immediately after such event. Any adjustment made pursuant to this Section
      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.

     

    b) [INTENTIONALLY
      DELETED]. 

    

    c) [INTENTIONALLY
      DELETED]. 

     

    d) [INTENTIONALLY
      DELETED]

     

    e) Fundamental
      Transaction.
      If, at
      any time while this Debenture is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one transaction
      or
      a series of related transactions, (C) any tender offer or exchange offer
      (whether by the Company or another Person) is completed pursuant to which
      holders of Common Stock are permitted to tender or exchange their shares for
      other securities, cash or property, or (D) the Company effects any
      reclassification 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 (in any such case, a “Fundamental
      Transaction”),
      then,
      upon any subsequent conversion of this Debenture, 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, the same kind and amount of securities, cash or property as it
      would have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of 1 share of Common Stock (the “Alternate
      Consideration”).
      For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of 1 share of Common
      Stock
      in such Fundamental Transaction, and the Company shall apportion the Conversion
      Price among the Alternate Consideration in a reasonable manner reflecting the
      relative value of any different components of the

    
      
         

      

      
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    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 Debenture following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new debenture consistent with the foregoing
      provisions and evidencing the Holder’s right to convert such debenture into
      Alternate Consideration. The terms of any agreement pursuant to which a
      Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of this Section
      5(e)
      and insuring that this Debenture (or any such replacement security) will be
      similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    f) Calculations.
      All
      calculations under this Section 5 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
      5,
      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 Company) issued and outstanding.

    

    g) Notice
      to the Holder.

    

    i. Adjustment
      to Conversion Price.
      Whenever the Conversion Price is adjusted pursuant to any provision of this
      Section 5, the Company shall promptly mail to each Holder a notice setting
      forth
      the Conversion Price after such adjustment and setting forth a brief statement
      of the facts requiring such adjustment and basic terms of the dilutive security.
      If the Company enters into a Variable Rate Transaction, despite the prohibition
      thereon in the Purchase Agreement, the Company shall be deemed to have issued
      Common Stock or Common Stock Equivalents at the lowest possible conversion
      price
      at which such securities may be converted or exercised.

     

    ii. Notice
      to Allow Conversion by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock, (B) the Company shall declare a special nonrecurring
      cash dividend on or a redemption of the Common Stock, (C) the Company 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 Company shall be required
      in
      connection with any reclassification of the Common Stock, any consolidation
      or
      merger to which the Company is a party, any sale or transfer of all or
      substantially all of the assets of the Company, of any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property
      or
      (E) the
      Company shall authorize the voluntary or involuntary dissolution, liquidation
      or
      winding up of the affairs of the Company, then, in each case, the Company shall
      cause to be filed at each office or agency maintained for the purpose of
      conversion of this

    
      
         

      

      
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    Debenture,
      and shall cause to be delivered
      to the Holder at its last address as it shall appear upon the Debenture
      Register, at least 10 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. The Holder is entitled to convert this Debenture during the
      10-day period commencing on the date of such notice through the effective date
      of the event triggering such notice.

     

    Section
      6. Redemption.

    

    a) Monthly
      Redemption.
      On each
      Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount
      (such redemption, the “Monthly
      Redemption”).
      The
      Monthly Redemption Amount payable on each Monthly Redemption Date shall be
      paid
      in cash; provided,
      however,
      as to
      any Monthly Redemption and upon 12 Trading Days’ prior written irrevocable
      notice (the “Monthly
      Redemption Notice”),
      in
      lieu of a cash redemption payment the Company may elect to pay all or part
      of a
      Monthly Redemption Amount in Conversion Shares (such amount in U.S. dollars
      to
      be paid on a Monthly Redemption Date in Conversion Shares, the “Monthly
      Redemption Share Amount”)
      based
      on a conversion price equal to 80% of the average of the VWAPs for the 10
      consecutive Trading Days ending on the Trading Day that is immediately prior
      to
      the applicable Monthly Redemption Date (subject to adjustment for any stock
      dividend, stock split, stock combination or other similar event affecting the
      Common Stock during such 10 Trading Day period) (the price calculated during
      the
      10 Trading Day period immediately prior to the Monthly Redemption Date, the
      “Monthly
      Redemption Price”
and
      such 10 Trading Day period, the “Monthly
      Redemption Period”);
      provided,
      further,
      that
      the Company may not pay the Monthly Redemption Amount in Conversion Shares
      unless (y) from the date the Holder receives the duly delivered Monthly
      Redemption Notice through and until the date such Monthly Redemption is paid
      in
      full, the Equity Conditions have been satisfied, unless waived in writing by
      the
      Holder, and (z) as to such Monthly Redemption, prior to such Monthly Redemption
      Period (but not more than 5 Trading Days prior to the commencement of the
      Monthly Redemption Period), the Company shall have delivered to the Holder’s
      account with The Depository Trust Company (the date of such delivery, the
“Pre-Redemption
      Conversion Shares Delivery Date”)
      a
      number of shares of Common Stock to be applied against such Monthly Redemption
      Share Amount equal to the applicable Monthly Redemption Share
      Amount

    
      
         

      

      
        -
          18 -

        
          

        

      

      
         

      

    

    divided
      by 80% of the average of the VWAPs for the 10 consecutive Trading Days
      immediately preceding the Pre-Redemption Conversion Shares Delivery Date (the
      “Pre-Redemption
      Conversion Shares”); provided,
      however,
      with
      respect to clause (y) of this sentence, the Holder has agreed to waive
      subsections (ii), (iii), (vi), (x) of the definition of “Equity Conditions”,
      provided that
      (a)
      the Conversion Shares may be sold by the Holder without volume or manner
      restrictions and counsel to the Company has provided the Holder with an opinion
      addressed to the transfer agent to such effect and acceptable to the transfer
      agent, (b) no Event of Default restricts in any way the Holder’s ability to
      immediately resell the Conversion Shares, and (c) the aggregate trading volume
      of the Common Stock on the Trading Market for the 12 consecutive Trading Days
      immediately prior to the applicable Monthly Redemption Date exceeds
      $150,000.
      The
      Holder may convert, pursuant to Section 4(a), any principal amount of this
      Debenture subject to a Monthly Redemption at any time prior to the date that
      the
      Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages
      and any other amounts then owing to the Holder are due and paid in full. Unless
      otherwise indicated by the Holder in the applicable Notice of Conversion, any
      principal amount of this Debenture converted during the applicable Monthly
      Redemption Period until the date the Monthly Redemption Amount is paid in full
      shall be first applied to the principal amount subject to the Monthly Redemption
      Amount payable in cash and then to the Monthly Redemption Amount payable in
      Conversion Shares. Any principal amount of this Debenture converted during
      the
      applicable Monthly Conversion Period in excess of the Monthly Redemption Amount
      shall be applied against the last principal amount of this Debenture scheduled
      to be redeemed hereunder, in reverse time order from the Maturity Date;
provided,
      however,
      if any
      such conversion is applied against such Monthly Redemption Amount, the
      Pre-Redemption Conversion Shares, if any were issued in connection with such
      Monthly Redemption or were not already applied to such conversions, shall be
      first applied against such conversion. The Company covenants and agrees that
      it
      will honor all Notices of Conversion tendered up until such amounts are paid
      in
      full. The Company’s determination to pay a Monthly Redemption in cash, shares of
      Common Stock or a combination thereof shall be applied ratably to all of the
      holders of the then outstanding Debentures based on their (or their
      predecessor’s) initial purchases of Debentures pursuant to the Purchase
      Agreement. At any time the Company delivers a notice to the Holder of its
      election to pay the Monthly Redemption Amount in shares of Common Stock, the
      Company shall file a prospectus supplement pursuant to Rule 424 disclosing
      such
      election.

    

    b) Optional
      Redemption at Election of Company.
      Subject
      to the provisions of this Section 6, at any time after the Effective Date,
      the
      Company may deliver a notice to the Holder (an “Optional
      Redemption Notice”
and
      the
      date such notice is deemed delivered hereunder, the “Optional
      Redemption Notice Date”)
      of its
      irrevocable election to redeem some or all of the then outstanding principal
      amount of this Debenture for cash in an amount equal to the Optional Redemption
      Amount on the 12th
      Trading
      Day following the Optional Redemption Notice Date (such date, the “Optional
      Redemption Date”
and
      such redemption, the “Optional
      Redemption”).
      The
      Optional Redemption Amount is payable in full on the Optional Redemption Date.
      The Company may only

    
      
         

      

      
        -
          19 -

        
          

        

      

      
         

      

    

    effect
      an
      Optional Redemption if each of the Equity Conditions shall have been met on
      each
      Trading Day during the period commencing on the Optional Redemption Notice
      Date
      through to the Optional Redemption Date and
      through and including the date payment of the Optional Redemption Amount is
      actually made.
      If any
      of the Equity Conditions shall cease to be satisfied at any time during the
      12
      Trading Day period, then the Holder may elect to nullify the Optional Redemption
      Notice by notice to the Company within 3 Trading Days after the first day on
      which any such Equity Condition has not been met (provided that if, by a
      provision of the Transaction Documents, the Company is obligated to notify
      the
      Holder of the non-existence of an Equity Condition, such notice period shall
      be
      extended to the third Trading Day after proper notice from the Company) in
      which
      case the Optional Redemption Notice shall be null and void, ab initio.
      The
      Company covenants and agrees that it will honor all Notices of Conversion
      tendered from the time of delivery of the Optional Redemption Notice through
      the
      date all amounts owing thereon are paid in full.

    

    c) Redemption
      Procedure.
      The
      payment of cash or, in the case of a Monthly Redemption, the issuance of Common
      Stock if applicable, shall be payable on the Monthly Redemption Date or Optional
      Redemption Date, as the case may be. In the case of a Monthly Redemption, in
      the
      event that the number of Pre-Redemption Conversion Shares exceeds the number
      of
      Conversion Shares required to be issued on the Monthly Redemption Date as set
      forth in Section 6(a), within 3 Trading Days the Holder shall either (i) return
      such excess Pre-Redemption Conversion Shares to the Company for cancellation
      or
      (ii) convert an additional principal amount of this Debenture at the Conversion
      Price to be applied against such excess Pre-Redemption Conversion Shares. If
      any
      portion of the payment pursuant to a Monthly Redemption or Optional Redemption
      shall not be paid by the Company by the applicable due date, interest shall
      accrue thereon at an interest rate equal to the lesser of 15% per annum or
      the
      maximum rate permitted by applicable law until such amount is paid in full.
      Notwithstanding anything herein contained to the contrary, if any portion of
      the
      Optional Redemption Amount or Monthly Redemption Amount, as applicable, remains
      unpaid after such date, the Holder may elect, by written notice to the Company
      given at any time thereafter accompanied by any payments of cash or Common
      Stock
      therefore paid by the Company in respect of such redemption, to invalidate
      such Optional Redemption or Monthly Redemption, ab initio.
      Notwithstanding anything to the contrary in this Section 6, the Company’s
      determination to redeem in cash or its elections under Section 6(a) shall be
      applied ratably among the Holders of Debentures.
      The
      Holder may elect to convert the outstanding principal amount of the Debenture
      subject to redemptions under Sections 6(a) or 6(b) pursuant to Section 4 at
      any
      time prior to actual payment in cash for any redemption under this Section
      6 by
      the delivery of a Notice of Conversion to the Company. 

     

    Section
      7. Negative
      Covenants.
      As long
      as any portion of this Debenture remains outstanding, the Company shall not,
      and
      shall not permit any of its Subsidiaries to, directly or indirectly, except
      with
      the prior written consent of the Agent (as defined in the Security
      Agreement):

    
      
         

      

      
        -
          20 -

        
          

        

      

      
         

      

    

    a) other
      than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
      suffer to exist any indebtedness for borrowed money of any kind, including
      but
      not limited to, a guarantee;

     

    b) other
      than Permitted Liens, enter into, create, incur, assume or suffer to exist
      any
      Liens of any kind, on or with respect to any of its property or assets now
      owned
      or hereafter acquired or any interest therein or any income or profits
      therefrom;

    

    c) amend
      its
      charter documents, including, without limitation, the certificate of
      incorporation and bylaws, in any manner that materially and adversely affects
      any rights of the Holder;

    

    d) repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis
      number
      of shares of its Common Stock or Common Stock Equivalents other than as to
      (a)
      the Conversion Shares or shares of Preferred Stock as permitted or required
      under the Transaction Documents and (b) repurchases of Common Stock or Common
      Stock Equivalents of departing officers and directors of the Company, provided
      that such repurchases shall not exceed an aggregate of $100,000 for all officers
      and directors during the term of this Debenture; 

    

    e) pay
      cash
      dividends or distributions on any equity securities of the Company;

    

    f) enter
      into any transaction with any Affiliate of the Company which would be required
      to be disclosed in any public filing with the Commission, unless such
      transaction is made on an arm’s-length basis and expressly approved by a
      majority of the disinterested directors of the Company (even if less than a
      quorum otherwise required for board approval); or

    

    g) enter
      into any agreement with respect to any of the foregoing.

     

    Section
      8. Events
      of Default.
      

    

    a) “Event
      of Default”
means,
      wherever used herein, any of the following events (whatever the reason for
      such
      event and whether such event shall be voluntary or involuntary or effected
      by
      operation of law or pursuant to any judgment, decree or order of any court,
      or
      any order, rule or regulation of any administrative or governmental
      body):

    

    i. any
      default in the payment of (A) the principal amount of any Debenture or (B)
      interest, liquidated damages and other amounts owing to a Holder on any
      Debenture, as and when the same shall become due and payable (whether on a
      Conversion Date or the Maturity Date or by acceleration or otherwise) which
      default, solely in the case of an interest payment or other default under clause
      (B) above, is not cured within 3 Trading Days;

    
      
         

      

      
        -
          21 -

        
          

        

      

      
         

      

    

     

    ii. the
      Company shall fail to observe or perform any other covenant or agreement
      contained in the Debentures (other than a breach by the Company of its
      obligations to deliver shares of Common Stock to the Holder upon conversion,
      which breach is addressed in clause (xi) below) which failure is not cured,
      if
      possible to cure, within the earlier to occur
      of
(A)
      5
Trading
      Days after notice of such failure sent by the Holder or by any other
      Holder
      and (B)
      10 Trading Days after the Company has become or should have become aware of
      such
      failure;

    

    iii. a
      default
      or event of default (subject to any grace or cure period provided in the
      applicable agreement, document or instrument) shall occur under (A) any of
      the
      Transaction Documents or (B) any other material agreement, lease, document
      or
      instrument to which the Company or any Subsidiary is obligated (and not covered
      by clause (vi) below);

    

    iv. any
      representation
      or warranty made in this Debenture, any other Transaction Documents, any written
      statement pursuant hereto or thereto or any other report, financial statement
      or
      certificate made or delivered to the Holder or any other Holder shall
      be
      untrue or incorrect in any material respect as of the date when made or deemed
      made;

    

    v. the
      Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
      of Regulation S-X) shall be subject to a Bankruptcy Event;

     

    vi. the
      Company or any Subsidiary shall default on any of its obligations under any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced, any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement that (a) involves an
      obligation greater than $150,000, whether such indebtedness now exists or shall
      hereafter be created, and (b) results in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable; 

    

    vii. the
      Common Stock shall not be eligible for listing or quotation for trading on
      a
      Trading Market and shall not be eligible to resume listing or quotation for
      trading thereon within five Trading Days;

    

    viii. the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction or shall agree to sell or dispose of all or in excess of 40% of
      its
      assets in one transaction or a series of related transactions (whether or not
      such sale would constitute a Change of Control Transaction);

    
      
         

      

      
        -
          22 -

        
          

        

      

      
         

      

    

    ix. the
      Company shall fail for any reason to deliver certificates to a Holder prior
      to
      the seventh Trading Day after a Conversion Date pursuant to Section 4(d) or
      the
      Company shall provide at any time notice to the Holder, including by way of
      public announcement, of the Company’s intention to not honor requests for
      conversions of any Debentures in accordance with the terms hereof;

    

    x. any
      monetary judgment, writ or similar final process shall be entered or filed
      against the Company, any Subsidiary or any of their respective property or
      other
      assets for more than $50,000, and such judgment, writ or similar final process
      shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;
      or

    

    xi. if
      a
      proper Disclosure Request has been made pursuant to Section 4.6(b) of the
      Purchase Agreement and the Company fails to either (i) make public disclosure
      of
      the information that is the subject of such Disclosure Request in a manner
      consistent with Rule 101(e) of Regulation FD or (ii) provide such Purchaser
      with
      a written statement that the Company does not believe that such information
      is
      material nonpublic information or that it was delivered pursuant to the prior
      request or consent of such Purchaser, in either case within 5 business days
      of
      its receipt of such Disclosure Request.

     

    b) Remedies
      Upon Event of Default.
      If any
      Event of Default occurs, the outstanding principal amount of this Debenture,
      plus accrued but unpaid interest, liquidated damages and other amounts owing
      in
      respect thereof through the date of acceleration, shall become, at the Holder’s
      election, immediately due and payable in cash at the Mandatory Default Amount.
      Commencing 5 days after the occurrence of any Event of Default that results
      in
      the eventual acceleration of this Debenture, the interest rate on this Debenture
      shall accrue at an interest rate equal to the lesser of 15% per annum or the
      maximum rate permitted under applicable law. Upon the payment in full of the
      Mandatory Default Amount, the Holder shall promptly surrender this Debenture
      to
      or as directed by the Company. In connection with such acceleration described
      herein, the Holder need not provide, and the Company hereby waives, any
      presentment, demand, protest or other notice of any kind, and the Holder may
      immediately and without expiration of any grace period enforce any and all
      of
      its rights and remedies hereunder and all other remedies available to it under
      applicable law. Such acceleration may be rescinded and annulled by Holder at
      any
      time prior to payment hereunder and the Holder shall have all rights as a holder
      of the Debenture until such time, if any, as the Holder receives full payment
      pursuant to this Section 8(b). No such rescission or annulment shall affect
      any
      subsequent Event of Default or impair any right consequent thereon.

     

    Section
      9. Miscellaneous.
      

     

    a) Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holder
      hereunder, including, without limitation, any Notice of

    
      
         

      

      
        -
          23 -

        
          

        

      

      
         

      

    

    Conversion,
      shall be in writing and delivered personally, by facsimile, or sent by a
      nationally recognized overnight courier service, addressed to the Company,
      at
      the address set forth above, facsimile number (203) 797-9285,
      Attention: Peter W. DeVecchis, Jr. or
      such
      other facsimile number or address as the Company may specify for such purpose
      by
      notice to the Holder delivered in accordance with this Section 9(a). Any and
      all
      notices or other communications or deliveries to be provided by the Company
      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 the Holder appearing on the books of the
      Company, or if no such facsimile number or address appears, at the principal
      place of business of the Holder. 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 specified on the signature page prior to 5:30 p.m. (New York
      City time), (ii) the date immediately following the date of transmission, if
      such notice or communication is delivered via facsimile at the facsimile number
      specified on the signature page between 5:30 p.m. (New York City time) and
      11:59
      p.m. (New York City time) on any date, (iii) the second Business Day following
      the date of mailing, if sent by 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 Debenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of, liquidated damages and accrued interest, as applicable,
      on
      this Debenture at the time, place, and rate, and in the coin or currency, herein
      prescribed. This Debenture is a direct debt obligation of the Company. This
      Debenture ranks pari passu
      with all
      other Debentures now or hereafter issued under the terms set forth
      herein.  

     

    c) Lost
      or Mutilated Debenture.
      If this
      Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
      execute and deliver, in exchange and substitution for and upon cancellation
      of a
      mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
      destroyed Debenture, a new Debenture for the principal amount of this Debenture
      so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
      of
      such loss, theft or destruction of such Debenture, and of the ownership hereof,
      reasonably satisfactory to the Company.

    

    d) Governing
      Law; Arbitration.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York. Any controversy or claim arising out of or
      related to this Debenture or the breach thereof, shall be settled by binding
      arbitration in New York, New York in accordance with the Expedited Procedures
      (Rules 53-57) of the Commercial Arbitration Rules of the American Arbitration
      Association (“AAA”).
      A
      proceeding shall be commenced upon written demand by the Company or Holder
      to
      the other. The arbitrator(s) shall enter a judgment by default against any
      party, which fails or refuses to appear in any properly noticed arbitration
      proceeding. The proceeding shall be conducted by one (1)
      arbitrator,

    
      
         

      

      
        -
          24 -

        
          

        

      

      
         

      

    

    unless
      the amount alleged to be in dispute exceeds two hundred fifty thousand dollars
      ($250,000), in which case three (3) arbitrators shall preside. The arbitrator(s)
      will be chosen by the parties from a list provided by the AAA, and if the
      parties are unable to agree within ten (10) days, the AAA shall select the
      arbitrator(s). The arbitrators must be experts in securities law and financial
      transactions. The arbitrators shall assess costs and expenses of the
      arbitration, including all attorneys’ and experts’ fees, as the arbitrators
      believe is appropriate in light of the merits of the parties’ respective
      positions in the issues in dispute. Each party submits irrevocably to the
      jurisdiction of any state court sitting in New York, New York or to the United
      States District Court sitting in New York, New York for purposes of enforcement
      of any discovery order, judgment or award in connection with such arbitration.
      The award of the arbitrator(s) shall be final and binding upon the parties
      and
      may be enforced in any court having jurisdiction. The arbitration shall be
      held
      in such place as set by the arbitrator(s) in accordance with Rule 55. With
      respect to any arbitration proceeding in accordance with this section, the
      prevailing party’s reasonable attorney’s fees and expenses shall be borne by the
      non-prevailing party.

    

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

     

    e) Waiver.
      Any
      waiver by the Company or the Holder of a breach of any provision of this
      Debenture 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
      Debenture. The failure of the Company or the Holder to insist upon strict
      adherence to any term of this Debenture on one or more occasions shall not
      be
      considered a waiver or deprive that party of the right thereafter to insist
      upon
      strict adherence to that term or any other term of this Debenture. Any waiver
      by
      the Company or the Holder must be in writing.

     

    f) Severability.
      If any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture 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.
      The Company covenants (to the extent that it

    
      
         

      

      
        -
          25 -

        
          

        

      

      
         

      

    

    may
      lawfully do so) that it shall not at any time insist upon, plead, or in any
      manner whatsoever claim or take the benefit or advantage of, any stay, extension
      or usury law or other law which would prohibit or forgive the Company from
      paying all or any portion of the principal of or interest on this Debenture
      as
      contemplated herein, wherever enacted, now or at any time hereafter in force,
      or
      which may affect the covenants or the performance of this indenture, and the
      Company (to the extent it may lawfully do so) hereby expressly waives all
      benefits or advantage of any such law, and covenants that it will not, by resort
      to any such law, hinder, delay or impeded the execution of any power herein
      granted to the Holder, but will suffer and permit the execution of every such
      as
      though no such law has been enacted.

     

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

    

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

    

    i) Assumption. 
      Any successor to the Company or any surviving entity in a Fundamental
      Transaction shall (i) assume, prior to such Fundamental Transaction, all of
      the
      obligations of the Company under this Debenture and the other Transaction
      Documents pursuant to written agreements in form and substance satisfactory
      to
      the Holder (such approval not to be unreasonably withheld or delayed) and (ii)
      issue to the Holder a new debenture of such successor entity evidenced by a
      written instrument substantially similar in form and substance to this
      Debenture, including, without limitation, having a principal amount and interest
      rate equal to the principal amount and the interest rate of this Debenture
      and
      having similar ranking to this Debenture, which shall be satisfactory to the
      Holder (any such approval not to be unreasonably withheld or delayed).  The
      provisions of this Section 9(i) shall apply similarly and equally to successive
      Fundamental Transactions and shall be applied without regard to any limitations
      of this Debenture.

    

    j) Secured
      Obligation.
      The
      obligations of the Company under this Debenture are secured by all assets of
      the
      Company and certain of the Subsidiaries pursuant to the Security Agreement,
      dated as of August 30, 2007, between the Company, certain of the Subsidiaries
      of
      the Company and the Secured Parties (as defined therein).

    

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

     

     

    
      
         

      

      
        -
          26 -

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Debenture to be duly executed
      by a
      duly authorized officer as of the date first above indicated.

    

    

    
      	
              SOLOMON
                TECHNOLOGIES, INC.

            
	 
	
              By: 
                __________________________________________

              Name:
                Peter W. DeVecchis, Jr.

              Title:
                President

            

    

    

    
      
         

      

      
        -
          27 -

        
          

        

      

      
         

      

    

    ANNEX
      A

    

    NOTICE
      OF CONVERSION

     

    The
      undersigned hereby elects to convert principal under the Original Issue Discount
      Variable Rate Self-Liquidating Senior Secured Convertible Debenture due October
      1, 2009 of Solomon Technologies, Inc., a Delaware corporation (the “Company”),
      into
      shares of common stock, par value $0.001 per share (the “Common
      Stock”),
      of
      the Company 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 reasonably
      requested by the Company in accordance therewith. No fee will be charged to
      the
      holder for any conversion, except for such transfer taxes, if any.

    

    By
      the
      delivery of this Notice of Conversion the undersigned represents and warrants
      to
      the Company that its ownership of the Common Stock does not exceed the amounts
      specified under Section 4 of this Debenture, as determined in accordance with
      Section 13(d) of the Exchange Act.

    

    The
      undersigned agrees to comply with the prospectus delivery requirements under
      the
      applicable securities laws in connection with any transfer of the aforesaid
      shares of Common Stock. 

    

    Conversion
      calculations:   

    Date
      to
      Effect Conversion:

    

    Principal
      Amount of Debenture to be Converted:

    

    Payment
      of Interest in Common Stock __ yes __ no

    If
      yes,
      $_____ of Interest Accrued on Account of Conversion at Issue.

    Number
      of
      shares of Common Stock to be issued:

    Signature:

    Name:

     

    Address
      for Delivery of Common Stock Certificates:

    

    Or

    

    DWAC
      Instructions:

    
      
         

      

      
        -
          28 -

        
          

        

      

      
         

      

    

     

     

    Schedule
      1

    

    CONVERSION
      SCHEDULE

    

    The
      Original Issue Discount Variable Rate Self-Liquidating Senior Secured
      Convertible Debentures due on October 1, 2009 in the aggregate principal amount
      of $______ are issued by Solomon Technologies, Inc. This Conversion Schedule
      reflects conversions made under Section 4 of the above referenced
      Debenture.

    

    Dated:
      

     

     

    
      	
              Date
                of Conversion

              (or
                for first entry, Original Issue Date)

            	
              Amount
                of Conversion

            	
              Aggregate
                Principal Amount Remaining Subsequent to Conversion

              (or
                original Principal Amount)

            	
              Company
                Attest

            
	   
	    
	   
	     

	     
	  
	   
	  

	
               
                

            	 
	  
	  

	  
	  
	  
	  

	   
	  
	  
	  

	  
	  
	  
	   

	  
	  
	  
	  

	  
	  
	  
	  

	  
	  
	  
	  

    

    

     

    -
      29
      -EX 10.3

     

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of June 30, 2008, by and among Solomon Technologies, Inc., a Delaware
      corporation (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

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

     

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

     

    ARTICLE
      I.

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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          1 -

        
          

        

      

      
         

      

    

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

     

    “Closing
      Date”
means
      a
      Trading Day on or before September 30, 2008 when all of the Transaction
      Documents have been executed and delivered by the Company and each of the
      Purchasers purchasing Securities at the relevant Closing, and all conditions
      precedent to (i) the Purchasers’ obligations to pay the Subscription Amount for
      the Securities being purchased and (ii) the Company’s obligations to deliver the
      Securities being purchased have been satisfied or waived.

     

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

     

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

     

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

     

    “Company
      Counsel”
means
      Richard A. Fisher, Esq., with offices located at the principal offices of the
      Company.

     

    “Conversion
      Price”
shall
      mean the Preferred Stock Conversion Price as such term is defined in the
      Certificate of Designation.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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          2 -

        
          

        

      

      
         

      

    

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

     

    “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).

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon conversion in full
      of
      shares of Preferred Stock, ignoring any conversion limits set forth therein,
      and
      assuming that any previously unconverted shares of Preferred Stock are held
      until the third anniversary of the Closing Date.

     

    
      
         

      

      
        -
          3 -

        
          

        

      

      
         

      

    

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

     

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

     

    “Securities”
means
      the 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). 

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      substantially concurrent with the execution and delivery of this Agreement
      by
      the parties hereto, the Company agrees to sell, and the Purchasers, severally
      and not jointly, agree to purchase, 300 shares of Preferred Stock at a purchase
      price of $833.33 per share. Each Purchaser shall deliver to the Company via
      wire
      transfer or a certified check of immediately available funds equal to its
      Subscription Amount and the Company shall deliver to each Purchaser its shares
      of Preferred Stock, as determined pursuant to Section 2.2(a), and the Company
      and each Purchaser shall deliver the other items set forth in Section 2.2
      deliverable at the Closing. Upon satisfaction of the covenants and conditions
      set forth in Sections 2.2 and 2.3, the Closing shall occur at such location
      as
      the parties shall mutually agree.

     

    2.2  Deliveries. 

     

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

     

    
      
        (i) 
          this
          Agreement duly executed by the Company;

         

      

    

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

     

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

     

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

    
      
         

      

      
        -
          5 -

        
          

        

      

      
         

      

    

     

    
      
        (i) 
          this
          Agreement duly executed by such Purchaser; and

         

      

    

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

     

    2.3 Closing
      Conditions. 

     

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

     

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

     

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

     

    (iii) the
      delivery by the Purchasers of the items set forth in Section 2.2(b) of this
      Agreement.

     

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

     

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

     

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

     

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

     

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

     

    (v) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg L.P. shall not have been suspended or limited, or minimum prices
      shall
      not have been established on securities whose trades are reported by such
      service, or on any Trading Market, nor shall a banking moratorium have been
      declared either by the United States or New York State

     

    
      
         

      

      
        -
          6 -

        
          

        

      

      
         

      

    

    authorities
      nor shall there have occurred any material outbreak or escalation of hostilities
      or other national or international calamity of such magnitude in its effect
      on,
      or any material adverse change in, any financial market which, in each case,
      in
      the reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to purchase the Securities at the Closing.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

    (a) Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all of the issued
      and outstanding shares of capital stock of each Subsidiary are validly issued
      and are fully paid, non-assessable and free of preemptive and similar rights
      to
      subscribe for or purchase securities. 

     

    (b) Organization
      and Qualification.
      The
      Company and each of the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in material violation or default of any of the provisions of
      its
      respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the Subsidiaries
      is
      duly qualified to conduct business and is in good standing as a foreign
      corporation or other entity in each jurisdiction in which the nature of the
      business conducted or property owned by it makes such qualification necessary,
      except where the failure to be so qualified or in good standing, as the case
      may
      be, could not have or reasonably be expected to result in a Material Adverse
      Effect and to the Company’s knowledge no Proceeding has been instituted in any
      such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
      or curtail such power and authority or qualification. For purposes of this
      Agreement, “Material
      Adverse Effect”
means
      (i) a material adverse effect on the legality, validity or enforceability of
      any
      Transaction Document, (ii) a material adverse effect on the results of
      operations, assets, business, prospects or condition (financial or otherwise)
      of
      the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
      effect on the Company’s ability to perform in any material respect on a timely
      basis its obligations under any Transaction Document; provided that none of
      the
      following shall be deemed, either alone or in combination, to constitute a
      Material Adverse Effect, with respect to the

     

    
      
         

      

      
        -
          7 -

        
          

        

      

      
         

      

    

    Company:
      (a) conditions generally affecting any of the industries or markets of the
      United States and that do not disproportionately impact the Company and its
      Subsidiaries and Affiliates, taken as a whole, when compared with other
      businesses operating in the same sector, (b) financial market fluctuations
      or
      conditions (including changes in interest rates or foreign currency exchange
      rates) and that do not disproportionately impact the Company and its
      Subsidiaries and Affiliates, taken as a whole, when compared with other
      businesses operating in the same sector, (c) any changes in tax, securities
      or
      other Applicable Laws, (d) any action, omission, change, effect, circumstance
      or
      condition contemplated by this Agreement or attributable to the execution,
      performance or announcement of this Agreement and the transactions contemplated
      hereby or (e) acts of terrorism, war (whether declared or not), hostilities,
      or
      any similar event or occurrence.

     

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

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance by the Company of the Transaction Documents,
      the issuance and sale of the Securities and the consummation by it to which
      it
      is a party of the other transactions contemplated hereby and thereby do not
      and
      will not: (i) conflict with or violate any provision of the Company’s or any
      Subsidiary’s certificate or articles of incorporation, bylaws or other
      organizational or charter documents, (ii) conflict with, or constitute a default
      (or an event that with notice or lapse of time or both would become a default)
      under, result in the creation of any Lien upon any of the properties or assets
      of the Company or any Subsidiary, or give to others any rights of termination,
      amendment, acceleration or cancellation (with or without notice, lapse of time
      or both) of, any agreement, credit facility, debt or other instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other understanding
      to
      which the Company or any Subsidiary is a party or by which

     

    
      
         

      

      
        -
          8 -

        
          

        

      

      
         

      

    

    any
      property or asset of the Company or any Subsidiary is bound or affected, or
      (iii) subject to the Required Approvals, conflict with or result in a violation
      of any law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      a
      Subsidiary is subject (including federal and state securities laws and
      regulations), or by which any property or asset of the Company or a Subsidiary
      is bound or affected; except in the case of each of clauses (ii) and (iii),
      such
      as could not have or reasonably be expected to result in a Material Adverse
      Effect.

     

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

     

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

     

    (g) Capitalization.
      The
      capitalization of the Company is as set forth on Schedule
      3.1(g).
      Except
      as set forth on Schedule
      3.1(g),
      the
      Company has not issued any capital stock since its most
      recently filed report under the Exchange Act,
      other
      than pursuant to the exercise of employee stock options under the Company’s
      stock option plans, the issuance of shares of Common Stock to employees pursuant
      to the Company’s employee stock purchase plan and pursuant to the conversion or
      exercise of Common Stock Equivalents outstanding as of the date of the most
      recently filed periodic report under the Exchange Act. Except as set forth
      on
Schedule
      3.1(g),
      no
      Person has any right of first refusal, preemptive right, right of participation,
      or any similar right to participate in the transactions contemplated by the
      Transaction Documents. Except as set forth on Schedule
      3.1(g),
      the
      issuance and sale of the Securities will not obligate the Company to issue
      shares of Common Stock or other securities to any Person (other than the
      Purchasers) and will not result in a right of any holder of Company securities
      to adjust the exercise, conversion, exchange or reset price under any of such
      securities. To the

     

    
      
         

      

      
        -
          9 -

        
          

        

      

      
         

      

    

    Company’s
      knowledge, all of the outstanding shares of capital stock of the Company are
      validly issued, fully paid and nonassessable, have been issued in compliance
      with all federal and state securities laws. Except as set forth on Schedule
      3.1(g),
      none of
      such outstanding shares was issued in violation of any preemptive rights or
      similar rights to subscribe for or purchase securities. No further approval
      or
      authorization of any stockholder, the Board of Directors or others is required
      for the issuance and sale of the Securities. There are no stockholders
      agreements, voting agreements or other similar agreements with respect to the
      Company’s capital stock to which the Company is a party or, to the knowledge of
      the Company, between or among any of the Company’s stockholders.

     

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

     

    (i) Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof, (i) there has been no event, occurrence or development
      that
      has had or that could reasonably be expected to result in a Material Adverse
      Effect, (ii) the Company has not incurred any liabilities (contingent or
      otherwise) other than (A) trade payables and accrued expenses incurred in the
      ordinary course of business consistent with past practice

     

    
      
         

      

      
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    and
      (B)
      liabilities not required to be reflected in the Company’s financial statements
      pursuant to GAAP or disclosed in filings made with the Commission, (iii) the
      Company has not altered its method of accounting, (iv) the Company has not
      declared or made any dividend or distribution of cash or other property to
      its
      stockholders or purchased, redeemed or made any agreements to purchase or redeem
      any shares of its capital stock and (v) the Company has not issued any equity
      securities to any officer, director or Affiliate, except pursuant to existing
      Company stock option plans. The Company does not have pending before the
      Commission any request for confidential treatment of information. Except for
      the
      issuance of the Securities contemplated by this Agreement or as set forth on
      Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      on
      Form 8-K at the time this representation is made that has not been publicly
      disclosed at least one Trading Day prior to the date that this representation
      is
      made.

     

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

     

    (k) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a Material Adverse Effect. None of the Company’s or its
      Subsidiaries’ employees is a member of a union that relates to such employee’s
      relationship with the Company, and neither the Company or any of its
      Subsidiaries is a party to a collective bargaining agreement, and the Company
      and its Subsidiaries believe that their relationships with their employees
      are
      good. No executive officer, to the knowledge of the Company, is, or is now
      expected by the Company to be, in violation of any material term of any
      employment contract, confidentiality, disclosure or proprietary information
      agreement or non-competition agreement, or any other contract or agreement
      or
      any restrictive covenant in favor of any third party, and the continued
      employment of each such executive officer does not subject the Company
      or

     

    
      
         

      

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

     

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

     

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

     

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

     

    (o) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service

     

    
      
         

      

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

     

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

     

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

     

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

     

    (s) Certain
      Fees.
      Except
      as set forth on Schedule
      3.1(s),
      no
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by the Transaction Documents. The

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

    (y) Disclosure.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company confirms
      that

     

    
      
         

      

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

     

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

     

    (aa) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the
      Securities hereunder, (i) the fair saleable value of the Company’s assets
      exceeds the amount that will be required to be paid on or in respect of the
      Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature; (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business as now conducted and as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company, and
      projected capital requirements and capital availability thereof; and (iii)
      the
      current cash flow of the Company, together with the proceeds the Company would
      receive, were it to liquidate all of its assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its liabilities when such amounts are required to be paid. The
      Company does not intend to incur debts beyond its ability to pay such debts
      as
      they mature (taking into account the timing and amounts of cash to be payable
      on
      or in respect of its debt). The Company has no knowledge of any facts or
      circumstances which lead it to believe that it will file for reorganization
      or
      liquidation under the bankruptcy or reorganization laws of any jurisdiction
      within one year from the Closing Date. Schedule
      3.1(aa)
      sets
      forth as of the dates thereof all outstanding secured and unsecured Indebtedness
      of the Company or any Subsidiary, or for which the Company or any Subsidiary
      has
      commitments. For the purposes of this Agreement, “Indebtedness”
means
      (a) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in

     

    
      
         

      

      
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    the
      ordinary course of business; and (c) the present value of any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Except
      as
      set forth on Schedule
      3.1(aa),
      neither the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

     

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

     

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

     

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

     

    (ee) Accountants.
      The
      name of the Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the knowledge and belief of the Company, (i) such
      accounting firm is a registered public accounting firm as required by the
      Exchange Act and (ii) there is no reason to expect that such accounting firm
      will refuse to express its opinion with respect to the financial statements
      to
      be included in the Company’s Annual Report on Form 10-KSB for the year ending
      December 31, 2008.

     

    (ff) RESERVED.

     

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

     

    
      
         

      

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

     

    (jj) Regulation
      M Compliance. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or paid any compensation for soliciting purchases of, any of the
      securities of

     

    
      
         

      

      
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    the
      Company or (iii) paid or agreed to pay to any Person any compensation for
      soliciting another to purchase any other securities of the Company, other than,
      in the case of clauses (ii) and (iii), compensation paid to the Company’s
      placement agent in connection with the placement of the Securities.

     

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

     

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

     

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

     

    (c) Own
      Account.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities as principal for its own account and not
      with a view to or for distributing or reselling such Securities or any part
      thereof in violation of the Securities Act or any applicable state securities
      law, has no present intention of distributing any of such Securities in
      violation of the Securities Act or any applicable state securities law and
      has
      no direct or indirect arrangement or understandings with any other persons
      to
      distribute or regarding the distribution of such

     

    
      
         

      

      
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    Securities
      (this representation and warranty not limiting such Purchaser’s right to sell
      the Securities pursuant to the Registration Statement or otherwise in compliance
      with applicable federal and state securities laws) in violation of the
      Securities Act or any applicable state securities law. Such Purchaser is
      acquiring the Securities hereunder in the ordinary course of its
      business.

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    (i) Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than the transaction contemplated hereunder, such Purchaser has not directly
      or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with such Purchaser, executed any transaction, including Short
      Sales, in the securities of the Company during the period commencing
      from
      the time
      that such Purchaser first received a term sheet (written or oral) from the
      Company or any other Person setting forth the material terms of the transactions
      contemplated hereunder until the date hereof (“Discussion
      Time”).
      Notwithstanding
      the foregoing, in the case of a Purchaser that is a multi-managed investment
      vehicle whereby separate portfolio managers manage separate portions of such
      Purchaser's assets and the portfolio managers have no direct knowledge of the
      investment decisions made by the portfolio managers managing other portions
      of
      such Purchaser's assets, the representation set forth above shall only apply
      with respect to the portion of assets managed by the portfolio manager that
      made
      the investment decision to purchase the Securities covered by this Agreement.
      Other than to other Persons party to this Agreement, such Purchaser has
      maintained the confidentiality of all disclosures made to it in connection
      with
      this transaction (including the existence and terms of this transaction). .
      Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
      shall constitute a representation or warranty, or preclude any actions, with
      respect to the identification of the availability of, or securing of, available
      shares to borrow in order to effect short sales or similar transactions in
      the
      future.

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
      Restrictions.

     

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

     

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

     

    [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

     

    
      
         

      

      
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    REGISTRATION
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT”) AND ARE “RESTRICTED
      SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES
      MAY NOT BE OFFERED OR FOR SALE, SOLD OR OTHERWISE TRANSFERED EXCEPT PURSUANT
      TO
      AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
      AN
      EXEMPTION FROM, OR UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED
      TO
      THE SATISFACTION OF THE COMPANY.

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and, if required under the terms of such arrangement, such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such
      a pledge or transfer would not be subject to approval of the Company and no
      legal opinion of legal counsel of the pledgee, secured party or pledgor shall
      be
      required in connection therewith. Further, no notice shall be required of such
      pledge. At the appropriate Purchaser’s expense, the Company will execute and
      deliver such reasonable documentation as a pledgee or secured party of
      Securities may reasonably request in connection with a pledge or transfer of
      the
      Securities, including, if the Securities are subject to registration pursuant
      to
      Section 4.17, the preparation and filing of any required prospectus supplement
      under Rule 424(b)(3) under the Securities Act or other applicable provision
      of
      the Securities Act to appropriately amend the list of selling stockholders
      thereunder.

     

    (c) Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, (ii) following any sale of such Underlying
      Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for
      sale under Rule 144, without the requirement for the Company to be in compliance
      with the current public information required under Rule 144 as to such
      Underlying Shares and without volume or manner-of-sale restrictions or (iv)
      if
      such legend is not required under applicable requirements of the Securities
      Act
      (including judicial interpretations and pronouncements issued by the staff
      of
      the Commission). The Company shall cause its counsel to issue a legal opinion
      to
      the Transfer Agent promptly after the Effective Date if required by the Transfer
      Agent to effect the removal of the legend hereunder. If all or any shares of
      Preferred Stock are converted at a time when there is an effective registration
      statement to cover the resale of the Underlying Shares, or if such Underlying
      Shares may be sold under Rule 144, without the requirement for the Company
      to be
      in compliance with the current public information required under Rule 144 as
      to
      such Underlying Shares and without volume or manner-of-sale restrictions or
      if
      such legend is not otherwise required under applicable requirements of the
      Securities Act (including judicial interpretations and pronouncements issued
      by
      the staff of the Commission) then such Underlying Shares shall be issued free
      of
      all legends. 

    
      
         

      

      
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    The
      Company agrees that following the Effective Date or at such time as such legend
      is no longer required under this Section 4.1(c), it will, no later than three
      Trading Days following the delivery by a Purchaser to the Company or the
      Transfer Agent of a certificate representing Underlying Shares, as applicable,
      issued with a restrictive legend (such third Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to the Transfer Agent
      that enlarge the restrictions on transfer set forth in this Section. If
      requested by a Purchaser, Certificates for Underlying Shares subject to legend
      removal hereunder shall be transmitted by the Transfer Agent to such Purchaser
      by crediting the account of the Purchaser’s prime broker with the Depository
      Trust Company System.

    

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

     

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

     

    4.3 Furnishing
      of Information; Public Information.
      

     

    (a) If
      the
      Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
      Act
      on the date hereof, the Company agrees to cause the Common Stock to be
      registered under Section 12(g) of the Exchange Act on or before the
      60th
      calendar
      day following the date hereof. Until the time that no Purchaser owns Securities,
      the Company covenants to maintain the registration of the Common Stock under
      Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain
      extensions in respect thereof and file within the applicable grace period)
      all
      reports required to be filed by the Company after the date hereof pursuant
      to
      the Exchange Act. As long as any Purchaser owns Securities, if the Company
      is
      not required to file reports pursuant to the Exchange Act, it will prepare
      and
      furnish to the Purchasers and make publicly available in accordance with Rule
      144(c) such information as is required for the Purchasers to sell the Securities
      under Rule 144. The Company further covenants that it will take such further
      action as any

     

    
      
         

      

      
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    holder
      of
      Securities may reasonably request, to the extent required from time to time
      to
      enable such Person to sell such Securities without registration under the
      Securities Act within the requirements of the exemption provided by Rule 144.
      

     

    (b)
       

     

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

     

    4.5 Conversion
      Procedures.
      Each of
      the form of Notice of Conversion included in the Certificate of Designation
      set
      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.

     

    4.6 Securities
      Laws Disclosure; Publicity.
      

     

    a) The
      Company shall, within four Trading Days of the date hereof, issue a Current
      Report on Form 8-K disclosing the material terms of the transactions
      contemplated hereby and including the Transaction Documents as exhibits thereto
      (the “Form
      8-K”).
      The
      Company and each Purchaser shall consult with each other in issuing any other
      press releases with respect to the transactions contemplated hereby, and neither
      the Company nor any Purchaser shall issue any such press release or otherwise
      make any such public statement without the prior consent of the Company, with
      respect to any press release of any Purchaser, or without the prior consent
      of
      each Purchaser, with respect to any press release of the Company, which consent
      shall not unreasonably be withheld or delayed, except if such disclosure is
      required by law, in which case the disclosing party shall promptly provide
      the
      other party with prior notice of such public statement or communication.
      Notwithstanding the foregoing, the Company shall not publicly disclose the
      name
      of any Purchaser, or include the name of any Purchaser in any filing with the
      Commission or any regulatory agency or Trading Market, without the prior written
      consent of such Purchaser, except (i) as required by federal securities law
      in
      connection with (A) the Form 8-K, (B) any registration statement contemplated
      by
      Section 4.17 of this Agreement and (C) the filing of final Transaction Documents
      (including signature pages thereto) with the Commission and (ii) to the extent
      such disclosure is required by law or Trading Market regulations, in which
      case
      the Company shall provide the Purchasers with prior notice of such disclosure
      permitted under this subclause (ii).

     

    b) In
      the
      event that the Company shall, on or after the date hereof, provide

     

    
      
         

      

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

     

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

     

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

     

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

     

    4.10 Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.10, the Company will indemnify and hold
      each
      Purchaser and its directors, officers, shareholders, members, partners,
      employees and agents (and any other Persons with a functionally equivalent
      role
      of a Person holding such titles notwithstanding a lack of such title or any
      other title), each Person who controls such Purchaser (within the meaning of
      Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
      directors, officers, shareholders, agents, members, partners or employees (and
      any other Persons with a functionally equivalent role of a Person holding such
      titles notwithstanding a lack of such title or any other title) of such
      controlling person (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in

     

    
      
         

      

      
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    settlements,
      court costs and reasonable attorneys’ fees and costs of investigation that any
      such Purchaser Party may suffer or incur as a result of or relating to (a)
      any
      breach of any of the representations, warranties, covenants or agreements made
      by the Company in this Agreement or in the other Transaction Documents or (b)
      any action instituted against a Purchaser, or any of them or their respective
      Affiliates, by any stockholder of the Company who is not an Affiliate of such
      Purchaser, with respect to any of the transactions contemplated by the
      Transaction Documents (unless such action is based upon a breach of such
      Purchaser’s representations, warranties or covenants under the Transaction
      Documents or any agreements or understandings such Purchaser may have with
      any
      such stockholder or any violations by the Purchaser of state or federal
      securities laws or any conduct by such Purchaser which constitutes fraud, gross
      negligence, willful misconduct or malfeasance). If any action shall be brought
      against any Purchaser Party in respect of which indemnity may be sought pursuant
      to this Agreement, such Purchaser Party shall promptly notify the Company in
      writing, and the Company shall have the right to assume the defense thereof
      with
      counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
      Purchaser Party shall have the right to employ separate counsel in any such
      action and participate in the defense thereof, but the fees and expenses of
      such
      counsel shall be at the expense of such Purchaser Party except to the extent
      that (i) the employment thereof has been specifically authorized by the Company
      in writing, (ii) the Company has failed after a reasonable period of time to
      assume such defense and to employ counsel or (iii) in such action there is,
      in
      the reasonable opinion of such separate counsel, a material conflict on any
      material issue between the position of the Company and the position of such
      Purchaser Party, in which case the Company shall be responsible for the
      reasonable fees and expenses of no more than one such separate counsel. The
      Company will not be liable to any Purchaser Party under this Agreement (i)
      for
      any settlement by a Purchaser Party effected without the Company’s prior written
      consent, which shall not be unreasonably withheld or delayed or (ii) to the
      extent, but only to the extent that a loss, claim, damage or liability is
      attributable to any Purchaser Party’s breach of any of the representations,
      warranties, covenants or agreements made by such Purchaser Party in this
      Agreement or in the other Transaction Documents.

     

    4.11 Reservation
      and Listing of Securities.

     

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

     

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

     

    (c) The
      Company shall, if applicable: (i) in the time and manner required by the
      principal Trading Market, prepare and file with such Trading Market an
      additional shares listing application covering a number of shares of Common
      Stock at least equal to

     

    
      
         

      

      
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    the
      Required Minimum on the date of such application, (ii) take all steps necessary
      to cause such shares of Common Stock to be approved for listing or quotation
      on
      such Trading Market as soon as possible thereafter, (iii) provide to the
      Purchasers evidence of such listing or quotation, and (iv) maintain the listing
      or quotation of such Common 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 RESERVED.
      

     

    4.14 Equal
      Treatment of Purchasers.
      No
      consideration (including any modification of any Transaction Document) shall
      be
      offered or paid to any Person to amend or consent to a waiver or modification
      of
      any provision of any of the Transaction Documents unless the same consideration
      is also offered to all of the parties to the Transaction Documents. For
      clarification purposes, this provision constitutes a separate right granted
      to
      each Purchaser by the Company and negotiated separately by each Purchaser,
      and
      is intended for the Company to treat the Purchasers as a class and shall not
      in
      any way be construed as the Purchasers acting in concert or as a group with
      respect to the purchase, disposition or voting of Securities or
      otherwise.

     

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

     

    
      
         

      

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

     

    4.17 Piggy-Back
      Registration Rights.
      If at
      any time after the date hereof, the Company shall determine to prepare and
      file
      with the Commission a Registration Statement relating to an offering for its
      own
      account or the account of others of any of its equity securities, other than
      on
      Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their
      then equivalents, relating to equity securities to be issued solely in
      connection with any acquisition of any entity or business or equity securities
      issuable in connection with stock option or other employee benefit plans, then
      the Company shall send a written notice of such determination to each Purchaser
      and, if within ten calendar days after the date of delivery of such notice,
      any
      such Purchaser shall so request in writing, the Company shall include in such
      Registration Statement all or any part of the Underlying Shares as the Purchaser
      requests to be registered so long as such Underlying Shares are proposed to
      be
      disposed in the same manner as those securities set forth in the Registration
      Statement; provided, however, if the offering is an underwritten offering and
      was initiated by the Company or at the request of a shareholder, and if the
      managing underwriters advise the Company that the inclusion of Underlying Shares
      requested to be included in the Registration Statement would cause an adverse
      effect on the success of any such offering, based on market conditions or
      otherwise (an "Adverse
      Effect"),
      then
      the Company shall be required to include in such Registration Statement, to
      the
      extent of the amount of securities that the managing underwriters advise may
      be
      sold without causing such Adverse Effect, (a) first, the securities of the
      Company and (b) second, the shares, including the Underlying Shares, of all
      shareholders, on a pro rata basis, requesting registration and whose shares
      the
      Company is obligated by contract to include in the Registration Statement;
      provided, further, however, to the extent that all of the Underlying Shares
      are
      not included in the initial Registration Statement, the Purchaser shall have
      the
      right to request the inclusion of its Underlying Shares in subsequent
      Registration Statements until all such Shares have been registered in accordance
      with the terms hereof and all such Underlying Shares have been registered in
      accordance with the terms thereof. If the offering in which the Underlying
      Shares is being included in a Registration Statement is a firm commitment
      underwritten offering, unless otherwise agreed by the Company, the Purchaser
      shall sell its Underlying Shares in such offering using the same underwriters
      and, subject to the provisions hereof, on the same terms and conditions as
      the
      other shares of Common Stock that are included in such underwritten offering.
      The Company shall use its best efforts to cause any Registration Statement
      to be
      declared effective by the Commission as promptly as is possible following it
      being filed with the Commission and to remain effective until all Underlying
      Shares subject thereto have been sold. All fees and expenses incident to the
      performance of or compliance with this Section 4.17 by the Company shall be
      borne by the Company whether or not any Underlying Shares are sold pursuant
      to
      the Registration Statement. The Company shall indemnify and hold harmless the
      Purchaser, the officers, directors, members, partners, agents, brokers,
      investment advisors and employees of each of them, each person who controls
      the

     

    
      
         

      

      
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    Purchaser
      (within the meaning of Section 15 of the Securities Act or Section 20 of the
      Exchange Act), and the officers, directors, members, shareholders, partners,
      agents and employees of each such controlling person, to the fullest extent
      permitted by applicable law, from and against any and all losses, claims,
      damages, liabilities, costs (including, without limitation, reasonable
      attorneys’ fees) and expenses (collectively, the “Losses”),
      as
      incurred, arising out of or relating to (i) any untrue or alleged untrue
      statement of a material fact contained in the Registration Statement, any
      prospectus included therein or any form of prospectus or in any amendment or
      supplement thereto or in any preliminary prospectus, or arising out of or
      relating to any omission or alleged omission of a material fact required to
      be
      stated therein or necessary to make the statements therein (in the case of
      any
      prospectus or form of prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading or (ii) any violation
      or alleged violation by the Company of the Securities Act, the Exchange Act
      or
      any state securities law, or any rule or regulation thereunder, in connection
      with the performance of its obligations under this Section 4.17, except to
      the
      extent, but only to the extent, that such untrue statements or omissions
      referred to in (i) above are based solely upon information regarding the
      Purchaser furnished in writing to the Company by the Purchaser expressly for
      use
      therein, or to the extent that such information relates to the Purchaser or
      the
      Purchaser’s proposed method of distribution of Underlying Shares and was
      reviewed and expressly approved in writing by the Purchaser expressly for use
      in
      the Registration Statement, such prospectus or such form of prospectus or in
      any
      amendment or supplement thereto. The rights of the Purchaser under this Section
      4.17 shall survive until all Underlying Shares have been either registered
      under
      a Registration Statement or been sold pursuant to an exemption to the
      registration requirements of the Securities Act.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before June 30, 2008;
      provided,
      however,
      that
      such termination will not affect the right of any party to sue for any breach
      by
      the other party (or parties).

     

    5.2 Fees
      and Expenses.
      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

     

    
      
         

      

      
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    respect
      to such matters, which the parties acknowledge have been merged into such
      documents, exhibits and schedules.

     

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

     

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

     

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

     

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

     

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

     

    5.9 Governing
      Law; Arbitration.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York. Any controversy or claim arising out of or
      related to this Agreement or the breach thereof, shall be settled by binding
      arbitration in New York, New York in accordance with the Expedited Procedures
      (Rules 53-57) of the

     

    
      
         

      

      
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    Commercial
      Arbitration Rules of the American Arbitration Association (“AAA”).
      A
      proceeding shall be commenced upon written demand by the Company or Purchaser
      to
      the other. The arbitrator(s) shall enter a judgment by default against any
      party, which fails or refuses to appear in any properly noticed arbitration
      proceeding. The proceeding shall be conducted by one (1) arbitrator, unless
      the
      amount alleged to be in dispute exceeds two hundred fifty thousand dollars
      ($250,000), in which case three (3) arbitrators shall preside. The arbitrator(s)
      will be chosen by the parties from a list provided by the AAA, and if the
      parties are unable to agree within ten (10) days, the AAA shall select the
      arbitrator(s). The arbitrators must be experts in securities law and financial
      transactions. The arbitrators shall assess costs and expenses of the
      arbitration, including all attorneys’ and experts’ fees, as the arbitrators
      believe is appropriate in light of the merits of the parties’ respective
      positions in the issues in dispute. Each party submits irrevocably to the
      jurisdiction of any state court sitting in New York, New York or to the United
      States District Court sitting in New York, New York for purposes of enforcement
      of any discovery order, judgment or award in connection with such arbitration.
      The award of the arbitrator(s) shall be final and binding upon the parties
      and
      may be enforced in any court having jurisdiction. The arbitration shall be
      held
      in such place as set by the arbitrator(s) in accordance with Rule 55. With
      respect to any arbitration proceeding in accordance with this section, the
      prevailing party’s reasonable attorney’s fees and expenses shall be borne by the
      non-prevailing party.

     

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

     

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

     

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

     

    
      
         

      

      
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    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 from time to time upon written notice to the Company, any
      relevant notice, demand or election in whole or in part without prejudice to
      its
      future actions and rights; provided,
      however,
      in the
      case of a conversion the Preferred Stock, the Purchaser shall be required to
      return any shares of Common Stock delivered in connection with any such
      rescinded conversion notice.

     

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

     

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

     

    5.16 Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to any Purchaser pursuant
      to
      any Transaction Document or a Purchaser enforces or exercises its rights
      thereunder, and such payment or payments or the proceeds of such enforcement
      or
      exercise or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside, recovered from, disgorged by or are
      required to be refunded, repaid or otherwise restored to the Company, a trustee,
      receiver or any other person under any law (including, without limitation,
      any
      bankruptcy law, state or federal law, common law or equitable cause of action),
      then to the extent of any such restoration the obligation or part
      thereof

     

    
      
         

      

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

     

    5.18 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.

     

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

     

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

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        -
          32 -

        
          

        

      

      
         

      

    

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

     

    
      	
              SOLOMON
                TECHNOLOGIES, INC.

            	
              Address
                for Notice:

            
	 	 
	
              By: 
                __________________________________________

              Name:

              Title:

            	
              14
                Commerce Drive

              Danbury,
                CT 06810

              Fax:
                (203) 797-9285

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

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

               

              Richard
                A. Fisher, Esq.

              Solomon
                Technologies, Inc.

              14
                Commerce Drive

              Danbury,
                CT 06810

            	 
	 	 

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
         

      

      
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    [PURCHASER
      SIGNATURE PAGES TO SOLM SECURITIES PURCHASE AGREEMENT]

    

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

     

    Name
      of
      Purchaser: ________________________________________________________

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________

    Email
      Address of Purchaser:
      ________________________________________________

    Facsimile
      Number of Purchaser:
      ________________________________________________

    

    Address
      for Notice of Purchaser:

     

     

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

     

     

     

    Subscription
      Amount: $250,000

    

    

    Shares
      of
      Preferred Stock: 300

    

    

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

    

     

     

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