Document:

EXHIBIT 10.2

    

    SECOND
AMENDMENT TO

    AMENDMENT
TO DEBENTURES AND WARRANTS,

    AGREEMENT
AND WAIVER

    

    THIS
SECOND AMENDMENT TO AMENDMENT TO DEBENTURES AND WARRANTS, AGREEMENT AND WAIVER
(this “Agreement”) is
entered into on July 2, 2009 by and among Ecotality, Inc., a Nevada
corporation (the “Company”), on the one hand,
and Enable Growth Partners LP
(“EGP”), Enable Opportunity Partners LP (“EOP”), Pierce Diversified
Strategy Master Fund LLC, Ena (“Pierce”, together with EGP,
EOP and Pierce, the “Enable
Funds”), and BridgePointe Master Fund Ltd. (“BridgePointe,” together with
the Enable Funds, each individually referred to as an “Existing Holder” and
collectively as the “Existing
Holders” or the
“Existing Investors”). Capitalized terms not defined in this Agreement
shall have the meanings ascribed to such terms in the May 2009 Amendment (as
defined below).

    

    Recitals

    

    WHEREAS, the Debtors and the
Existing Holders entered into an Amendment to Debentures and Warrants, Agreement
and Waiver on or about May 15, 2009, as amended by the First Amendment (the
“May 2009
Amendment”);

    

    WHEREAS, on or about June
      
, 2009, the Existing Investors entered into a First Amendment to
Amendment to Debentures and Warrants, Agreement and Waiver (the “First Amendment”);
and

    

    WHEREAS, the Company and the
Investors now desire that the terms of the May 2009 Amendment be further
modified and clarified and have entered into this Agreement to document their
agreement regarding such modifications.

    

    NOW THEREFORE, in
consideration of the mutual promises and agreements contained herein, and
intending to be legally bound hereby, the undersigned parties hereby agree as
follows:

    

    A.           Incorporation of Preliminary
Statements. The Recitals set forth above by this reference hereto are
hereby incorporated into this Agreement.

    

    B.    Amendment to Section 11(b)
of the May 2009 Amendment.

    

    (1)           The
following definition is added in Section 11(b) of the May 2009 Amendment,
immediately following the definition of “Included Holder’s Fully Diluted
Amount”:

    

    “Included Holder’s
Augmented Fully Diluted Amount” shall mean the sum of (i) the Included
Holder’s Fully Diluted Amount, plus (ii) the number of shares of Common Stock of
the Company that have been issued to the Included Holder by the Company
pursuant to the conversion of the Included Holder’s Debentures and the exercise
of the Included Holder’s Warrants, since their respective issuance dates, and
regardless of whether or not such shares of Common Stock have been sold by the
Included Holder.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (2)          Amendment to Section 12 of
the May 2009 Amendment. In the first sentence of Section 12 of the May
2009 Amendment, the phrase “Included Holder’s Fully Diluted Amounts” is hereby
replaced with the phrase “Included Holder’s Augmented Fully Diluted Amounts” and
the phrase “Included Holder’s Fully Diluted Amount” is hereby replaced with the
phrase “Included Holder’s Augmented Fully Diluted Amount.”

    

    The
amendments described in this Section B are conditioned upon, and shall not take
effect until, substantively identical revisions are made to any warrants issued
or issuable in connection with the Bridge Notes (as defined in the May 2009
Amendment).

    

    (3)          Amendment to Section 4 of
the May 2009 Amendment. The date in the first sentence of Section 4 of
the May 2009 Amendment which reads “June 30, 2009” is hereby amended and
replaced with “July 2, 2009.”

    

    C. Agreement and Clarification
Regarding Amended and Exchanged Securities.

    

    (1)  In
conjunction with the May 2009 Amendment, the Company signed Amended and Restated
Warrants (the “Amended and
Restated Warrants”), in the form of Exhibit A attached hereto, in the
name of each Existing Investor to include the Increased Amount of Warrants set
forth in Schedule A to the May 2009 Amendment Agreement. The Company and the
Existing Holders each hereby agree and acknowledge that the Amended and Restated
Warrants (as they may be further adjusted by the June 30 True-Up, as defined in
the May 2009 Amendment) were and are being issued in substitution for and not in
satisfaction of the Warrants originally issued in November, 2007 and December
2007, respectively, and for no additional cash consideration.

    

    In
addition, to the extent that amended and restated Debentures are issued to
reflect the amendments of the May 2009 Amendment, the Company and the Existing
Holders each hereby agree and acknowledge that such amended and restated
Debentures are being issued in substitution for and not in satisfaction of the
Debentures originally issued in November, 2007 and December 2007, respectively,
and for no additional cash consideration.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    It is
expressly agreed and understood that, pursuant to Rule 144, the holding period for
the Debentures, as amended (and for the underlying shares issuable upon
the conversion thereof) and for the Amended and
Restated Warrants (and for the underlying shares issuable upon the
cashless exercise thereof) shall each tack back (the “Rule 144 Tacking”) to the
original November 2007 or December 2007 issue date (as applicable) of the
Warrants and Debentures, respectively. In addition, in lieu of the issuance any
new warrant certificates in satisfaction of the Make-Up Warrants under Section
12 of the May 2009 Amendment, the Company and Existing Holders agree that in
lieu thereof, and for no new cash consideration, each Existing Holder shall
exchange its Amended and Restated Warrant held immediately prior to the
Triggering Issuance giving rise to the Make-Up Warrant issuance for an Amended
and Restated Warrant reflecting the aggregate amounts required to be held by
such Existing Holder following such Triggering Issuance under Section 12 of the
May 2009 Amendment, with the holding period of such warrants tacking back to the
original November 2007 or December 2007 issue date, as applicable. The Company
agrees not to take a position contrary to this Section C. In addition to, and
without limiting the rights and obligations of the parties under the Transaction
Documents (including, without limitation, the provisions of Section 4.1 of the
Securities Purchase Agreements), the Company agrees to take all actions,
including, without limitation, use its best efforts to cause the issuance by its
legal counsel of any necessary legal opinions, to issue to the Existing Holders
any Debentures, as amended (and for the underlying shares issuable upon the
conversion thereof) and the Amended and Restated Warrants (and the underlying
shares issuable upon the cashless exercise thereof) without restriction and not
containing any restrictive legend without the need for any action by the
Existing Holder, except as otherwise provided herein, such issuance to otherwise
be made in accordance with the terms and conditions of the applicable
Transaction Documents.

    

    (2) Upon
an Existing Holder’s conversion of a Debenture, as amended or cashless exercise
of any of the Amended and Restated Warrants, following the receipt by the
Company of a standard Rule 144 representation letter from such Existing Holder,
the Company shall issue the applicable number of unrestricted and unlegended
shares to such Existing Holder in such exercise, provided that:

    

    (a) the
Company shall not require any legal opinion from the Existing Holders as to the
Rule 144 Tacking,

    

    (b) the
Company may require reasonable backup from the exercising holder regarding its
non-affiliate status for Rule 144 purposes, provided that the Company shall not
require another opinion of counsel as to non-affiliate status from BridgePointe
Master Fund Ltd. (“BridgePointe”) in addition to
the BridgePointe Opinion (as defined below) previously provided, so long as
BridgePointe represents in the applicable Rule 144 Representation Letter (i)
that BridgePointe does not have an appointee sitting on the Company’s board of
directors, and (ii) there has been no other material change of facts or law that
could reasonably be expected to change BridgePointe’s non-affiliate status since
the date of the BridgePointe Opinion. For purposes hereof, the “BridgePointe Opinion” shall
mean the opinion of counsel provided, on or about June 26, 2009, by the Law
Office of Otto E. Sorensen, APC to Holladay Stock Transfer, Inc. on
BridgePointe’s behalf.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (3)           At
the option of any Existing Holder, in addition to, and without limiting the
rights and obligations under the Transaction Documents and Section (C)(1) and
(2) above, upon an Existing Holder’s conversion of a Debenture, as amended or
cashless exercise of any of the Amended and Restated Warrants in reliance on
Rule 144, if the Company’s transfer agent requires a legal opinion with respect
to the issuance of Common Stock without a restrictive legend in connection
therewith, following the receipt by the Company of a Rule 144 opinion from
outside counsel to the applicable Existing Holder, the Company shall issue the
applicable number of unrestricted and unlegended shares to such Existing Holder
otherwise in accordance with, and subject to the terms and conditions of the
applicable Transaction Documents.

    

    D.           No Further
Amendments. Except as set forth above, the May 2009 Amendment shall
remain in full force and effect in accordance with its terms.

    

    E.           Counterparts. This
Agreement may be executed in counterparts and delivered by facsimile and all so
executed and delivered shall constitute a single original.

    

    [signature
pages follow]

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

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

    

    
      
        
          
            	
                    ECOTALITY, INC., a
      Nevada corporation

                  	 
	 
      	 
      	 
	
                    By:

                  	 
      	 
	
                    Name:

                  	 
      	 
	
                    Title:

                  	
                    President

                  	 

          

        

      

    

    

    [signature page of Holders/Investors
follows]

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    Convertible
Debenture Holders’ Signature Page

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                BRIDGEPOINTE MASTER FUND LTD.

                                              
	 
      	 
      	 
	
                                                By:

                                              	 
      	 
	
                                                Name:

                                              	 
      	 
	
                                                Title:

                                              	 
      	 
	 
      	 
      	 
	
                                                ENABLE
      GROWTH PARTNERS LP

                                              
	 
      	 
      	 
	
                                                By:

                                              	 
      	 
	
                                                Name:

                                              	 
      	 
	
                                                Title:

                                              	 
      	 
	 
      	 
      	 
	
                                                ENABLE
      OPPORTUNITY PARTNERS LP

                                              
	 
      	 
      	 
	
                                                By:

                                              	 
      	 
	
                                                Name:

                                              	 
      	 
	
                                                Title:

                                              	 
      	 
	 
      	 
      	 
	
                                                PIERCE
      DIVERSIFIED STRATEGY MASTER FUND LLC, ENA

                                              
	 
      	 
      	 
	
                                                By:

                                              	 
      	 
	
                                                Name:

                                              	 
      	 
	
                                                Title:

                                              	 
      	 

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        6EXHIBIT 10.3

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of July 2, 2009 between Ecotality, Inc., a Nevada corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

     

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

     

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

     

    ARTICLE
I.

    DEFINITIONS

     

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

     

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

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.  With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.

     

    “Authorized Share
Approval” means that both (i) the vote by the stockholders of the Company
to approve an amendment to the Company’s articles or certificate of
incorporation that increases the number of authorized shares of Common Stock to
at least 1,300,000,000 shares of Common Stock (the “Amendment”) and (ii)
the filing by the Company of the Amendment with the Secretary of State of the
State of Nevada and the acceptance of the Amendment by the Secretary of State of
the State of Nevada have occurred.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.

     

     “Commission” means the
Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.

     

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

    

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

    

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

     

    “Debentures” means the
8% Secured Convertible Debentures due, subject to the terms therein October 1,
2010, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached
hereto.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued, whether at the
closing or subsequent thereto, pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that any such issuance shall only be to a Person which is
either a direct or indirect equity owner of, or an entity that is, itself or
through its subsidiaries, an operating company in a business synergistic with
the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities.
Notwithstanding the foregoing, regardless of whether or not an issuance would
otherwise be included within clauses (a), (b) or (c) above, the term Exempt
Issuance shall not include (i) issuances of Common Stock or Common Stock
Equivalents done at an effective price of less than $.01 or (ii) issuances of
Common Stock or Common Stock Equivalents done at a time when the average of the
VWAPs of the Company's common stock for the ten (10) consecutive trading days
immediately preceding such issuance is less than $.01.

    

     “Existing Transaction
Document(s)”  means the “Transaction Documents” as defined
under those certain Securities Purchase Agreements dated November 6, 20007 and
December 6, 2007, as amended.

     

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

     

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

     

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

     

    “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).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise or conversion
in full of all Warrants and Debentures (including Underlying Shares issuable as
payment of interest), ignoring any conversion or exercise limits set forth
therein, and assuming that the Conversion Price is at all times on and after the
date of determination 85% of the then Conversion Price on the Trading Day
immediately prior to the date of determination.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Security Agreement”
means the Security Agreement, in the form of Exhibit H attached
hereto.

    

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

     

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

     

     “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Debentures and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to 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, include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

     

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

     

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

     

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

     

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

     

    “Transfer Agent” means
Holladay Stock Transfer, Inc., the current transfer agent of the Company, whose
mailing address is 2939 N. 67th Place, Suite C, Scottsdale, Arizona, 85251, and
fax number is (480) 481-3941, and any successor transfer agent of the
Company.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

     

    “Voting Agreement”
means the written agreement, in the form of Exhibit H attached hereto, of
all of the officers, directors, and stockholders holding more than 10% of the
issued and outstanding shares of Common Stock on the date hereof to vote all
Common Stock over which such Persons have voting control as of the record date
for the meeting of stockholders of the Company in favor of the Authorized Share
Approval, amounting to, in the aggregate, at least 50.1% of the issued and
outstanding Common Stock.

     

     “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 Company, the fees and expenses of
which shall be paid by the Company.

     

    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise expiring on May 1, 2014, in
the form of Exhibit C
attached hereto.

     

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

     

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

     

    
      
        
        

      

      
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    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, the Debentures, for an aggregate cash
Subscription Amount of up to $2,500,000.  Each Purchaser shall deliver
to the Company, via wire transfer or a certified check, immediately available
funds equal to its Subscription Amount and the Company shall deliver to each
Purchaser its respective Debenture and a Warrant, 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 conditions set forth in Sections 2.2 and 2.3, the Closing
shall occur at the offices of WS or such other location as the parties shall
mutually agree.

     

    2.2           Deliveries.

    
    

     

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

     

    
      	
               
      

            	
              (i)

            	
              this
      Agreement duly executed by the
Company;

            

    

     

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

     

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

     

    (iv)           the
Voting Agreement, of all of the officers, directors, and stockholders holding
more than 10% of the issued and outstanding shares of Common Stock on the date
hereof to vote all Common Stock over which such Persons have voting control as
of the record date for the meeting of stockholders of the Company in favor of
the Authorized Share Approval, amounting to, in the aggregate, at least 50.1% of
the issued and outstanding Common Stock.;

     

    (v)          the
Security Agreement, duly executed by all parties thereto, including updated
schedules as of the Closing Date, along with all of the Security Documents,
including the Subsidiary Guarantee and domestic and foreign security interest
recordation filings, duly executed by the parties thereto;

     

    (vi)        the
intercreditor agreement, in the form of Exhibit G attached
hereto, (the “Intercreditor
Agreement”) duly executed by the Company and each Subsidiary, and each
holder of the debentures issued under the Existing Transaction Documents;
and

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

    
      	
               
      

            	
              (i)

            	
              this
      Agreement duly executed by such
Purchaser;

            

    

     

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

     

    (iii)          the
Intercreditor Agreement duly executed by such Purchaser;

     

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

     

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

     

    2.3           Closing
Conditions.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (iii)         
on or before June 30, 2009, the Company shall have delivered to each Purchaser
and each other party required to receive a Warrant under the Amendment
Agreement, a Warrant registered in the name of such entity, which Warrants shall
be in the form of (x) Exhibit
C-1 attached hereto with respect to any Purchaser that is not a party to
the Existing Transaction Documents or (y) Exhibit C-2 with respect to each
entity that is party to the Existing Transaction Documents, all of which shall
have an exercise price equal to $0.01, subject to adjustment therein (the
amounts of all such Warrants to be issued on or before June 30, 2009 shall be as
set forth on Schedule 2.3(b)
hereto);

     

    (iv)         
the delivery of a second amendment agreement to the Amendment Agreement, in the
form attached hereto as Exhibit F, duly executed by the parties
thereto;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

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

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (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
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (l)         
  Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as 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 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.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially 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.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (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 the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

     

    (q)           Transactions with
Affiliates, Employees and other Security Holders.  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 or
other security holders of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or other security holder or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
or security holder has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $60,000 other than for (i) payment
of salary or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee benefits,
including stock option agreements under any stock option plan of the
Company.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (v)           Registration
Rights.  Other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (ee)         Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedule.  To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report on Form 10-K
(or 10-KSB) for the year ending December 31, 2007.

     

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

     

    (gg)         No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1           Transfer
Restrictions.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

    

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    4.5           Conversion and Exercise
Procedures.  The form of Notice of Exercise included in the
Warrants and the form of Notice of Conversion included in the Debentures set forth the totality
of the procedures required of the Purchasers in order to exercise the Warrants
or convert the Debentures.  No additional legal opinion or other
information or instructions shall be required of the Purchasers to exercise
their Warrants or convert their Debentures.  The Company shall honor
exercises of the Warrants and conversions of the Debentures 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.  The Company shall, by 8:30 a.m. (New York City
time) on the Trading Day following the date hereof, issue a Current Report on
Form 8-K disclosing the material terms of the transactions contemplated hereby
and attaching the Transaction Documents as exhibits thereto.  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) any registration
statement contemplated by the Registration Rights Agreement and (B) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under this clause (ii).

     

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

     

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

     

    
      
        
        

      

      
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    4.9           Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for the specific purposes, and in the specific
amounts set forth on Schedule 4.9
hereto.

     

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

     

    
      
        
        

      

      
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    4.11         Reservation and Listing of
Securities.

     

    (a)           Following
the Authorized Share Approval, the Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents at least equal to the Required Minimum as of such date.

     

    (b)           If,
on any date after the date of the Authorized Share Approval, 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)           In
addition, the Company shall hold a special meeting of shareholders (which may
also be at the annual meeting of shareholders) at the earliest practical date
following the date hereof, and in any event on or before September 1, 2009, for
the purpose of obtaining the Authorized Share Approval, with the recommendation
of the Company’s Board of Directors that such proposal be approved, and the
Company shall solicit proxies from its shareholders in connection therewith in
the same manner as all other management proposals in such proxy statement and
all management-appointed proxyholders shall vote their proxies in favor of such
proposal.  In addition, the Company agrees to use its best efforts to
promptly respond to any comments the Commission may have with respect to any
preliminary proxy statement.  If the Company does not obtain the
Authorized Share Approval at the first meeting, the Company shall call a meeting
every 30 days thereafter to seek Authorized Share Approval until the earlier of
the date the Authorized Share Approval is obtained or the Debentures and
Warrants are no longer outstanding.

     

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

     

    

    4.12         [RESERVED]

     

    4.13         Subsequent Equity
Sales.

     

    (a)           From
the date hereof until 45 days after the Effective Date, neither the Company nor
any Subsidiary shall issue (or enter into any agreement, discussions or letter
of intent to issue) shares of Common Stock or Common Stock Equivalents; provided, however, the 45 day
period set forth in this Section 4.13 shall be extended for the number of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (b)           From
the date hereof until the date the Debentures are no longer outstanding, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.

     

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

     

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

     

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

     

    
      
        
        

      

      
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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         Capital
Changes.  Until such time that the Debentures are no longer
outstanding,  the Company shall not undertake a reverse or forward
stock split or reclassification of the Common Stock without the prior written
consent of the Purchasers holding 85% of the principal amount outstanding of the
Debentures.

     

    4.18         Other
Covenants.  For purposes of this Section 4.18, defined terms
not otherwise defined in this agreement shall have the meanings set forth in
that certain amendment agreement dated May 15, 2009 among the Company, its
subsidiaries and the investors signatory thereto (the “Amendment
Agreement”).

    

    (a)           If
Donald Karner (“Karner”) and Kevin
Morrow (“Morrow”) each provide
their reasonable best efforts assistance as provided in Section 6 of the
Amendment Agreement,  and the Company with Karner’s and Morrow’s
assistance fails to secure executed Stimulus Contracts (as defined in Section 1
of the Amendment Agreement) having an aggregate total contract value of
$20,000,000 or more from May 15, 2009 through October 1, 2009, then the Company
shall, by October 9, 2009, transfer ownership of all stock and assets of the
Ecotality subsidiary, The Clarity Group, Inc. to Karner (the “Transfer”) as specified on Schedule
“C”  of the Amendment Agreement, and the Purchasers hereby
agree, to allow such Transfer and to take
whatever actions may be required to complete such Transfer.  If such a
transaction is set aside as a preferential payment or fraudulent transfer in any
proceedings in connection with the bankruptcy of the Company or any subsidiary,
the Company and the Purchasers agree, the Karner Group will retain any and all
claims against the Company or any subsidiary arising out of the ETEC Purchase
Loans and the ETEC Securities Purchase Agreement, including all working capital
adjustments, as if such Transfer had never been consummated.

    

    (b)           Monthly
Budget.  The Company shall comply with the Quarterly Budget
Forecast attached hereto as Schedule 4.18 (the
“Quarterly Budget
Forecast”).  Any failure by
the Company to comply with the Quarterly Budget Forecast within a variance of
plus or minus 10% or with the Agreed Use of Proceeds Schedule shall constitute
an event of default under the Existing Debentures and the Bridge
Notes.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    (c)           Inspection of Financial
Records.  The Company shall allow the Included Holders or their
designee, upon an Included Holder’s written request, to access the Company’s
financial records during reasonable business hours in order to verify whether
the Company is complying with the Quarterly Budget Forecast and the Agreed Use
of Proceeds Schedule.  The Company will agree to publicly disclose in
a  Form 8-K within sixty (60) days of a written request by an Included
Holder, any material non-public information that has been disclosed to the
Included Holder in the course of such an inspection.  In the event
that the Included Holder is exposed to any material, non-public information and
the Company fails to file a Form 8-K publicly disclosing such information in
accordance with the above, or in the event that the Company has disclosed
material non-public information to an Included Holder without the Included
Holder’s advance written permission, then such Included Holder shall have the
right to immediately make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material, nonpublic information
without the prior approval by the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees or agents.  Such
Included Holder shall not have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents, for any such disclosure.  The Company understands and
confirms that the Included Holders are relying on the foregoing representations
in effecting transactions in securities of the Company.

     

    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 July 2, 2009;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

     

    5.2           Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Enable Capital Management, LLC (“Enable”) the
non-accountable sum of $20,000 for its legal fees and expenses, $10,000 of which
has been paid prior to the Closing.  The Company shall deliver to each
Purchaser, prior to the Closing, a completed and executed copy of the Closing
Statement attached hereto as Annex
A.  Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

     

    5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.  Nothing herein or in any other Transaction Document shall
be deemed to supersede the terms and conditions of the Existing Transaction
Documents.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    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 second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

     

    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers of at least 85% in
interest of the Securities still held by Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

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

     

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

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    5.22         Waiver of
Jury Trial.  In any action, suit or
proceeding in any jurisdiction brought by any party against any other party, the
parties each knowingly and intentionally, to the greatest extent permitted by
applicable law, hereby absolutely, unconditionally, irrevocably and expressly
waives forever trial by jury.

     

    (Signature
Pages Follow)

     

    
      
        
        

      

      
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    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.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        ECOTALITY,
      INC.

                                      	
                                        Address for Notice:

                                      
	 	 
	
                                        By:

                                      	 
      	 
      	
                                        Fax:

                                      
	 	
                                        Name: 

                                      	 	 
	 	
                                        Title:

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

                                      	 
      

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    [PURCHASER
SIGNATURE PAGES TO ETLY 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 address for
notice):

    

    Subscription
Amount: _____________

    

    Warrant
Shares: _________________

    

    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
PAGES CONTINUE]

    

    
      
        
        

      

      
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    Annex
A

    

    CLOSING
STATEMENT

    

    Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto, the
purchasers shall purchase up to $2,500,000 of Debentures and Warrants from
Ecotality, Inc. (the “Company”).  All
funds will be wired into an account maintained by the Company.  All
funds will be disbursed in accordance with this Closing Statement.

    

    
      
        
          	
                  Disbursement
      Date: 

                	
                  July
      2, 2009

                

        

      

    

    

       

      
        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                I.   PURCHASE
      PRICE

                                              	 	 	 
	 	 	 	 
	
                                                Gross
      Proceeds to be Received

                                              	 	$	2,500,000	 
	 
      	 	 	 	 
	
                                                II.   DISBURSEMENTS

                                              	 	 	 	 
	 	 	 	 	 
	 
      	 	 	 	 
	
                                                Enable
      Capital Management, LLC

                                              	 	$	10,000	 
	 
      	 	 	 	 
	 
      	 	 	 	 
	
                                                Total
      Amount Disbursed:

                                              	 	$	10,000	 

                                      

                                    

                                  

                                

                              

                            

                             

                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                
                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            
                                                                                                              
                                                                                                                
                                                                                                                  
                                                                                                                    
                                                                                                                      
                                                                                                                        
                                                                                                                          
                                                                                                                            
                                                                                                                              
                                                                                                                                
                                                                                                                                  
                                                                                                                                    	
                                                                                                                                            WIRE
      INSTRUCTIONS:

                                                                                                                                          
	 
	To: 	
                                                                                                                                            Ecotality,
      Inc.

                                                                                                                                          
	 	6821 E. Thomas
      Rd.
	 	Scottsdale, AZ
      85251
	 	 
	Bank
      of America 
	3123
      North Scottsdale Rd. 
	Scottsdale
      Arizona  85251
	 
	ABA
      #026009593 
	Account
      #004659613789 
	 	 
	To:	Enable Capital
      Management, LLC	$	 	
                                                                                                                                            10,000

                                                                                                                                          
	 	One Ferry Building,
      Suite 255 
	 	San Francisco, CA
      94111 
	 	 
	City
      National Bank 
	ABA
      #122-016-066
	For
      credit to the account of Enable Capital Management, LLC
	Account
      #432-753700 

                                                                                                                                  

                                                                                                                                

                                                                                                                              

                                                                                                                            

                                                                                                                          

                                                                                                                        

                                                                                                                      

                                                                                                                    

                                                                                                                  

                                                                                                                

                                                                                                              

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    
      DISCLOSURE
SCHEDULE

      

      to
the

      

      SECURITIES
PURCHASE AGREEMENT

      

      between

      

      ECOTALITY,
INC.

      

      and

      

      THE
PURCHASERS NAMED THEREIN

      

      Dated
July 2, 2009

      

      The
section numbers referenced in this Disclosure Schedule refer to the sections of
that certain Securities Purchase Agreement, dated as of July 2, 2009 (the “Purchase Agreement”), by and
among Ecotality, Inc., a Nevada corporation (the “Company”), and the purchasers
identified on the signature page to the Purchase Agreement (the “Purchasers”). Capitalized
terms used, but not otherwise defined, herein shall have the meanings ascribed
to them in the Purchase Agreement.

      The
information and disclosures contained in this Disclosure Schedule (and any
schedule, exhibit, appendix or attachment to this Disclosure Schedule) shall
provide an exception to or otherwise qualify the representations, warranties and
covenants of the Company contained in the Purchase
Agreement.  Information or disclosures provided in any schedule,
exhibit, appendix or attachment to this Disclosure Schedule form an integral
part of this Disclosure Schedule and are incorporated herein by reference for
all purposes as if set forth fully herein.

      Any
matter disclosed in this Disclosure Schedule shall not be deemed an admission or
representation as to the materiality of the item so disclosed.  No
disclosure in this Disclosure Schedule relating to any possible breach or
violation of any agreement, law or regulation shall be construed as an admission
or indication that any such breach or violation exists or has actually occurred,
and nothing in this Disclosure Schedule constitutes an admission of any
liability or obligation of the Company to any third party or shall confer or
give to any third party any remedy, claim, liability, reimbursement, cause of
action or other right.  Unless otherwise stated, all statements made
herein are made as of the date of the execution of the Purchase
Agreement.

      The
headings contained in this Disclosure Schedule are for reference purposes only
and shall not in any way affect the meaning or interpretation of the information
and disclosures contained in this Disclosure Schedule.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 2.3(b) – Warrants
Delivered on Closing Date

       

      Pursuant
to the Transaction Documents, no new Warrants will be issued to the
Purchasers.  However, pursuant to the May 15 Amendment (as defined
below), the number of Warrants set forth in the right-hand column of the table
below was issued to the Existing Investors.  In some cases, the number
of such Warrants that were issued to the Existing Investors in lieu of the
Warrants issued on May 15, 2009 is less than the number of Warrants issued to
such Existing Investors on May 15, 2009, due to the Warrants issued to Shenzhen
Goch Investment Ltd. in their capacity as a Purchaser under the Transaction
Documents (and their resultant inclusion as an Existing Investor as defined in
the May 15 Amendment).

       

      
        
          
            
              
                
                  
                    
                      
                        	
                                Orig

                                Date

                              	 	
                                Name

                              	 	
                                Final

                                Warrants

                                Issued for

                                May 15, 2009

                                Waiver

                              	 	 	
                                80% Alloc

                                Adj Post

                                Bridge

                              	 	 	
                                Final

                                Warrants to

                                be Issued for

                                June 30,

                                2009 True Up

                              	 
	
                                Nov
      2007

                              	 	
                                BridgePointe
      Master Fund Ltd.

                              	 	 	97,052,454	 	 	 	-	 	 	 	97,052,454	 
	
                                Nov
      2007

                              	 	
                                Enable
      Growth Partners LP

                              	 	 	250,832,642	 	 	 	-	 	 	 	250,832,642	 
	
                                Nov
      2007

                              	 	
                                Enable
      Opportunity Partners LP

                              	 	 	29,509,723	 	 	 	-	 	 	 	29,509,723	 
	
                                Nov 2007

                              	 	
                                Pierce
      Diversified Strategy Master Fund LLC, ENA

                              	 	 	14,754,861	 	 	 	(3,899,988	)	 	 	10,854,873	 
	
                                Dec 2007

                              	 	
                                BridgePointe
      Master Fund Ltd.

                              	 	 	55,740,588	 	 	 	(33,968,970	)	 	 	21,721,618	 
	
                                Dec
      2007

                              	 	
                                Enable
      Growth Partners LP

                              	 	 	106,235,001	 	 	 	(99,391,487	)	 	 	6,843,514	 
	
                                Dec
      2007

                              	 	
                                Enable
      Opportunity Partners LP

                              	 	 	11,803,889	 	 	 	(10,919,967	)	 	 	883,922	 
	
                                Dec
      2007

                              	 	
                                Pierce
      Diversified Strategy Master Fund LLC, ENA

                              	 	 	-	 	 	 	-	 	 	 	-	 
	
                                Jun 2009

                              	 	
                                Shenzhen
      Goch Investment Ltd.

                              	 	 	-	 	 	 	104,938,231	 	 	 	104,938,231	 
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                                TOTAL

                              	 	 
      	 	 	565,929,158	 	 	 	(43,242,181	)	 	 	522,636,977	 

                      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(a) –
Subsidiaries

       

      The
Company’s direct and indirect subsidiaries are listed below:

      

      Ecotality
Stores, Inc. DBA Fuel Cell Store

      Electric
Transportation Engineering Corporation (“ETEC”)

      ETEC
North, LLC

      G.H.V.
Refrigeration, Inc.

      Portable
Energy De Mexico, S.A. d C.V.

      The
Clarity Group, Inc.

      0810009
B.C. Unlimited Liability Company

      

      On May
15, 2009, the Company, the holders of the securities issued pursuant to the
Existing Transaction Documents, and certain other individuals entered into that
certain Amendment to Debentures and Warrants, Agreement and Waiver, dated as of
May 15, 2009 (the “May 15
Amendment”).  In accordance with the terms of the May 15
Amendment, the Company and Donald Karner (“Karner”) agreed that if Karner
continues to remain a full time employee of the Company, and the Company (with
Karner’s assistance) fails to secure executed Stimulus Contracts (as defined in
the May 15 Amendment) having an aggregate total contract value of $20,000,000 or
more during the period from May 15, 2009 through October 1, 2009, then the
Company must, on or prior to October 9, 2009, transfer ownership of all stock
and assets of The Clarity Group, Inc. to Karner.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(d) – No
Conflicts

       

      The
Transaction Documents conflict with, and would constitute a default (or an event
that with notice or lapse or time or both would become a default) under the
Existing Transaction Documents.  However, in connection with its entry
into the May 15 Amendment, the Company obtained the consents required to enter
into the Transaction Documents; provided that the
transactions contemplated thereunder are consummated on or before July 2,
2009.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(g) –
Capitalization

       

      Below is
a capitalization table which lists the number of shares of Common Stock owned by
executive officers, directors and 10%
owners of the Company’s Common Stock as of the Closing Date.

      

      
        
          
            
              
                
                  
                    
                      
                        	 
      	 	
                                As
      of July 2, 2009

                              	 
	 
      	 	
                                # Share O/S

                              	 	 	
                                %

                                Ownership

                              	 
	
                                Jonathan
      Read, CEO, Ecotality

                              	 	 	5,650,018	 	 	 	3.5	%
	
                                Harold
      Sciotto, Secretary and Treasurer Ecotality

                              	 	 	35,558,924	 	 	 	22.0	%
	
                                Donald
      Karner, President, eTec

                              	 	 	3,744,000	 	 	 	2.3	%
	
                                Kevin
      Morrow, Vice President, eTec

                              	 	 	2,444,000	 	 	 	1.5	%
	
                                Barry
      Baer, CFO, Ecotality

                              	 	 	-	 	 	 	-	 
	
                                Jerry
      Lin, Board Member

                              	 	 	200,000	 	 	 	0.1	%
	
                                E. Slade Mead, Board Member

                              	 	 	424,586	 	 	 	0.3	%
	
                                Officers & Directors as a
      Group

                              	 	 	48,021,528	 	 	 	29.7	%
	
                                BridgePointe
      Master Fund

                              	 	 	45,370	 	 	 	0.0	%
	
                                Edison Source Company

                              	 	 	33,333,333	 	 	 	20.6	%
	
                                Officers, Directors, Beneficial
      Owners

                              	 	 	81,400,231	 	 	 	50.3	%
	
                                Shares
      Outstanding -Non Directors/Officers/ Beneficial Owners

                              	 	 	80,551,333	 	 	 	49.7	%
	
                                Total shares outstanding

                              	 	 	161,951,564	 	 	 	100.0	%

                      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(h) – SEC
Reports

       

      The Company filed its Annual Report for
the year ended December 31, 2008 on April 16, 2009.  Even with the
extensions granted, the report was due on April 15, 2009.  The Company
is not aware of any penalties or other actions pending or threatened as a result
of the filing delay.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(i) – Material
Changes

       

      In connection with the May 15
Amendment, the Company issued a significant number of new warrants to purchase
shares of its common stock.  There are not currently enough authorized
shares of common stock for the Company to reserve the required number of shares
to cover the future exercise of those warrants.  On June 1, 2009, the
Company filed a preliminary proxy statement on Form 14A providing notification
of matters to be voted upon at the Company’s Annual Meeting of Shareholders,
including a substantial increase in the number of authorized shares of common
stock.  On June 9, 2009, the SEC informed the Company’s counsel that
it intends to conduct a full review of the Company’s Form 14A and may require
additional disclosure regarding the increase in the number of authorized
shares.  The SEC review may delay the planned June 30, 2009 date of
the Annual Meeting and may reduce the likelihood that the increase in the number
of authorized shares will be approved by the Company’s
shareholders.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(l) –
Compliance

       

      Prior to the execution of the May 15
Amendment, the Company was in default of the Existing Transaction
Documents.  In connection with the waiver of such defaults in the May
15 Amendment, the Company agreed that, as of June 30, 2009, it would issue a
number of additional warrants to each Included Holder (as defined in the May 15
Amendment) such that, in the aggregate, the number of shares of Company common
stock that would be issuable upon the full conversion of all Included Holders’
Included Debt (as defined in the May 15 Amendment), including principal amounts
and the amount of accrued and unpaid interest as of June 30, 2009, without
regard to any contractual limitations on the amount that can be converted or
exercised, the Included Holders’ Debenture Conversion Shares plus the number of
Total Warrants (as defined in the May 15 Amendment) collectively held by the
Included Holders immediately following such adjustment (for purposes of
clarification, excluding any warrants issued to any Included Holders pursuant to
a joint venture transaction) would constitute 80% of the June 30 Fully Diluted
Amount (as defined in the May 15 Amendment).  There are not currently,
and on June 30, 2009 there were not, enough authorized shares of the Company’s
common stock to reserve an adequate number of shares of common stock to cover
the exercise of the new warrants issued to the Included Holders.  The
underlying shares required by the Existing Transaction Documents will not be
authorized until receipt of the Authorized Share Approval.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule 3.1(n) – Title to
Assets

       

      On
January 16, 2007, the Company purchased an office building located in
Scottsdale, Arizona, for an aggregate price of $575,615.  A total of
$287,959 has been paid and a tax credit has been recorded in the amount of $156.
 The remaining balance of $287,500 is structured as an interest-only loan
from C. Timothy Caldwell, bears an interest rate of 6.75% calculated annually,
with monthly payments in the amount of $1,617 due beginning on February 16,
2007.  The entire principal balance is due on or before January 16,
2012.  The loan is secured by a deed of trust on the office
building.

       

      In
accordance with the terms of the May 15 Amendment, the Company and Karner agreed
that if Karner continues to remain a full time employee of the Company, and the
Company (with Karner’s assistance) fails to secure executed Stimulus Contracts
(as defined in the May 15 Amendment) having an aggregate total contract value of
$20,000,000 or more during the period from May 15, 2009 through October 1, 2009,
then the Company must, on or prior to October 9, 2009, transfer ownership of all
stock and assets of The Clarity Group, Inc. to Karner.

       

      In connection with the Existing
Transaction Documents, the Company granted to the purchasers of the securities
purchased thereunder a security interest in and to certain personal property of
the Company and its subsidiaries.  In connection with the Existing
Transaction Documents, UCC-1 financing statements were filed against the Company
and its direct and indirect subsidiaries on or about November 7, 2007 and Patent
Assignments for Security were filed with the United States Patent and Trademark
Office, in each case to secure the obligations under the securities purchased
under the Existing Transaction Documents.

       

      On August 29, 2008, the Company issued
a 0% Bridge Note to Karner and Kathryn Forbes (“Forbes”) with a face amount of
$495,000 (the “Karner-Forbes
Bridge Note”).  The Karner-Forbes Bridge Note is secured by an
interest, junior to the lien of the Existing Holders (as defined in the May 15
Amendment) in all of the Company’s present and future accounts receivable and
other rights of any kind to receive payments for services rendered and goods
supplied by the Company.  On November 12, 2008 a UCC-1 Financing
Statement was filed in favor of Karner and Forbes to evidence the security
interest in the collateral for the Karner-Forbes Bridge Note.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        Schedule 3.1(o) – Patents
and Trademarks

         

        On the Closing Date, the Company and
Shenzhen Goch Investment Ltd. (“Goch”) expect to enter into a
letter of intent to form two joint ventures to manufacture and sell products
utilizing the Company intellectual property in China.  The letter of
intent with Goch contemplates that an irrevocable license to use such Company
intellectual property to produce and sell such goods in China will be granted to
the joint ventures.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule 3.1(q) –
Transactions with Affiliates and Certain Existing Holders

         

        In connection with the May 15
Amendment, the Company agreed to issue a significant number of new warrants to
purchase shares of its common stock to holders of its debt and equity securities
who acquired such securities pursuant to the Existing Transaction
Documents.  The Company also granted to those holders of its debt and
equity securities certain rights to appoint two representatives to its Board of
Directors.

         

        Goch,
which is one of the Purchasers, has entered into a letter of intent with the
Company to form two joint ventures to manufacture and sell products utilizing
the Company intellectual property in China.  The letter of intent with
Goch contemplates that an irrevocable license to use such Company intellectual
property to produce and sell such goods in China will be granted to the joint
ventures.

         

        In
accordance with the terms of the May 15 Amendment, the Company and Karner agreed
that if Karner continues to remain a full time employee of the Company, and the
Company (with Karner’s assistance) fails to secure executed Stimulus Contracts
(as defined in the May 15 Amendment) having an aggregate total contract value of
$20,000,000 or more during the period from May 15, 2009 through October 1, 2009,
then the Company must, on or prior to October 9, 2009, transfer ownership of all
stock and assets of The Clarity Group, Inc. to Karner.

        

        On August 29, 2008, the Company issued
the Karner-Forbes Bridge Note.  The Karner-Forbes Bridge Note is
secured by an interest, junior to the lien of the Existing Holders, in all of
the Company’s present and future accounts receivable and other rights of any
kind to receive payments for services rendered and goods supplied by the
Company.  On November 12, 2008 a UCC-1 Financing Statement was filed
in favor of Karner and Forbes to evidence the security interest in the
collateral for the Karner-Forbes Bridge Note.

         

        Karner and Kevin Morrow (“Morrow”), collectively, made a
loan of $500,000 to the Company as evidenced by the Stock Purchase Agreement, by
and among the Company as Buyer and Karner and Morrow, as sellers, effective as
of November 6, 2007 (the “ETEC
Stock Purchase Agreement”).  The Company owes Karner and
Morrow, collectively, (i) an amount equal to $235,253 in deferred purchase price
pursuant to the Section 1.2 of the ETEC Stock Purchase Agreement, and (ii) an
amount equal to $400,000 pursuant to the Net Working Capital Adjustment
Provision in Section 6.4 of the ETEC Stock Purchase Agreement.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule 3.1(s) – Certain
Fees

         

        The Company has retained Ardour Capital
Investments, LLC (“Ardour
Capital”) as its financial advisor in connection with the Transactions
and in connection with the Goch joint ventures.  The Company expects
to pay any fees or commissions owed to Ardour Capital with the proceeds from the
Transactions.  The Company estimates that its aggregate fees for
legal, accounting and financial advisors to be paid at Closing will be
approximately $465,000.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule 3.1(v) –
Registration Rights

         

        The
Company is a party to a Registration Rights Agreement, dated as of October 1,
2007, with Innergy Power Corporation, a Delaware corporation (“Innergy”), which was entered
into in connection with the purchase of all of Innergy’s
assets.  Pursuant to such Registration Rights Agreement, the Company
has granted Innergy “piggyback” registration rights to include the 3,000,000
shares of common stock issued to Innergy if the Company proposes to register any
shares of its common stock in connection with a public offering of such shares
solely for cash on any form of registration statement in which the inclusion of
Innergy’s registrable securities is appropriate.

         

        In
connection with the Existing Transaction Documents, the Company entered into a
Registration Rights Agreement, dated as of November 6, 2007, and a Registration
Rights Agreement, dated as of December 6, 2007, in favor of the respective
purchasers thereunder.  Pursuant to such Registration Rights
Agreements, the Company agreed to file and have declared effective a
registration statement covering the resale of certain shares of Common Stock and
other securities issued pursuant to the Existing Transaction
Documents.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule 3.1(w) – Listing
and Maintenance Requirements

         

        The
Company filed its Annual Report for the year ended December 31, 2008 on April
16, 2009.  Even with the extensions granted, the report was due on
April 15, 2009.  The Company is not aware of any penalties or other
actions pending or threatened as a result of the filing delay.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule 3.1(aa) –
Solvency

         

        As a
result of the May 15 Amendment and its modification of the terms of its existing
obligations, the Company is no longer in default under the Existing Transaction
Documents and believes that it is, and will be, solvent upon the consummation of
the transactions contemplated by the Transaction Documents.  However,
since the Company has incurred losses since its inception and it may be unable
to generate sufficient net sales in the future, the Company may not be able to
make the required payments of principal and/or interest to its lenders on the
schedule set forth in the May 15 Amendment, or at all, unless there are
significant improvements in the Company’s cash flow or its ability to raise new
capital.

        

        The
Company’s cash flow and ability to raise new capital are, to a large extent,
dependent on its ability to attract and retain funding from the U.S. Department
of Energy (DOE) and other government sources.  Government funding of
projects related to renewable energy, energy, and transportation is subject to
cuts or cancellation without notice, and the future of such revenue streams is
uncertain and out of the Company’s control.  As a result, the
Company’s future cash flow, capital requirements, capital availability and
ability to raise new capital also depend on factors outside of its
control.

        

        If the
Company’s financial position does not improve and it is unable to meet its
obligations under the May 15 Amendment, it will be necessary for the Company to
seek to restructure those obligations.  If no such restructuring can
be negotiated between the Company and its lenders, the filing of a voluntary or
involuntary bankruptcy petition could result.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule
3.1(ee) – Independent Accountants

         

        The
Company’s independent public accountants are:

        

        Weaver
& Martin, LLC

        Certified
Public Accountants & Consultants

        411
Valentine, Suite 300

        Kansas
City, Missouri 64111

        

        Phone:
(816) 756-5525

        Fax:
(816) 756-2252

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        

        Schedule
3.1(ff) – Seniority

        

        

        The
following Indebtedness is senior to or on par with the Debentures:

        

        On
January 16, 2007, the Company purchased an office building located in
Scottsdale, Arizona, for an aggregate price of $575,615.  A total of
$287,959 has been paid and a tax credit has been recorded in the amount of $156.
 The remaining balance of $287,500 is structured as an interest-only loan
from C. Timothy Caldwell, bears an interest rate of 6.75% calculated annually,
with monthly payments in the amount of $1,617 due beginning on February 16,
2007.  The entire principal balance is due on or before January 16,
2012.  The loan is secured by a deed of trust on the office
building.  The loan is senior to the Debentures only to the extent of
the deed of trust on the office building.

        

        Pursuant to the Existing Transaction
Documents, the Company entered into a Security Agreement, dated November 6,
2007, and issued indebtedness secured by a blanket lien against all of its
assets.  While the Debentures issued pursuant to this Agreement
purport to be pari
passu with such existing indebtedness, the Company cannot guarantee that
the Security Agreement and Intercreditor Agreement being executed in connection
with the Transactions will be interpreted in a way that achieves such pari passu
treatment.

        

        On August 29, 2008, the Company issued
the Karner-Forbes Bridge Note.  The Karner-Forbes Bridge Note is
secured by an interest, junior to the lien of the Existing Holders, in all of
the Company’s present and future accounts receivable and other rights of any
kind to receive payments for services rendered and goods supplied by the
Company.  On November 12, 2008 a UCC-1 Financing Statement was filed
in favor of Karner and Forbes to evidence the security interest in the
collateral for the Karner-Forbes Bridge Note.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Schedule
3.1(gg) – No Disagreements with Accountants and Lawyers

        

        The
Company has outstanding accounts payable to its counsel.  The Company
expects to pay all such outstanding accounts payable with the proceeds from the
Transactions.  The Company estimates that its aggregate fees for
legal, accounting and financial advisors to be paid at Closing will be
approximately $465,000.

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