AGREEMENT AND PLAN OF MERGER

 

Among

 

OMNICITY CORP.

 

And

 

OMNICITY ACQUISITION CO.

 

And

 

OMNICITY, INCORPORATED

 

Dated December 29, 2008

--------------------------------------------------------------------------------

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS

 .........................................................................................................
ARTICLE 2 THE
MERGER ..........................................................................................................

2

7

     2.01
     2.02
     2.03
     2.04
     2.05
     2.06
     2.07
     2.08
     2.09
     2.10
     2.11

Merger. ...........................................................................................................................
Effective
Time. ...................................................................................................................
Closing. .......................................................................................................................
Effects of the
Merger. ........................................................................
Effect of Merger on Company Shares and Merger Sub Shares. .
Shareholder
Approval. ......................................................................
Limitations on
Resale. ........................................................................
No Dissenting
Shares. ..........................................................................
Procedure for Exchange of Shares. ........................................
Company
Lenders. ....................................................................................
Board
Changes ..........................................................................................

7
7
7
8
8
9
9
10
10
11
12

ARTICLE 3 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

 

12

     3.01
     3.02
     3.03
     3.04
     3.05
     3.06
     3.07
     3.08
     3.09
     3.10
     3.11
     3.12
     3.13
     3.14
     3.15
     3.16
     3.17
     3.18
     3.19
     3.20
     3.21
     3.22
     3.23
     3.24
     3.25

Organization and Good Standing; Authorization. ......
No
Conflicts. ..............................................................................................
Capitalization. ..........................................................................................
Financial
Statements. ........................................................................
Title to Property; Encumbrances. ............................................
Accounts
Receivable. ..........................................................................
Intellectual
Property. ......................................................................
Banking and
Insurance. ....................................................................
Indebtedness. ..............................................................................................
Judgments;
Litigation. ........................................................................
Income and Other
Taxes. ....................................................................
Compliance with
Law. ..........................................................................
Employee Benefit
Matters. ..............................................................
No Undisclosed
Liabilities. ..............................................................
Permits, Licenses,
Etc. ..........................................................................
Regulatory
Filings. ..............................................................................
Consents. ........................................................................................................
Material Contracts; No Defaults. ............................................
Absence of Certain
Changes. ..........................................................
Employees and Labour Matters. ................................................
Affiliations. ................................................................................................
Principal Customers and Suppliers. ..........................................
Warranty
Liability. ..............................................................................
Brokers'
Fees. ..............................................................................................
Environmental
Matters. ..................................................................

12
13
13
14
14
15
15
17
18
18
19
20
20
22
22
23
23
23
25
26
26
27
27
27
27

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER

 ................................

28

     4.01
     4.02
     4.03
     4.04
     4.05
     4.06
     4.07
     4.08
     4.09
     4.10
     4.11
     4.12
     4.13
     4.14
     4.15
     4.16
     4.17
     4.18
     4.19
     4.20
     4.21
     4.22

Organization, Power and Authority of the Buyer. ....
Organization, Power and Authority of Merger Sub. ..
Authorization. ..........................................................................................
Capitalization. ..........................................................................................
Brokers'
Fees. ..............................................................................................
Interim Operation of Merger Sub; Merger Sub's Assets. .
Active
Business. ........................................................................................
Securities
Law. ..........................................................................................
Judgments;
Litigation. ........................................................................
Compliance with
Law. ..........................................................................
Consents. ........................................................................................................
No
Conflicts. ..............................................................................................
Financial
Statements. ........................................................................
Banking and
Insurance. ....................................................................
Indebtedness. ..............................................................................................
Income and Other
Taxes. ....................................................................
No Undisclosed
Liabilities. ..............................................................
Regulatory
Filings. ..............................................................................
Employee Benefit
Plans. ....................................................................
Employees and Labour Matters. ................................................
Environmental
Matters. ..................................................................
Buyer
Assets. ..............................................................................................

28
28
29
29
29
29
29
30
30
30
30
31
31
31
31
32
33
33
33
33
33
34

ARTICLE 5 CONDITIONS TO CONSUMMATION OF MERGER

 ...............................................

34

     5.01
     5.02
     5.03

Conditions to Each Party's Obligations. ..............................
Conditions to Obligations of the Buyer and Merger Sub. .
Conditions to Obligations of the Company. ......................

34
35
38

ARTICLE 6 COVENANTS OF THE COMPANY AND THE BUYER

 ............................................

40

     6.01
     6.02
     6.03
     6.04
     6.05
     6.06
     6.07
     6.08
     6.09
     6.10
     6.11
     6.12

Covenants of the Company and the Buyer. ........................
Expenses. ........................................................................................................
Publicity;
Confidentiality. ..............................................................
Further
Assurances. ............................................................................
Competing Offers; Merger or Liquidation. ........................
Notification of Certain Matters. ..............................................
Governmental
Filings. ........................................................................
Due Diligence; Access to Information; Confidentiality. .
Private
Placement. ................................................................................
Monthly Financial Statements. ..................................................
Business
Plan ..............................................................................................
Releases ..........................................................................................................

40
41
42
42
42
42
43
43
45
45
45
45

ARTICLE 7 CONDUCT OF BUSINESS PENDING CLOSING

 ......................................................

45

     7.01
     7.02
     7.03
     7.04
     7.05
     7.06
     7.07
     7.08
     7.09
     7.10
     7.11
     7.12
     7.13
     7.14
     7.15
     7.16

Ordinary
Course. ....................................................................................
Organic
Changes. ....................................................................................
Indebtedness. ..............................................................................................
Accounting. ..................................................................................................
Compliance with Legal Requirements. ..................................
Disposition of
Assets. ............................................................................
Compensation. ............................................................................................
Modification or Breach of Agreements; New Agreements. .
Capital
Expenditures. ..........................................................................
Maintain
Insurance. ..............................................................................
Discharge. ......................................................................................................
Actions. ............................................................................................................
Permits. ............................................................................................................
Tax Assessments and
Audits. ..........................................................
Board Observation
Rights. ..............................................................
Existing Asset Purchase Agreements ......................................

45
46
46
46
46
46
47
47
47
47
47
47
48
48
48
48

ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER

 ...............................................

48

     8.01
     8.02
     8.03

Termination. ................................................................................................
Effect of
Termination. ........................................................................
Expenses and Termination
Fees. ..................................................

48
49
49

ARTICLE 9 SURVIVAL, INDEMNIFICATION AND ARBITRATION

 ................................

50

     9.01
     9.02
     9.03
     9.04

Survival. ........................................................................................................
Indemnification of the Company and the Buyer. ..........
Indemnification
Procedure. ............................................................
Arbitration. ................................................................................................

50
50
51
53

ARTICLE 10 GENERAL PROVISIONS

 ....................................................................................

53

     10.01
     10.02
     10.03
     10.04
     10.05
     10.06
     10.07
     10.08
     10.09
     10.10

Notices. ............................................................................................................
Severability. ..............................................................................................
Entire
Agreement. ..................................................................................
Successors and
Assigns. ....................................................................
Amendment. ..................................................................................................
Waiver. ............................................................................................................
Counterparts. ............................................................................................
Schedules and
Annexes. ....................................................................
Construction. ............................................................................................
Governing
Law. ..........................................................................................

53
54
55
55
55
55
55
55
56
56

__________

 

--------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER

is entered into as of December 29, 2008, by and among Omnicity Corp., a Nevada
corporation (the "Buyer"), Omnicity Acquisition Co., an Indiana corporation and
a wholly-owned subsidiary of the Buyer ("Merger Sub"), and Omnicity, Inc. an
Indiana corporation (the "Company").

R E C I T A L S

A. The Buyer desires to acquire all of the issued and outstanding shares of the
Company from the shareholders of the Company in exchange for shares of the
Buyer;

B. The Buyer owns all of the outstanding shares of capital stock of Merger Sub,
which was organized for the sole purpose of effecting the transactions
contemplated hereby;

C. To effect the acquisition of the Company by the Buyer, the parties propose to
merge Merger Sub with and into the Company (the "Merger") pursuant to applicable
Legal Requirements (as defined herein), with the Company being the surviving
corporation and becoming a wholly-owned subsidiary of the Buyer;

D. The Board of Directors of each of the Buyer, Merger Sub and the Company have
determined that the Merger, upon the terms and subject to the conditions set
forth herein, is fair to, and in the best interests of, each such corporation
and its respective securityholders;

E. The Board of Directors of each of the Buyer, Merger Sub and the Company have
approved the Merger and all related transactions in accordance with the laws of
its jurisdiction of organization and its constituting documents;

F. In accordance with applicable Legal Requirements, the Company proposes to
hold a special meeting of its shareholders to obtain approval of the Merger and,
as an inducement to the Buyer to enter into this Agreement, certain officers,
directors and shareholders of the Company shall enter into a voting agreement,
in substantially the form attached hereto as Exhibit A (the "Company Voting
Agreement"), to vote the Company Common Shares (as defined herein) owned by them
to approve the Merger and this Agreement and the transactions contemplated
hereby at the special meeting;

G. In connection with the transactions contemplated hereby, and to provide
financing for the operations of the Company prior to completion of the Merger,
the Buyer on its behalf and on behalf of certain lenders (the "Lenders") shall
loan to the Company the principal amount of up to US$2,000,000 (the "Loan") to
be raised by way of a private placement of capital stock of the Buyer and/or the
Buyer arranging for investors (the "Company Creditors") to acquire convertible
debentures from the Company directly, as provided herein; and

H. All amounts owing to the Lenders and Company Creditors shall be converted
into shares of common stock of the Buyer as provided herein.

1

--------------------------------------------------------------------------------

NOW, THEREFORE

, in consideration of the mutual covenants, agreements, representations and
warranties herein contained, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

Unless the context otherwise requires, in this Agreement, the following terms
shall have the meanings ascribed to them:

(a) "Action" shall mean any actual claim, action, suit, arbitration, hearing,
inquiry, proceeding, cause of action, complaint, charge or investigation by or
before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.

(b) "Affiliate" of any Person shall mean any other Person which directly or
indirectly controls, is controlled by, or is under common control with, the
indicated Person.

(c) "Agreement" shall mean this agreement and all exhibits, annexes and
schedules hereto.

(d) "Articles of Merger" means articles of merger, in such appropriate form as
is determined by the parties in accordance with laws of the State of Indiana, to
be filed with the Secretary of State of the State of Indiana to effect the
Merger.

(e) "Business" means the business heretofore carried on by the Company and which
business is to be carried on by the Surviving Corporation following completion
of the Merger, consisting of being engaged in the business of the build-out and
expansion into full broadband solutions, including a rollup and consolidation of
the United States rural WISP market.

(f) "Business Day" shall mean any day excluding Saturday, Sunday or any day
which shall be in the State of Indiana, or the City of Carmel, a legal holiday
or a day on which banking institutions are authorized by law to close.

(g) "Buyer" shall mean Omnicity Corp, a Nevada corporation.

(h) "Buyer Balance Sheet" shall have the meaning ascribed to such term in
Section 3.15.

(i) "Buyer Common Shares" shall mean the common shares in the capital of the
Buyer.

(j) "Buyer Financial Statements" shall have the meaning ascribed to such term in
Section 3.13.

(k) "Certificate" shall have the meaning ascribed to such term in Section
1.09(b).

2

--------------------------------------------------------------------------------

(l) "Closing" and "Closing Date" shall have the respective meanings ascribed to
such terms in Section 1.03.

(m) "Code" shall mean the U.S. Internal Revenue Code of 1986, as amended from
time to time.

(n) "Company" shall mean Omnicity, Incorporated.

(o) "Company Balance Sheet" shall have the meaning ascribed to such term in
Section 2.04(a).

(p) "Company Capital Stock" shall mean the Company Common Shares and all other
shares in the capital of the Company.

(q) "Company Common Shares" shall mean the shares of common stock in the capital
of the Company.

(r) "Company Creditors" shall have the meaning ascribed to such term in Recital
0.

(s) "Company Financial Statements" shall have the meaning ascribed to such term
in Section 2.04(a).

(t) "Company Voting Agreements" shall have the meaning ascribed to such term in
Recital 0.

(u) "Contractor IP Agreement" shall have the meaning ascribed to such term in
Section 2.07(h).

(v) "Convertible Debt Instruments" shall mean all debt instruments of the
Company which may be convertible into Company Common Shares or Buyer Merger
Shares and including, but not limited to, convertible loans.

(w) "Damages" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys', accountants' and experts' fees, disbursements of counsel,
and other costs and expenses incurred pursuing indemnification claims under
Article 8).

(x) "Debt Conversion Agreement" shall have the meaning ascribed to such term in
Recital 0.

(y) "Debt Conversion Amount" shall mean that number of Buyer Common Shares to
which each Company Lender is entitled pursuant to the Debt Conversion Agreement.

(z) "Effective Time" shall have the meaning ascribed to such term in
Section 1.02.

3

--------------------------------------------------------------------------------

(aa) "Employee IP Agreement" shall have the meaning ascribed to such term in
Section 2.07(h).

(bb) "Environmental Laws" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of gaseous,
particulate and effluent pollutants and the use, handling, storage, treatment,
removal, transport, transloading, cleanup, decontamination, discharge and
disposal of hazardous substances, including, without limitation, those statutes,
laws, rules and regulations set forth below in the definition of "Hazardous
Material".

(cc) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

(dd) "ERISA Affiliate" shall mean any Person which is (or at any relevant time
was) a member of a controlled group of corporations within the meaning of Code
Section 414(b), all trades or businesses under common control within the meaning
of Code Section 414(c), and all affiliated service groups within the meaning of
Code Section 414(m), of which the Company is (or at any relevant time was) a
member.

(ee) "Exchange Agent" shall have the meaning ascribed to such term in
Section 1.09(a).

(ff) "GAAP" means United States generally accepted accounting principles,
consistently applied.

(gg) "Governmental Entity" shall mean any local, state, federal, provincial or
foreign (i) court or (ii) government or governmental department, commission,
instrumentality, board, agency or authority, including the SEC, British Columbia
Securities Commission, Indiana Securities Division, the IRS and other taxing
authorities.

(hh) "Guaranties" shall have the meaning ascribed to such term in
Section 2.09(b).

(ii) "Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future.

(jj) "Indebtedness" shall mean, when used with reference to any Person, without
duplication: (i) any liability of such Person created or assumed by such Person,
or any Subsidiary thereof, (A) for borrowed money, (B) evidenced by a bond,
note, debenture or similar instrument (including a purchase money obligation,
deed of trust or mortgage) given in connection with the acquisition of, or
exchange for, any property or assets (other than supplies, inventory or similar
property acquired and consumed in the Ordinary Course but including earnout
obligations), including securities and other Indebtedness,

4

--------------------------------------------------------------------------------

(C) in respect of letters of credit issued for such Person's account and "swaps"
of interest and currency exchange rates (and other interest and currency
exchange rate hedging agreements) to which such Person is a party, or (D) for
the payment of money as lessee under leases that should be, in accordance with
GAAP, recorded as capital leases for financial reporting purposes; (ii) any
liability of others described in the preceding clause (A) guaranteed as to
payment of principal or interest by such Person, or (B) in effect guaranteed by
such Person through an agreement, contingent or otherwise, to purchase,
repurchase or pay the related Indebtedness or to acquire the security therefor;
(iii) all liabilities or obligations secured by a Lien upon property owned by
such Person and upon which liabilities or obligations such Person customarily
pays interest or principal, whether or not such Person has assumed or become
liable for the payment of such liabilities or obligations; and (iv) any
amendment, renewal, extension, revision or refunding of any such liability or
obligation.

(kk) "IP Rights" shall have the meaning ascribed to such term in
Section 2.07(a).

(ll) "IRS" shall mean the United States Internal Revenue Service.

(mm) "Knowledge", when used as a qualifier by the Company in connection with any
representations or warranties made by Company means the actual knowledge of
Richard Beltzhoover, without inquiry and when used as a qualifier by the Buyer
or MergerSub in connection with any representations or warranties made by the
Buyer or Merger Sub means the actual knowledge of Donald Prest, without inquiry.

(nn) "Leased Real Property" shall mean all real property, including structures,
buildings, fixtures and improvements thereon, leased by the Company.

(oo) "Legal Requirement" shall mean any statute, law, ordinance, rule,
instrument, published policy statement, regulation, permit, order, writ,
judgment, injunction, decree or award issued, enacted or promulgated by any
Governmental Entity.

(pp) "Letter of Transmittal" shall have the meaning ascribed to such term in
2.09(b).

(qq) "Lien" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.

(rr) "Loan" shall have the meaning ascribed to such term in Recital 0.

(ss) "Loan Agreement" shall have the meaning ascribed to such term in Recital 0.

(tt) "Material Adverse Effect" shall mean any event, change, condition or
circumstance that has had, or would reasonably be expected to result in,
individually or in the aggregate, a material adverse effect on the business,
properties or operations of the

5

--------------------------------------------------------------------------------

Company taken as a whole, or the Buyer and its Subsidiaries, taken as a whole,
as applicable; provided, however, none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Material Adverse Effect: any effect, change, condition or
circumstance to the extent directly or indirectly attributable to: (i) the
announcement or pendency of the Merger (including any cancellation of or delays
in customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships or any loss of employees); (ii)
conditions affecting the industries as a whole in which the Company or the
Buyer, as the case may be, participates, the U.S. or Canadian economy as a whole
or the foreign economies as a whole in any locations where Company or the Buyer,
as the case may be, or any of their Subsidiaries has material operations or
sales; (iii) the taking of any action required by this Agreement; (iv) acts of
war or terrorism; (v) changes in Legal Requirements, GAAP or applicable
accounting standards; (vi) any existing event, occurrence or circumstance with
respect to which the party claiming that a Material Adverse Effect has occurred
has Knowledge of as of the date hereof; (vii) any adverse change in or effect on
the business of Company that is cured by before the earlier of (1) closing or
(2) the date this Agreement is terminated .

(uu) "Merger" shall have the meaning ascribed to such term in Recital 0.

(vv) "Merger Shares" shall mean the Buyer Common Shares with a deemed value of
$0.35 per share to be issued pursuant to this Agreement to the Shareholders of
the Company in connection with the consummation of the transactions contemplated
hereby.

(ww) "Merger Sub" shall mean Omnicity Acquisition Co., an Indiana corporation, a
wholly owned Subsidiary of the Buyer.

(xx) "Ordinary Course" shall mean, when used with reference to the Company or
the Buyer, the ordinary course of the Company's or the Buyer's business,
respectively, substantially consistent with past practices.

(yy) "Permit" shall have the meaning ascribed to such term in Section 2.15.

(zz) "Person" shall mean all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures, Governmental Entities and any other entities.

(aaa) "Policies" shall have the meaning ascribed to such term in Section
2.08(b).

(bbb) "Proceeding" means any action, arbitration, audit, hearing, litigation, or
suit (whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Entity.

(ccc) "SEC" means the United States Securities and Exchange Commission.

6

--------------------------------------------------------------------------------

(ddd) "Securities Act" shall mean the United States Securities Act of 1933, as
amended.

(eee) "Shareholder" shall mean an owner of Company Common Shares.

(fff) "Stock Plans" shall mean all stock option plans and other stock or equity-
related plans of the Company.

(ggg) "Subsidiary" of a Person shall mean any corporation, partnership,
association or other business entity at least 50% of the outstanding voting
power of which is at the time owned or controlled directly or indirectly by such
Person.

(hhh) "Survival Period" shall have the meaning ascribed to such term in
Section 8.01.

(iii) "Surviving Corporation" shall have the meaning ascribed to such term in
Section 1.01.

(jjj) "Tax" shall mean any federal, provincial, state, local or foreign income,
gross receipts, license, payroll, unemployment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including, without
limitation, taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), employment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax or other
tax, assessment or charge of any kind whatsoever, including, without limitation,
any interest, fine, penalty or addition thereto, whether disputed or not.

(kkk) "Tax Return" shall mean any return, declaration, report, claim for refund
or information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.

(lll) "Welfare Plan" shall mean any "employee welfare benefit plan" as defined
in Section 3(1) of ERISA, which the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, and under which the
Company or any ERISA Affiliate may incur any liability.

ARTICLE 2
THE MERGER

2.01 Merger.

Upon the terms and subject to the conditions of this Agreement, at the Effective
Time Merger Sub shall be merged with and into the Company in accordance with the
applicable provisions of the laws of the State of Indiana. At the Effective Time
the identity and separate corporate existence of Merger Sub shall cease and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation") and a wholly-owned subsidiary of the Buyer.

7

--------------------------------------------------------------------------------

2.02 Effective Time.

Subject to the Closing of the transactions contemplated hereby, the Merger shall
become effective on the date and at the time the Certificate of Merger is filed
with the Secretary of State for the State of Indiana, in such form as required
by, and executed in accordance with, the applicable provisions of the laws of
the State of Indiana. The time at which the Merger shall become effective is
referred to herein as the "Effective Time."

2.03 Closing.

The closing of the transactions contemplated hereby (the "Closing") shall take
place at the offices of Dann Pecar Newman & Kleiman, P.C., One American Square,
Suite 2300, Indianapolis, IN 46282 and at such time as may be agreed to by the
Buyer and the Company on or before January 15, 2009, or such other time and
place as may be agreed to by the parties (the "Closing Date"). At the Closing,
the Company shall deliver or cause to be delivered to the Buyer all of the
documents, certificates and instruments contemplated by Sections 4.01 and 4.02,
and the Buyer shall deliver or cause to be delivered to the Company all of the
documents, certificates and instruments contemplated by Sections 4.01 and 4.03.

2.04 Effects of the Merger.

At the Effective Time:

(a) All the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.

(b) The articles of incorporation of Merger Sub shall be the Articles of
Incorporation of the Surviving Corporation.

(c) The bylaws of Merger Sub shall be the bylaws of the Surviving Corporation.

(d) The directors and officers of MergerSub shall be the initial directors and
officers of the Surviving Corporation.

(e) The name of the Surviving Corporation from and after the Effective Time
shall be "Omnicity, Incorporated".

(f) Each party shall use its reasonable best efforts to take all such actions as
may be necessary to effect the Merger in accordance with applicable Legal
Requirements and the terms hereof.

8

--------------------------------------------------------------------------------

2.05 Effect of Merger on Company Shares and Merger Sub Shares.

(a) Except as provided in paragraph (b) of this Section 2.05, at the Effective
Time each issued and outstanding Company Common Share immediately prior to the
Effective Time shall be converted and exchangeable for one (1) Merger Share in
accordance with the procedures set forth in Section 1.09.

(b) At the Effective Time each Company Common Share issued and outstanding
immediately prior to the Effective Time and owned by Merger Sub or the Buyer, if
any, shall be cancelled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.

(c) At the Effective Time all issued and outstanding shares of common stock of
Merger Sub held by the Buyer immediately prior to the Effective Time will be
converted into and become one validly issued, fully paid and non-assessable
share of common stock of the Surviving Corporation.

(d) Except as set forth in 2.05(b) above, on and after the Effective Date, and
until surrendered for exchange, each outstanding Certificate that immediately
prior to the Effective Date represented Company Common Shares (except shares
cancelled pursuant to the provisions hereof) shall be deemed for all purposes to
evidence ownership of and represent the number of Merger Shares into which such
Company Common Shares shall convert pursuant to the provisions hereof. After the
Effective Date, the recordholder of each such outstanding Certificate
representing Company Common Shares shall be entitled to vote the Merger Shares
into which such Company Common Shares shall have been converted on any matters
on which the holders of record of Buyer Common Shares having voting rights shall
be entitled to vote as of any date after the Effective Date. Subject to the
provisions of Section 2.09, in any matters relating to Certificates representing
Company Common Shares the Buyer shall be entitled to rely exclusively upon the
record of shareholders containing the names and addresses of the holders of
record of Company Common Shares on the Effective Date.

2.06 Shareholder Approval.

(a) The Company shall take all action necessary, desirable or advisable in
accordance with applicable law and its articles of incorporation and bylaws to
convene a special meeting of its Shareholders (the "Special Meeting") to
consider and vote upon, or shall solicit the written consent of the Shareholders
of the Company to, the adoption of this Agreement and the approval of the Merger
prior to Closing. The Company hereby represents and warrants to the Buyer and
Merger Sub that the adoption of this Agreement and the approval of the Merger
will require, pursuant to Indiana law, the approval of the holders of a majority
of the Company Common Shares outstanding on the record date chosen for purposes
of determining the stockholders of the Company entitled to vote on the adoption
of this Agreement and the approval of the Merger.

9

--------------------------------------------------------------------------------

(b) Upon execution of this Agreement by the parties, or within three Business
Days thereafter, the Company shall use its commercial reasonable efforts to
obtain from a majority of its Shareholders and deliver to the Buyer a Company
Voting Agreement from each such Shareholder in connection with the approval by
such Shareholders of the transactions contemplated hereby at the Special
Meeting.

2.07 Limitations on Resale.

The Merger Shares will be issued by the Buyer in such a manner as to be exempt
from (a) registration under the Securities Act, (b) the registration
requirements of the Indiana Securities Act, I.C. 23-19-1 et seq, and (c) the
prospectus and registration requirements of the applicable securities laws,
rules and regulations in each jurisdiction of Canada, and, as such, the resale
of such Merger Shares will be subject to the restrictions as provided in
Section 3.08, and the certificates representing the Merger Shares issued to
Shareholders of the Company as contemplated herein shall contain such legends as
may be required under applicable Legal Requirements in the United States and
Canada, as determined by the Buyer.

2.08 No Dissenting Shares.

Prior to and as a condition of Closing, the Company shall use its commercial
reasonable efforts to obtain from a majority of its Shareholders, in a form
acceptable to the Buyer in its sole discretion, a waiver of each such
Shareholder's respective dissenter's rights under applicable Legal Requirements.

2.09 Procedure for Exchange of Shares.

(a) The Buyer shall act as exchange agent (the "Exchange Agent") in the Merger.

(b) As soon as possible after the Effective Time, the Exchange Agent shall send
a notice and a transmittal form, substantially in the form attached hereto as
Exhibit D (collectively, with all documentation required thereby, the "Letter of
Transmittal"), to each holder of a stock certificate representing Company Common
Shares (each a "Certificate") advising such holder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange Agent such Certificate
in exchange for the Merger Shares issuable hereunder. Each holder of a
Certificate, upon proper surrender thereof to the Exchange Agent in accordance
with the instructions in such notice, shall be entitled to receive in exchange
therefor (subject to any taxes required to be withheld) the Merger Shares
issuable hereunder. From and after the Effective Time each such Certificate
shall be deemed for all purposes to evidence only the right to receive the
Merger Shares issuable pursuant to the Merger as provided herein and those
rights described in Section 2.05(d). Holders of Certificates shall not be
entitled to receive certificates for the Merger Shares to which they would
otherwise be entitled until such Certificates are properly surrendered.

10

--------------------------------------------------------------------------------

(c) If there is a transfer of Company Common Share ownership which is not
registered in the Company's transfer records at the time of Closing, a
certificate representing the proper number of Merger Shares may be issued to a
Person other than the Person in whose name the certificate so surrendered is
registered if (i) upon presentation to the corporate secretary of the Buyer,
such certificate shall be properly endorsed or otherwise be in proper form for
transfer, (ii) the Person requesting such payment shall pay any transfer or
other taxes required by reason of the issuance of Merger Shares to a Person
other than the registered holder of such certificate or establish to the
reasonable satisfaction of the Buyer that such tax has been paid or is not
applicable, and (iii) the issuance of such Merger Shares shall not, in the
reasonable discretion of the Buyer, violate the requirements of applicable
securities laws and regulations with respect to the private placement of Merger
Shares that will result from the Merger.

(d) All Merger Shares issued upon the surrender for exchange of Company Common
Shares in accordance with the above terms and conditions shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to such
Company Common Shares.

(e) In the event any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed, the Buyer shall issue in exchange for such
lost, stolen or destroyed Certificate the Merger Shares issuable hereunder. The
Board of Directors of the Buyer may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Buyer indemnity against any claim that may be
made against the Buyer with respect to the Certificate alleged to have been
lost, stolen or destroyed.

(f) From and after the Effective Time the holders of Company Common Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares, except as provided herein or under
applicable law.

(g) After the Effective Time there shall be no transfers on the stock transfer
books of the Company of any Company Common Shares which were outstanding
immediately prior to the Effective Time.

(h) No fractional Buyer Common Shares shall be issued to the holders of Company
Common Shares upon the surrender for exchange of Certificates and all fractional
shares issuable shall be rounded up or down to the nearest whole share.

2.10 Company Lenders.

(a) The Buyer, on behalf of itself and/or certain Lenders, agrees to loan,
pursuant to the terms of a loan agreement in substantially the form attached as
Exhibit A (the "Loan Agreement"), to be raised by way of private placement
and/or by arranging Company Creditors to acquire convertible debentures directly
from the Company, to the Company

11

--------------------------------------------------------------------------------

the aggregate principal sum of up to U.S. $2,000,000 (the "Principal Sum") upon
the earlier of (a) January 31, 2009 and (b) five business days of the completion
of a minimum of U.S. $300,000 private placement financing, with interest
accruing on the Principal Sum at the interest rate published in The Wall Street
Journal as the "Prime Rate" plus two percent (2%) per annum, compounded
semi-annually and not in advance (the "Interest"), repayable at maturity on the
first business day which is the earlier of: (i) 180 calendar days from the date
of advancement of each such Principal Sum, and (ii) the completion of the
Merger.

(b) The Principal Sum and Interest and any other amounts owing under the Loan
shall be secured, contemporaneously with the advancement of any funds under the
Loan, by way of a senior, subordinated (subordinated only to the Company's
existing banking indebtedness), fixed and floating charge on all of the assets
of the Company, pursuant to the terms of a security agreement in substantially
the form attached to the Loan Agreement.

(c) Each Lender (excluding the Buyer) shall have the right and option,
exercisable until 5:00 p.m. (Vancouver time) on the date of maturity of the
Loan, to convert all or any part of the Principal Sum, Interest or any other
amount owing to the Lender under the Loan into Buyer Common Shares (each a "Loan
Share"), at a price of US$0.35 per share. Notwithstanding the foregoing, upon
the completion of the Merger, the Principal Sum, Interest and any other amounts
owing under the Loan shall automatically be converted into Loan Shares, at a
price of US$0.35 per share, without any further action on the part of any of the
Buyer, the Company or the Lenders.

(d) Each of the Company Creditors shall enter into a debt conversion agreement
with the Buyer, MergerSub and the Company in substantially the form attached
hereto as Exhibit C (the "Debt Conversion Agreement"). Upon completion of the
Merger, all Company Creditors shall settle all amounts owing to them by the
Company for Buyer Common Shares (each a "Share For Debt"), at a price of
US$0.35, in accordance with the terms of the Debt Conversion Agreement.

2.11 Board Changes

At Closing the following changes will be effected to the board of directors and
officers of the Buyer:

(a) the board of directors of the Buyer shall appoint an aggregate of an
additional six directors to the board of directors of the Buyer comprised of two
nominees appointed by such directors of the Buyer and four nominees to be put
forward by the Shareholders of the Company, subsequent to which all directors
(other than those directors who have been nominated by Buyer to remain as a
director) and all officers of the Buyer will resign; and

(b) the newly appointed directors of the Buyer will appoint such executive
officers as may be determined by the such new Board of Directors.

12

--------------------------------------------------------------------------------

ARTICLE 3
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

The Company hereby represents and warrants to the Buyer that, except as set
forth in the Schedules referenced herein:

3.01 Organization and Good Standing; Authorization.

(a) The Company has been duly organized and exists as a corporation in good
standing under the laws of its jurisdiction of incorporation with full power and
authority (corporate and other) to own and lease its properties and to conduct
its business as currently conducted. The Company is duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each jurisdiction set forth on Schedule 2.01(a), such jurisdictions
comprising all jurisdictions in which the nature of the Business or location of
its properties requires such qualification.

(b) The Company has no Subsidiaries and does not own or control, nor does it
have any other equity investment or other interest in, directly or indirectly,
any corporation, joint venture, partnership, association or other Person.

(c) The Company has the corporate power and authority to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations under this Agreement. Subject to Shareholder approval,
the execution and delivery by the Company of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action by the Company. This Agreement, subject to
Shareholder approval, upon its execution and delivery by the Company, will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except as limited by general
principals of equity and subject to bankruptcy and other laws governing the
rights or remedies of creditors and debtors.

3.02 No Conflicts.

Except as set forth on Schedule 2.02, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not (a) result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or non-performance under, any material indenture, mortgage, deed of
trust, loan or credit agreement, lease, license or other material agreement or
instrument to which the Company is a party or by which the Company is bound or
affected or to which any of the property or assets of the Company is bound or
affected including, without limitation, all arrangements described in
Section 2.18 hereof, (b) result in the violation of the provisions of the
Articles of Incorporation or Bylaws of the Company or any material Legal
Requirement applicable to or binding upon the Company, (c) result in the
creation or imposition of any Lien,

13

--------------------------------------------------------------------------------

upon any property or asset of the Company, or (d) otherwise materially adversely
affect the contractual or other legal rights or privileges of the Company.
Schedule 2.02 sets forth a list of all material agreements to which the Company
is a party or by which it or its material assets are bound requiring the consent
of any party thereto to any of the transactions contemplated hereby.

3.03 Capitalization.

Schedule 2.03 sets out, as of the date hereof, the authorized capital stock of
the Company and the shares of Company Capital Stock which are issued and
outstanding. Schedule 2.03 sets forth a complete and accurate list of the
Shareholders, indicating the number of shares of Company Capital Stock held by
each Shareholder and their respective last known addresses. All of the issued
and outstanding shares of Company Capital Stock are, and all of the shares of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time will be, duly authorized, validly issued, fully paid, non-assessable and
free of all pre-emptive rights. Other than as set forth on Schedule 2.03, (i)
there are no existing options, warrants, rights, calls or commitments of any
character relating to shares of Company Common Shares or other Company Capital
Stock, (ii) there are no outstanding securities or other instruments convertible
into or exchangeable for shares of Company Common Shares or other Company
Capital Stock and no commitments to issue such securities or instruments and
(iii) no Person has any right of first refusal, pre-emptive right, subscription
right or similar right with respect to any shares of Company Common Shares or
other Company Capital Stock. The offer, issuance and sale of the Company Common
Shares were (i) exempt from the registration and prospectus delivery
requirements of the Securities Act, (ii) registered or qualified (or exempt from
registration or qualification) under the registration or qualification
requirements of all applicable state securities laws and (iii) accomplished in
material conformity with all other Legal Requirements.

3.04 Financial Statements.

(a) Schedule 2.04(a) includes true and complete copies of the audited balance
sheets (the "Company Balance Sheet") of the Company as of July 31, 2008 and
2007, and the related statements of income and cash flows, for the years then
ended (the "Company Financial Statements");

(b) The Financial Statements present fairly in all material respects the
financial condition of the Company as of the dates indicated therein and the
results of operations and changes in financial position of the Company for the
periods specified therein, have been prepared in all material respects in
conformity with United States GAAP applied on a consistent basis throughout the
periods indicated, and have been derived from the accounting records of the
Company representing only actual, bona fide transactions.

3.05 Title to Property; Encumbrances.

(a) The Company does not own and has never owned fee simple title to any real
property.

14

--------------------------------------------------------------------------------

(b) The Company has, and immediately prior to the Closing, will have valid and
marketable title to all personal property reflected on the Balance Sheet as
owned by it and all personal property acquired by the Company since the Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Balance Sheet Date in the Ordinary Course), in
each case free and clear of all Liens except as set forth on Schedule 2.05(b).

(c) Schedule 2.05(c) contains a list of each item of tangible personal property
having a cost or fair market value in excess of US$10,000 owned or leased by the
Company as of the date hereof.

(d) Schedule 2.05(d) contains a list of all real property leases, and all
material personal property leases under which the Company is the lessee,
together with (i) the location and nature of each of the leased properties, (ii)
the termination date of each such lease, and (iii) the name of the lessor.
Except as noted on Schedule 2.05(d), all leases pursuant to which the Company
leases from others real or personal property are valid, subsisting in full force
and effect in accordance with their respective terms, and to the Company's
Knowledge, there is not, under any real property lease, personal property lease,
any existing material default or event of default, whether or not subject to
waiver (or event that, with notice or passage of time, or both, would constitute
a default, or would constitute a basis of force majeure or other claim of
excusable delay or non-performance). True and complete copies of all real
property leases and personal property leases listed on Schedule 2.05(d) have
been delivered to the Buyer heretofore, as well as copies of any title reports,
surveys or environmental reports or audits relating to any leased real property.
Except as set forth on Schedule 2.05(d), no such lease set out on such Schedule
will require the consent of the lessor or licensor to or as a result of the
consummation of the transactions contemplated by this Agreement. For purposes of
this Agreement, a "lease" shall include a sublease.

(e) All material personal property owned by the Company and all material
personal property held by the Company pursuant to personal property leases is in
good operating condition and repair, subject only to ordinary wear and tear. The
leased real property and personal property described in Sections 2.05(a),
2.05(b) and 2.05(c) and the personal property held by the Company pursuant to
the leases described in Schedule 2.05(d) comprise all of the leased real
property and personal property with value greater than US$10,000 used in the
conduct of business of the Company.

(f) To the Company's Knowledge, there are no (i) leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any other Person
the right to acquire, use or occupy any portion of, any leased real property,
(ii) outstanding options or rights of first refusal to purchase all or any
portion of any leased real property or interest therein known to the Company,
and (iii) Persons (other than the Company) in possession of any leased real
property.

15

--------------------------------------------------------------------------------

(g) The leased real property and related premises are adequate for the conduct
of the Business as presently conducted.

3.06 Accounts Receivable.

All accounts receivable of the Company reflected in the Balance Sheet and all
accounts receivable of the Company that have arisen since the date of the
Balance Sheet (except such accounts receivable as have been collected since such
dates) are valid and enforceable claims against the account debtor, and the
goods and services sold and delivered that gave rise to such accounts were sold
and delivered in conformity in all material respects with all applicable express
and implied warranties, purchase orders, agreements and specifications, other
than to the extent of any reserves established therefor. To the Company's
Knowledge, such accounts receivable of the Company are subject to no valid
defence, offset or counterclaim and the reserves established therefor on the
Balance Sheet are adequate as of the Balance Sheet Date. Schedule 2.06 contains
a true and complete aging of the accounts receivable of the Company as of the
balance sheet date.

3.07 Intellectual Property.

(a) Definitions. For all purposes of this Agreement, the following terms shall
have the following respective meanings:

(i) "IP Rights" shall mean common law and statutory rights anywhere in the world
arising under or associated with (i) patents and patent applications
("Patents"), (ii) copyrights, copyright registrations and copyright
applications, "moral" rights and mask work rights ("Copyrights"), (iii) the
protection of trade and industrial secrets and confidential information ("Trade
Secrets"), (iv) trademarks, trade names and service marks and applications for
registration thereof ("Trademarks"), (v) domain names and corporate names and
registrations and applications for registration thereof, (vi) other proprietary
rights relating or with respect to the protection of technology, (vii)
divisions, continuations, renewals, re-issuances and extensions of the foregoing
(as applicable) and (viii) analogous rights to those set forth above; and

(ii) "Company Intellectual Property" shall mean any and all IP Rights that are
owned or purported to be owned by the Company.

(b) Schedule 2.07(b) contains a true and complete list of (i) Patents, (ii)
registered Trademarks and applications to register Trademarks, (iii) domain
names and corporate names and registrations and applications for registration
thereof, and (iv) registrations and applications for Copyrights (collectively
herein, "Registered IP") and unregistered Trademarks, in each case both domestic
and foreign, that constitute Company Intellectual Property.

16

--------------------------------------------------------------------------------

(c) Except as described in Schedule 2.07(c), the Company owns all Company
Intellectual Property free and clear of any Liens. The Company has taken
commercially reasonable security measures to protect the confidentiality of its
Trade Secrets and the confidential information of third parties that has been
disclosed to the Company under an obligation to keep such information
confidential pursuant to a valid confidentiality and non-disclosure agreement.

(d) Schedule 2.07(d) contains a true and complete list of all licenses pursuant
to which (i) a third party has granted or is required to grant to the Company
any IP Rights that are material to the operation of the Business
("In-Licenses"), and (ii) the Company has granted to a third party any rights or
licenses to Company Intellectual Property ("Out-Licenses", and together with the
In-Licenses, the "IP Licenses"). Except as described in Schedule 2.07(d), the
Company has not sold, transferred, or assigned any material Company Intellectual
Property. Other than pursuant to the In-Licenses and except as set forth in
Schedule 2.07(d), the Company is not required to make any payments by way of
royalties, fees or otherwise, to any owner or licensor of, or other claimant to,
any IP Rights that are used in the Business, or with respect to the
commercialization of any products presently sold or under development by the
Company.

(e) There are no outstanding Actions, and the Company has not received notice of
any claims or demands of any Person pertaining to the Company Intellectual
Property, and to the Company's Knowledge, no such Actions, claims or demands are
threatened, which challenge the rights of the Company to own or use the Company
Intellectual Property. To the Knowledge of the Company, no Person has infringed
in any material respect any of the Company Intellectual Property.

(f) The execution of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a material breach of any material IP
License nor (i) cause the material modification of any material term of any such
IP License, including but not limited to the material modification of the
effective rate of any royalties or other payments provided for in any such
license or agreement, (ii) cause the forfeiture or termination of any right or
license granted to the Company under an In-License, (iii) give any Person the
right to terminate any right or license granted by the Company under an
Out-License or (iv) materially impair the right of the Company under any IP
License.

(g) To the Company's Knowledge, the manufacture, marketing, license, sale or use
by the Company of any product or technology currently licensed or sold by
Company, does not infringe in any material respect any IP Rights of any third
Person. The Company has not received notice of any pending, and to the Company's
Knowledge, there is no threatened, claim or litigation asserting that the
manufacture, marketing, license, sale or use by the Company of any product or
technology currently licensed or sold by Company, infringes any IP Rights of any
third Person. To the Company's Knowledge, the Company has sufficient rights to
use the IP Rights as currently used by it in connection with the Business.

17

--------------------------------------------------------------------------------

(h) The Company has provided to the Buyer copies of its standard form of
employee confidentiality and invention assignment agreement and has ensured that
all employees of the Company (except as set out on Schedule 2.07(h)) have
executed such or a substantially similar agreement (the "Employee IP
Agreement"). The Company has provided to the Buyer copies of its standard form
of contractor confidentiality and invention assignment agreement (the
"Contractor IP Agreement") and has ensured that all consultants and contractors
of the Company (except as set out on Schedule 2.07(h) have executed such or a
substantially similar agreement.

(i) To the Company's Knowledge, none of the employees, consultants or
contractors of the Company is in violation of his or her respective Employee IP
Agreement or Contractor IP Agreement.

(j) The Company has not entered into any agreement to indemnify any other
Person, including but not limited to any employee, consultant, or contractor of
the Company, against any charge of infringement, misappropriation or misuse of
any IP Rights, other than indemnification provisions contained in purchase
orders or customer and other agreements arising in the Ordinary Course. All
current employees, consultants and contractors and, to the Knowledge of the
Company, all former employees, consultants and contractors of the Company have
assigned to the Company, any and all rights or claims in any IP Rights that any
such employee, consultant or contractor has or may have by reason of any
contribution, participation or other role in the development, conception,
creation, reduction to practice or authorship of any invention, innovation,
development or work of authorship or any other IP Right that is used in the
Business.

3.08 Banking and Insurance.

(a) Schedule 2.08(a) contains a true and complete list of the names and
locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification of
all such accounts and arrangements and the names of all persons authorized to
draw against any funds therein.

(b) Schedule 2.08(b) contains a true and complete list of all insurance policies
and bonds and self-insurance arrangements (collectively, the "Policies")
currently in full force and effect that cover or purport to cover risks or
losses to, or associated with, the Company, its Business, operations, premises,
properties, assets, employees, agents and directors. Copies of such Policies
have previously been made available to the Buyer. The Company does not have any
obligation, liability or other commitment relating to any contract of insurance
containing a provision for retrospective rating or adjustment of the Company's
premium obligation. The Company has not received written notice from any
carrier, and the Company has no knowledge, that the Company will be unable to
renew its existing insurance coverage as and when the same shall expire upon
terms at least as favourable as those currently in effect, other than possible
increases in premiums or changes in coverages (other than the act of executing
this Agreement and perform its obligations hereunder) that do not result from
any act or omission of the Company.

18

--------------------------------------------------------------------------------

3.09 Indebtedness.

(a) Other than as set forth on Schedule 2.09(a), the Company does not have any
liability or obligation for Indebtedness other than (i) as set forth in the
Company's Balance Sheet, (ii) those incurred in the Ordinary Course and not
required to be set forth in the Company's Balance Sheet under GAAP, (iii) those
incurred in the Ordinary Course since the Company's Balance Sheet Date and (iv)
those incurred in connection with this Agreement, and true and complete copies
of all instruments and documents evidencing, creating, securing or otherwise
relating to such Indebtedness have been delivered to the Buyer heretofore.
Except as described in Schedule 2.09(a), no event has occurred and no condition
has become known to the Company (including the transactions contemplated hereby)
that constitutes or, with notice or passage of time, or both, would constitute a
default or a basis of force majeure or other claim of accelerated or increased
rights, termination, excusable delay or non-performance by the Company, or any
other Person under any instrument or document relating to or evidencing
Indebtedness that would entitle any Person to require the Company to pay any
portion of the principal amount of such Indebtedness prior to the scheduled
maturity thereof. Except as described in Schedule 2.09(a), no instrument or
document evidencing, creating, securing or otherwise relating to Indebtedness
will or purports to require the consent of any Person to or as a result of the
consummation of the transactions contemplated by this Agreement. There are not
now and there will not be at Closing any outstanding Convertible Debt
Instruments or any outstanding options or other rights to acquire Company Common
Shares.

(b) Schedule 2.09(b) contains a list and brief description of all agreements or
instruments pursuant to which any of the Company's directors, employees or
Shareholders have guaranteed any Indebtedness of the Company (the "Guaranties").
True and complete copies of all Guaranties have been delivered to the Buyer
heretofore.

3.10 Judgments; Litigation.

Except as set forth on Schedule 2.10:

(a) There is no (i) outstanding judgment, order, decree, award, stipulation,
injunction of any Governmental Entity or arbitrator against or affecting the
Company or its properties, assets or Business, or (ii) Action outstanding, or to
the Company's Knowledge, threatened against the Company, or its properties,
assets or Business.

(b) There is no (i) outstanding judgment, order, decree, award, stipulation,
injunction of any Governmental Entity or arbitrator against or affecting any
officer, director or employee of the Company relating to the Company; (ii) to
the Company's Knowledge, Action threatened against the Company, or its
properties or assets; (iii) Action outstanding or to the Company's Knowledge,
threatened against the Company's officers, directors or employees relating to
the Company; and (iv) the Company has no knowledge of the basis for the
institution of any Action against the Company or any of their officers,
directors, employees, properties or assets which, if decided adversely, could
reasonably be anticipated to have a Material Adverse Effect on the Company.

19

--------------------------------------------------------------------------------

3.11 Income and Other Taxes.

Except as set forth on Schedule 2.11:

(a) All Tax Returns required to be filed through and including the date hereof
in connection with the operations of the Company are true, complete and correct
in all material respects and have been properly and timely filed or Company has
paid all penalties, fines and interest related to such late filing. The Company
has not requested any extension of time within which to file any Tax Return,
which Tax Return has not since been timely filed or is not yet due. The Company
has made available to the Buyer true, correct and complete copies of each Tax
Return of the Company with respect to the past three taxable years, and all
reports of, and communications from, any Governmental Entities relating to such
period. The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
income Taxes for federal income tax purposes within the meaning of Code Section
6662.

(b) All Taxes required to be paid or withheld and deposited through and
including the Closing Date in connection with the operations of the Company have
been duly and timely paid or deposited by the Company. The Company has properly
withheld or collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent contractors
and other third parties, and for Taxes on sales, and has properly and timely
remitted such withheld or collected amounts to the appropriate Governmental
Entity.

(c) The Company has made adequate provision on its books of account for all
Taxes with respect to its Business, properties and operations through the
balance sheet date, and the accruals for Taxes in the Balance Sheet are adequate
to cover all liabilities for Taxes of the Company for all periods ending on or
before the Balance Sheet Date.

(d) The Company has not heretofore (i) had a tax deficiency proposed, asserted
or assessed against it, (ii) executed any waiver of any statute of limitations
on the assessment or collection of any Taxes or (iii) been delinquent in the
payment of any Taxes.

(e) As of the date hereof, no Tax Return of the Company has been audited or the
subject of other Action by any Governmental Entity. The Company has not received
any notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Company or its assets or properties and the Company
has no reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.

20

--------------------------------------------------------------------------------

(f) The Company (i) has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under certain circumstances
could obligate the Company to make any payments that will not be deductible
under Code Section 280G; (ii) is not a United States real property holding
corporation within the meaning of Code Section 897(c)(2); (iii) is not a party
to a tax allocation or sharing agreement; (iv) has never been (or does not have
any liability for unpaid Taxes because it was) a member of an affiliated group
with the meaning of Code Section 1504(a); (v) has never applied for a tax ruling
from a Governmental Entity; and (vi) has never filed or been the subject of an
election under Code Section 338(g) or Code Section 338(h)(10) or caused or been
the subject of a deemed election under Code Section 338(e).

3.12 Compliance with Law.

Through and including the date hereof, the Company has not (i) to its Knowledge
violated, conducted its business or operations in violation of, or used or
occupied its properties or assets in violation of, any Legal Requirement, where
such violation would reasonably be expected to have a Material Adverse Effect on
the Company and (ii) received any written notice from any Governmental Entity of
any alleged violation of, nor any citation for non-compliance with, any Legal
Requirement, where such violation would reasonably be expected to have a
Material Adverse Effect on the Company.

3.13 Employee Benefit Matters.

(a) Schedule 2.13(a) is a complete list of all employee benefit plans of the
Company. True and complete copies of each of the following documents (and any
amendments thereto), where applicable, have been previously delivered to the
Buyer: (i) the plan documents; (ii) a written description of any plan which is
not in writing; (iii) if the plan is funded through a trust or any third party
funding vehicle, the trust or other funding agreement; (iv) the plan's most
recent financial statements; (v) the two most recent annual reports (including
all schedules and attachments thereto) required by ERISA (to the extent the plan
has been in existence for at least two years); (vi) the most recent actuarial
report and valuation; (vii) the most recent determination letter received from
the IRS with respect to each plan that is intended to be qualified under Code
Section 401(a) or to be recognized as tax-exempt under Code Section 501(c);
(viii) the most recent summary plan description and each summary of material
modifications required by ERISA; (ix) any agreement providing for the provision
of administrative or investment management services with respect to the plan;
and (x) all documents and correspondence received from or provided to the
Department of Labor, IRS, and Pension Benefit Guaranty Corporation during the
past two years.

21

--------------------------------------------------------------------------------

(b) To Company's Knowledge, each plan and related trust, annuity, or other
funding agreement complies and has been maintained in substantial compliance
with all applicable Legal Requirements. To Company's Knowledge, no non exempt
prohibited transaction (as defined in Code Section 4975 and ERISA Sections 406
and 408) has occurred and, to the Company's Knowledge, no "fiduciary" (as
defined in ERISA Section 3(21)) has committed any breach of duty which could
subject the Company, any ERISA Affiliate, or any director, officer, or employee
thereof to liability under Title I of ERISA or to tax under Code Section 4975.
All material obligations required to be performed by the Company and any other
Person under the terms of each plan and applicable Legal Requirements have been
performed.

(c) All required reports and descriptions, including, without limitation, annual
reports (Form 5500), summary annual reports, and summary plan descriptions, have
been filed and distributed timely. With respect to each plan which is a Welfare
Plan , the requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Section 4980B have been satisfied.

(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction contributions,
have been paid when due or accrued in accordance with the past custom and
practice of the Company and any ERISA Affiliate. No plan that is subject to Part
3 of Subtitle B of Title I of ERISA or to Code Section 412 has incurred any
accumulated funding deficiency, whether or not waived, and no other actual or
contingent liability for any other expenses or obligations of any plan exists.

(e) There are no pending or, to the Company's Knowledge, threatened Actions
(other than routine claims for benefits) asserted or instituted against any plan
or the assets of any plan, or against the Company, or any ERISA Affiliate,
trustee, administrator, or fiduciary of such plan.

(f) The Company (or, if applicable, an ERISA Affiliate) may terminate, suspend,
or amend each plan at any time without the consent of the participants or
employees covered by such plan. Neither the Company nor any ERISA Affiliate has
announced any intention, made any amendment or binding commitment, or given any
written or oral notice providing that the Company or an ERISA Affiliate (i) will
create additional Welfare Plans covering employees of the Company or any ERISA
Affiliate, (ii) will increase benefits promised or provided pursuant to any
plan, or (iii) will not exercise after the Closing Date any right or power it
may have to terminate, suspend, or amend any plan.

(g) Neither the Company nor any ERISA Affiliate maintains or has maintained at
any time, or contributes to or has contributed to or is or was required to
contribute to, any (i) Plan subject to Title IV of ERISA, including, without
limitation, any multi-employer plan (as defined in ERISA Section 3(37)), within
the past five years, or (ii) funded or unfunded medical, health, accident, or
life insurance plan or arrangement for current or future retirees or terminated
employees or their spouses or dependents (except to the extent required by Code
Section 4980B).

22

--------------------------------------------------------------------------------

(h) Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will constitute a termination of employment
or other event entitling any Person to any additional or other benefits, nor
that would otherwise modify benefits or the vesting of benefits, provided under
any Plan.

(i) No event has occurred which could subject the Company or any ERISA Affiliate
to any material liability (i) under any Legal Requirement relating to any plan,
or (ii) resulting from any obligation of the Company or an ERISA Affiliate to
indemnify any Person against liability incurred with respect to or in connection
with any plan.

(j) Each plan which is intended to be qualified under Code Section 401(a) has
received a favourable determination letter from the IRS. No event has occurred
and, to the knowledge of the Company, no facts or circumstances exist which may
cause or result in the loss or revocation of such determination.

(k) To the Company's Knowledge, each welfare plan that has been established,
maintained and administered by the Company is in substantial compliance with its
terms and conditions and with the requirements prescribed by any and all
material Legal Requirements that are applicable to such Welfare Plan.
Furthermore, no such welfare plan has unfunded liabilities, that as of the
Effective Time, will not be offset by insurance or fully accrued. Except as
required by Legal Requirements, no condition exists that would prevent the
Company from terminating or amending any such Welfare Plan at any time for any
reason without liability to the Company or its Affiliates (other than ordinary
administration expenses or routine claims for benefits). Each such Welfare Plan
has obtained from the Governmental Entity having jurisdiction with respect to
such Welfare Plan any required determinations, if any, that such welfare plan is
in compliance with the laws of the relevant jurisdiction if such determinations
are required in order to give effect to such welfare plan.

3.14 No Undisclosed Liabilities.

Except (a) to the extent set forth or provided for in the Balance Sheet, (b) as
set forth on Schedule 2.14, (c) for current liabilities incurred since the
Balance Sheet Date in the Ordinary Course, (d) for liabilities not required to
be set forth on a Balance Sheet prepared in accordance with United States GAAP
or (e) those incurred by the Buyer in connection with the execution of this
Agreement, as of the date hereof the Company does not have any material
liabilities, whether accrued, absolute, contingent or otherwise, whether due or
to become due and whether the amounts thereof are readily ascertainable or not,
or any unrealized or anticipated losses from any commitments of a contractual
nature, including Taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing.

23

--------------------------------------------------------------------------------

3.15 Permits, Licenses, Etc.

The Company possesses, and is operating, in all material respects, in
substantial compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary to
(a) occupy, maintain, operate and use the Leased Real Property as it is
currently used, (b) conduct its Business as currently conducted and (c) maintain
and operate its Welfare Plans, except where the failure to obtain or have any
such licenses, permits, certificates, authorizations, rights and other approvals
would not have a Material Adverse Effect on the Company (the "Permits").
Schedule 2.15 contains a true and complete list of all Permits and all such
Permits are in full force and effect. No proceeding is pending or, to the
Company's Knowledge, threatened looking toward the revocation, suspension or
limitation of any Permit. The consummation of the transactions contemplated by
this Agreement will not result in the revocation, suspension or limitation of
any Permit, and except as set forth on Schedule 2.15, no Permit will require the
consent of its issuing authority to or as a result of the consummation of the
transactions contemplated hereby.

3.16 Regulatory Filings.

The Company has made all required registrations and filings with and submissions
to all applicable Governmental Entities relating to the operations of the
Company as currently conducted, and as proposed to be conducted, including,
without limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection of the
environment, and the treatment, discharge, use, handling, storage or production,
or disposal of Hazardous Materials. All such registrations, filings and
submissions were in compliance, in all material respects, with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or submissions
and, to the Knowledge of the Company, no facts or circumstances exist which
would indicate that a material deficiency may be asserted by any such authority
with respect to any such registration, filing or submission.

3.17 Consents.

All consents, authorizations and approvals of any Person to or as a result of
the consummation of the transactions contemplated hereby that are necessary or
advisable in connection with the operations and business of the Company as
currently conducted and as proposed to be conducted, have been lawfully and
validly obtained by the Company, except as described in Schedules 2.02, 2.05(d),
2.09(a) and 2.15 hereto.

3.18 Material Contracts; No Defaults.

(a) Schedule 2.18(a) contains a true and complete list and description of each
individual sales order and sales contract of the Company having an indicated
gross value in excess of US$10,000 or having a term or duration in excess of
three months as of the date hereof. All outstanding sales orders and sales
contracts of the Company have been entered into in the Ordinary Course. Except
as described in Schedule 2.18(a), as of the date hereof, the Company has not
received any advance, progress payment or deposit in respect of any sales order
or sales contract, and the Company has no sales order or sales contract that
will result, upon completion or performance thereof, in gross margins materially
lower than those normally experienced by the Company for the services or
products covered by such sales order or sales contract.

24

--------------------------------------------------------------------------------

(b) Schedule 2.18(b) contains a true and complete list and description of all
purchase orders and purchase commitments of the Company having a gross indicated
value in excess of US$10,000 in the aggregate from any single supplier or other
vendor as of the date hereof. All outstanding purchase orders and purchase
commitments of the Company have been incurred in the Ordinary Course.

(c) Schedule 2.18(c) contains a true and complete list of all sales agency,
sales representative and similar contracts or agreements of the Company as of
the date hereof. Except as described in Schedule 2.18(c), all of such contracts
and agreements are terminable at any time by the Company without penalty upon
not more than 30 days' notice.

(d) Schedule 2.18(d) contains a true and complete list and description of all
non-competition agreements and covenants under which the Company, or, to the
Knowledge of the Company, any of the Company's officers or key employees is
obligated. Except as described in Schedule 2.18(d), the Company is not
restricted by any agreement from carrying on its Business or engaging in any
other activity anywhere in the world (including relocating, closing, or
terminating any of its operations or facilities), and, to the knowledge of the
Company, no such officer or key employee is a party to or otherwise bound or
affected by any agreement, covenant or other arrangement or understanding that
would restrict or impair his ability to perform diligently his other duties to
the Company. Schedule 2.18(d) also contains a true and complete list and
description of all non-competition agreements or covenants in favour of the
Company.

(e) Schedule 2.18(e) contains a true and complete list and description as of the
date hereof of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which it or its
properties, rights or assets are bound that are not otherwise disclosed in this
Agreement or the Schedules hereto. True and complete copies of such written
contracts, agreements, understandings, arrangements and commitments and true and
complete summaries of such oral contracts, agreements, understandings,
arrangements and commitments have been delivered to the Buyer heretofore. For
the purposes of this Section 2.18(e), "material" means any contract, agreement,
understanding, arrangement or commitment that (i) involves payments or receipts
by the Company in excess of US$10,000, (ii) involves capital expenditures in
excess of US$10,000, or (iii) to the Company's Knowlege, otherwise materially
affects the Company.

(f) Except as described in Schedule 2.18(f):

(i) each agreement, contract, arrangement or commitment described above in this
Section 2.18 is, and after the Closing on identical terms will be, legal, valid,
binding, enforceable and in full force and effect except those contracts that
expire or terminate by their terms prior to Closing and except as the validity
and enforceability may be affected by bankruptcy laws and laws otherwise
affecting the rights and remedies of creditors and debtors;

25

--------------------------------------------------------------------------------

(ii) no event or condition has occurred, constitutes, with notice or the passage
of time, or both, or would constitute a default or a basis of force majeure or
other claim of excusable delay, termination, non-performance or accelerated or
increased rights by the Company or any other Person under any contract,
agreement, arrangement, commitment or other written or oral, described above in
this Section 2.18 or otherwise disclosed pursuant to this Agreement on any
Schedule hereto that is material to the Business of the Company; and

(iii) to the Company's Knowledge, no Person with whom the Company has such a
contract, agreement, arrangement, commitment or other understanding is in
default thereunder or has failed to perform fully thereunder by reason of force
majeure or other claim of excusable delay, termination or non-performance
thereunder.

3.19 Absence of Certain Changes.

Other than in connection with the entry into the agreements and transactions
contemplated hereby and as disclosed in this Agreement, since the date of the
Balance Sheet (or except where specified, since the date hereof) and through the
date hereof, except as disclosed in Schedule 2.19, the Company has not: (a)
incurred any debts, obligations or liabilities (absolute, accrued, contingent or
otherwise), other than (i) current liabilities incurred in the Ordinary Course
which individually or in the aggregate, are not material to the business or
financial condition of the Company or (ii) short-term loans intended to provide
or extend financing until the Closing; (b) subjected to or permitted a Lien upon
or otherwise encumbered any of its assets, tangible or intangible; (c) sold,
transferred, licensed or leased any of its material assets or properties except
in the Ordinary Course; (d) discharged or satisfied any Lien other than a Lien
securing, or paid any obligation or liability other than, current liabilities
shown on the Balance sheet and current liabilities incurred since the Balance
Sheet date, in each case in the Ordinary Course; (e) cancelled or compromised
any material debt owed to or by or claim of or against it, or waived or released
any right of material value other than in the Ordinary Course; (f) suffered any
material physical damage, destruction or loss (whether or not covered by
insurance); (g) entered into any transaction or otherwise committed or obligated
itself to any capital expenditure other than (A) in the Ordinary Course, or (B)
involving less than US$10,000 in any one case or US$50,000 in the aggregate; (h)
made or suffered any change in its properties or operations other than changes,
events or conditions in the Ordinary Course, none of which (individually or in
the aggregate) has had or may have a Material Adverse Effect on the Company; (i)
made any material change in the accounting principles, methods, records or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted; (j) other than in the Ordinary Course, made or suffered any
amendment or termination of any material contract, agreement, lease or license
to which it is a party; (k) paid, or made any accrual or arrangement for payment
of, any severance or termination pay to, or entered into any employment or loan
or loan guarantee agreement with, any current or former officer or director; (l)
paid, or made any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind to any employee other
than pursuant to an agreement disclosed on Schedule 2.20(a) or Schedule 2.20(b)
or other than in the Ordinary Course, or paid, or made any accrual or
arrangement for payment of, any increase in compensation, bonuses or special
compensation of any kind to any officer or director of the Company or any
consultant to the Company; (m) made or agreed to make any charitable
contributions or incurred any non-business expenses; (n) changed or suffered
change in any plan or collective bargaining agreement affecting any employee of
the Company otherwise than to conform to Legal Requirements; (o) entered into
any agreement or otherwise obligated itself to do any of the foregoing; or (p)
acquired any item of tangible personal property having a cost or fair market
value in excess of US$10,000 outside of the Ordinary Course (other than personal
property held by the Company as lessee under a personal property lease).

26

--------------------------------------------------------------------------------

3.20 Employees and Labour Matters.

(a) Schedule 2.20(a) contains a true and complete list of all employees of the
Company as of the date hereof, together with details regarding annual, hourly
and other applicable rules of compensation, bonus entitlement, if any, length of
service, job title and a description of applicable benefits. Schedule 2.20(a)
also contains a true and complete list of contracts, agreements, plans,
arrangements, commitments and understandings (formal and informal) pertaining to
terms of employment, compensation, bonuses, profit sharing, stock purchases,
stock repurchases, stock options, commissions, incentives, loans or loan
guarantees, severance pay or benefits, use of the Company's property and related
matters of the Company with any current or former officer, director, key
employee or consultant.

(b) Schedule 2.20(b) contains a true and complete list of all labour, collective
bargaining, union and similar agreements under or by which the Company is
obligated.

(c) To the Company's Knowledge, except for the employment and labour agreements
listed on Schedules 2.20(a) and 2.20(b), none of the Buyer nor the Company will
have any responsibility for continuing any person in the employ (or retaining
any person as a consultant) of the Company from and after the Closing or have
any liability for any severance payments to or similar arrangements with any
such Person who shall cease to be an employee of the Company, as applicable at
or prior to the Closing.

(d) There is not occurring or, to the Company's Knowledge, threatened, any
strike, slow down, picket, work stoppage or other concerted action by any union
or other group of employees or other persons against the Company or their
premises or products. To the Company's Knowledge no union or other labour
organization has attempted to organize any of the employees of the Company.

(e) The Company has substantially complied, in all material respects, with all
Legal Requirements relating to employment and labour or has cured any previously
existing lack of compliance, and no facts or circumstances exist that could
reasonably be expected to substantiate a viable claim for wrongful termination
by any current or former employee of the Company or against the Company.

27

--------------------------------------------------------------------------------

3.21 Affiliations.

Except as disclosed on Schedule 2.21 and except for the ownership of securities
representing less than a 2% equity interest in various publicly traded
companies, to the Company's Knowledge, no officer or director of the Company or
any Affiliate of the Company or any of such Persons has, directly or indirectly,
(a) an interest in any Person that (i) furnishes or sells, or proposes to
furnish or sell, services or products that are furnished or sold by the Company,
or (ii) purchases from or sells or furnishes to, or proposes to purchase from or
sell or furnish to, the Company any goods or services, or (b) a beneficial
interest in any contract or agreement to which the Company is a party or by
which the Company or any of the assets of the Company are bound or affected.

3.22 Principal Customers and Suppliers.

(a) Schedule 2.22(a) contains a true and complete list of the name and address
of each customer that purchased in excess of 10% of the sales of goods or
services of the Company during the twelve months ended on the date of the
Balance Sheet, and since that date no such customer has terminated its
relationship with or materially curtailed its purchases from the Company or
indicated in writing (for any reason) to the Company its intention so to
terminate its relationship or materially curtail its purchases.

(b) Schedule 2.22(b) contains a true and complete list of each supplier from
whom the Company purchased in excess of 10% of the purchases of goods or
services of the Company during the twelve months ended on the date of the
Balance Sheet, and since that date no such supplier has terminated its
relationship with or materially curtailed its accommodations, sales or services
to the Company or indicated (for any reason) to the Company its intention to
terminate such relationship or materially curtail its accommodations, sales or
services.

3.23 Warranty Liability.

Schedule 2.23 contains a true and complete description of (a) all material
express warranties granted or made with respect to services rendered or goods
sold by the Company in the past three years and (b) the aggregate liability of
the Company related to such warranties for each of the last three calendar
years.

28

--------------------------------------------------------------------------------

3.24 Brokers' Fees.

Except as set forth on Schedule 2.24, no broker, finder or similar agent has
been employed by or on behalf of the Company in connection with this Agreement
or the transactions contemplated hereby. The Company has not entered into any
agreement or understanding of any kind with any person or entity for the payment
of any brokerage commission, finder's fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby.

3.25 Environmental Matters.

The Company is, and at all times has been, in full compliance with, and has not
been in violation of or liable under, any Environmental Law (as defined below)
such that non-compliance or violation would reasonably be expected to have a
Material Adverse Effect on the Company or the Surviving Corporation. The Company
has no basis to expect, nor have it received, any actual or threatened order,
notice or other communication from any governmental agency, office or body, or
any private citizen, acting in the public interest, or the current or prior
owner or operator of any building in which the Company transacts business, of
any actual or potential violations or failure to comply with any Environmental
Law. For purposes of this Agreement, the term "Environmental Law" shall mean any
legal requirement that requires or relates to: (a) advising appropriate
authorities, employees and/or the public of intended or actual releases of
pollutants or hazardous substances or materials, violations of discharge limits
or other prohibitions, and the commencement of activities, such as resource
extraction or construction, that could have a significant impact on the
environment; (b) preventing or reducing to acceptable levels the release or
existence of pollutants or hazardous materials or substances in the environment;
(c) reducing the quantities, preventing the release or minimizing the hazardous
characteristics of wastes that are generated; (d) assuring that products are
designed, formulated, packaged and used so that they do not present unreasonable
risks to human health or the environment when used or disposed of; (e)
protecting resources, species or ecological amenities; (f) reducing to
acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants or other potentially harmful substances; (g) cleaning up
pollutants that have been released, preventing the threat of release, or paying
the costs of such clean up or prevention; or (h) making responsible parties pay
private parties or groups of private parties for damages done to their health or
the environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public property or assets. None of the
operations of the Company involves the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state, local or foreign equivalent.

29

--------------------------------------------------------------------------------

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer and Merger Sub hereby, jointly and severally, represent and warrant,
except as set forth in the Schedules referenced herein:

4.01 Organization, Power and Authority of the Buyer.

The Buyer has been duly organized and exists as a corporation in good standing
under the laws of the State of Nevada with full power and authority (corporate
and other) to own and lease its properties and to conduct its business as
currently conducted. The Buyer has no Subsidiaries other than Merger Sub and
does not own or control, nor does it have any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other Person.

4.02 Organization, Power and Authority of Merger Sub.

Merger Sub has been duly organized and is existing as a corporation in good
standing under the laws of the State of Indiana with full power and authority
(corporate and other) to own and lease its properties and to conduct its
business as currently conducted. Merger Sub has no Subsidiaries and does not own
or control, nor does it have any other equity investment or other interest in,
directly or indirectly, any corporation, joint venture, partnership, association
or other Person.

4.03 Authorization.

Each of the Buyer and Merger Sub has the corporate power and authority to
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations under this Agreement. The execution and
delivery by each of the Buyer and Merger Sub of this Agreement, and the
consummation by each of them of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action by each of the Buyer and
Merger Sub. This Agreement, upon its execution and delivery by each of Buyer and
Merger Sub, will constitute the legal, valid and binding obligation of each of
Buyer and Merger Sub, enforceable against each of Buyer and Merger Sub in
accordance with its terms except as limited by general principals of equity and
subject to bankruptcy and other laws governing the rights or remedies of
creditors and debtors.

4.04 Capitalization.

The authorized capital stock of the Buyer consists solely of shares of the Buyer
Common Shares, of which, as of December 29, 2008, 43,967,007 shares were issued
and outstanding. All of the issued and outstanding shares of Buyer Common Shares
are duly authorized, validly issued, fully paid, non-assessable, and free of all
pre-emptive rights. All of the Merger Shares to be issued pursuant to this
Agreement, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid, non-assessable, free of all pre-emptive
rights. The authorized capital stock of Merger Sub consists solely of 10,000
shares of common stock, of which one share of common shares is, and on the
Closing Date will be, issued and outstanding. All of the issued and outstanding
shares of capital stock of Merger Sub are, and on the Closing Date will be,
owned beneficially and of record by Buyer.

30

--------------------------------------------------------------------------------

4.05 Brokers' Fees.

Except as set forth on Schedule 3.05, no broker, finder or similar agent has
been employed by or on behalf of Buyer or Merger Sub in connection with this
Agreement or the transactions contemplated hereby, and neither the Buyer nor
Merger Sub have entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder's fee or
any similar compensation in connection with this Agreement or the transactions
contemplated hereby. .

4.06 Interim Operation of Merger Sub; Merger Sub's Assets.

Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement. Merger Sub has and on the Closing Date
shall have no assets, obligations or liabilities other than its rights and
obligations under this Agreement.

4.07 Active Business.

The Buyer, either directly or through its Subsidiaries, is not and has not been
engaged in an active trade or business (other than previous exploration work)
inside or outside the United States for two years prior to the Closing Date.

4.08 Securities Law.

(a) The Merger Shares will be issued in such a manner as to be exempt from the
prospectus and registration requirements of applicable Legal Requirements of
Canada and the United States and will be subject to restrictions on resale in
Canada and of the United States.

(b) None of the securities regulatory authorities in Canada or the SEC or any
similar regulatory authority or any other jurisdiction has issued any order
preventing or suspending trading in any securities of the Buyer which is
currently in effect.

(c) The issued and outstanding shares of Buyer Common Stock are not listed and
posted for trading on any stock exchange in Canada or the United States.

4.09 Judgments; Litigation.

(a) There is no (i) outstanding judgment, order, decree, award, stipulation,
injunction of any Governmental Entity or arbitrator against or affecting Buyer
or Merger Sub or their properties, assets or business or (ii) Action
outstanding, or to the Buyer's Knowledge, threatened against the Buyer or Merger
Sub or their properties, assets or business.

31

--------------------------------------------------------------------------------

(b) There is no (i) outstanding judgment, order, decree, award, stipulation,
injunction of any Governmental Entity or arbitrator against or affecting any
officer, director or employee of the Buyer or Merger Sub relating to the Buyer
or Merger Sub; (ii) to the Buyer's Knowledge, Action threatened against the
Buyer or Merger Sub or their properties or assets or business; (iii) Action
outstanding or, to the Buyer's Knowledge, threatened against the Buyer's or
Merger Sub's officers, directors or employees relating to the Buyer or Merger
Sub; and (iv) the Buyer has no knowledge of the basis for the institution of any
Action against the Buyer or Merger Sub or any of their officers, directors,
employees, properties or assets which, if decided adversely, could reasonably be
anticipated to have a Material Adverse Effect on the Buyer.

4.10 Compliance with Law.

Through and including the date hereof, Buyer and Merger Sub (a) have to their
Knowledge not violated, have not conducted their respective business or
operations in violation of, and have not used or occupied their respective
properties or assets in violation of, any Legal Requirement, where such
violation would reasonably be expected to have a Material Adverse Effect on the
Buyer or Merger Sub, and (b) have not received any written notice from any
Governmental Entity of any alleged violation of, nor any citation for
non-compliance with, any Legal Requirement, where such violation would
reasonably be expected to have a Material Adverse Effect on the Buyer or Merger
Sub.

4.11 Consents.

All consents, authorizations and approvals of any Person to or as a result of
the consummation of the transactions contemplated hereby that are necessary or
advisable in connection with the operations and business of the Buyer or Merger
Sub as currently conducted and as proposed to be conducted, have been lawfully
and validly obtained by the Buyer or Merger Sub, except where the failure to
obtain or have any such consents, authorizations and approvals would not
reasonably be expected to have a Material Adverse Effect on the Buyer.

4.12 No Conflicts.

Except as set forth on Schedule 3.12, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not (a) result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or non-performance under, any material indenture, mortgage, deed of
trust, loan or credit agreement, lease, license or other material agreement or
instrument to which the Buyer is a party or by which the Buyer is bound or
affected or to which any of the property or assets of the Buyer is bound or
affected, (b) result in the violation of the provisions of the Certificate of
Incorporation or Bylaws of the Buyer or any material Legal Requirement
applicable to or binding upon the Buyer, (c) result in the creation or
imposition of any Lien, upon any property or asset of the Buyer, or (d)
otherwise materially adversely affect the contractual or other legal rights or
privileges of the Buyer. Schedule 3.12 sets forth a list of all material
agreements to which the Buyer is a party or by which it or its material assets
are bound requiring the consent of any party thereto to any of the transactions
contemplated hereby.

32

--------------------------------------------------------------------------------

4.13 Financial Statements.

The Buyer's financial statements for the year ended June 30, 2008 are set out in
the Company's Form 10-KSB for the year ended June 30, 2008 filed with the SEC
and the Company's financial statements for the three months ended September 30,
2008 are set out in the Company's Form 10-Q filed November 18, 2008 (the "Buyer
Financial Statements"). The Buyer Financial Statements present fairly in all
material respects the financial condition of the Buyer as of the dates indicated
therein and the results of operations and changes in financial position of the
Buyer for the periods specified therein, have been prepared in all material
respects in conformity with United States GAAP applied on a consistent basis
throughout the periods indicated, and have been derived from the accounting
records of the Buyer representing only actual, bona fide transactions.

4.14 Banking and Insurance.

Schedule 3.14 contains a true and complete list of the names and locations of
all financial institutions at which the Buyer or Merger Sub maintains a checking
account, deposit account, securities account, safety deposit box or other
deposit or safekeeping arrangement, the numbers or other identification of all
such accounts and arrangements and the names of all persons authorized to draw
against any funds therein.

4.15 Indebtedness.

(a) Other than as set forth on Schedule 3.15, the Buyer and Merger Sub do not
have any liability or obligation for Indebtedness other than (i) as set forth in
the Buyer's balance sheet set out in the Buyer Financial Statements (the "Buyer
Balance Sheet"), and (ii) those incurred in connection with this Agreement, and
true and complete copies of all instruments and documents evidencing, creating,
securing or otherwise relating to such Indebtedness have been delivered to the
Buyer heretofore. Except as described in Schedule 3.15, no event has occurred
and no condition has become known to Buyer (including the transactions
contemplated hereby) that constitutes or, with notice or passage of time, or
both, would constitute a default or a basis of force majeure or other claim of
accelerated or increased rights, termination, excusable delay or non-performance
by the Buyer, or any other Person under any instrument or document relating to
or evidencing Indebtedness that would entitle any Person to require the Buyer to
pay any portion of the principal amount of such Indebtedness prior to the
scheduled maturity thereof. Except as described in Schedule 2.09(a), no
instrument or document evidencing, creating, securing or otherwise relating to
Indebtedness will or purports to require the consent of any Person to or as a
result of the consummation of the transactions contemplated by this Agreement.
There are not now and there will not be at Closing any outstanding Convertible
Debt Instruments or any outstanding options or other rights to acquire Common
Shares except in connection with the Private Placement or as set out in the
Buyer Financial Statements.

33

--------------------------------------------------------------------------------

(b) Schedule 3.15(b) contains a list and brief description of all agreements or
instruments pursuant to which any of the Buyer's directors, employees or
Shareholders have guaranteed any Indebtedness of the Buyer (the "Buyer
Guarantees"). True and complete copies of all Buyer Guaranties have been
delivered to the Buyer heretofore.

4.16 Income and Other Taxes.

Except as set forth on Schedule 3.16:

(a) All Tax Returns required to be filed through and including the date hereof
in connection with the operations of the Buyer are true, complete and correct in
all material respects and have been properly and timely filed or Buyer has paid
all penalties, fines and interest related to such late filing. The Buyer has not
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been timely filed or is not yet due. The Buyer has made
available to the Company true, correct and complete copies of each Tax Return of
the Buyer with respect to the past three taxable years, and all reports of, and
communications from, any Governmental Entities relating to such period. The
Buyer has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of income Taxes for
federal income tax purposes within the meaning of Code Section 6662.

(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the Buyer have
been duly and timely paid or deposited by the Buyer. The Buyer has properly
withheld or collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent contractors
and other third parties, and for Taxes on sales, and has properly and timely
remitted such withheld or collected amounts to the appropriate Governmental
Entity.

(c) The Buyer has made adequate provision on its books of account for all Taxes
with respect to its business, properties and operations through the balance
sheet date, and the accruals for Taxes in the Buyer Balance Sheet are adequate
to cover all liabilities for Taxes of the Buyer for all periods ending on or
before the Balance Sheet Date.

(d) The Buyer has not heretofore (i) had a tax deficiency proposed, asserted or
assessed against it, (ii) executed any waiver of any statute of limitations on
the assessment or collection of any Taxes or (iii) been delinquent in the
payment of any Taxes.

34

--------------------------------------------------------------------------------

(e) As of the date hereof, no Tax Return of the Buyer has been audited or the
subject of other Action by any Governmental Entity. The Buyer has not received
any notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Buyer or its assets or properties and the Buyer has
no reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.

4.17 No Undisclosed Liabilities.

Except (a) to the extent set forth or provided for in the Buyer Balance Sheet,
(b) as set forth on Schedule 3.17 or (c) those incurred by the Company in
connection with the execution of this Agreement, as of the date hereof the Buyer
does not have any material liabilities, whether accrued, absolute, contingent or
otherwise, whether due or to become due and whether the amounts thereof are
readily ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.

4.18 Regulatory Filings.

The Buyer has made all filings required to be made with the SEC under the
Securities Act of 1934, as amended (the "Exchange Act"), and is a "shell
company" pursuant to Rule 12b-2 of the Exchange Act.

4.19 Employee Benefit Plans.

Buyer and Merger Sub do not now have, have never had, and will not on the
Closing Date have any employee benefit plans, any plan or benefit system or
scheme covered or regulated by ERISA or covered or regulated by any analogous or
similar Legal Requirement in effect in Canada or any province thereof.

4.20 Employees and Labour Matters.

Buyer does not have any employees, other than its officers.

4.21 Environmental Matters.

Buyer does not have, and in the past has not had, any material operations.

4.22 Buyer Assets.

The Buyer does not and at the Effective Time will not own any assets except (a)
its interest in Merger Sub, (b) its rights under this Agreement, and (c) the
cash identified on the Buyer Balance Sheet.

35

--------------------------------------------------------------------------------

ARTICLE 5
CONDITIONS TO CONSUMMATION OF MERGER

5.01 Conditions to Each Party's Obligations.

The respective obligations of each party to effect the transactions contemplated
hereby are subject to the fulfillment or waiver at or prior to the Effective
Date of the following conditions:

(a) There shall have been no law, statute, rule or regulation, domestic or
foreign, enacted or promulgated which would prohibit or make illegal the
consummation of the transactions contemplated hereby.

(b) This Agreement and all of the transactions contemplated hereby shall have
been duly authorized by the Boards of Directors of the Company, the Buyer and
Merger Sub. The Merger and this Agreement shall have been approved by the
Shareholders of the Company as required at the Special Meeting.

(c) There shall not be threatened, instituted or pending any Action or
proceeding before any court or governmental authority or agency (i) challenging
or seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby
or seeking to obtain material damages in connection with such transactions, (ii)
seeking to prohibit direct or indirect ownership or operation by the Buyer or
Merger Sub of all or a material portion of the business or assets of the
Company, or to compel the Buyer or Merger Sub or any of their respective
subsidiaries or the Company to dispose of or to hold separately all or a
material portion of the business or assets of the Buyer or of the Company, as a
result of the transactions contemplated hereby, (iii) seeking to invalidate or
render unenforceable any material provision of this Agreement or any of the
other agreements attached as exhibits hereto or contemplated hereby or (iv)
otherwise relating to and having a Material Adverse Effect upon the transactions
contemplated hereby.

(d) There shall not be any action taken, or any statute, rule, regulation,
judgment, order or injunction contemplated, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
hereby, by any federal, state or other court, government or governmental
authority or agency, that would reasonably be expected to result, directly or
indirectly, in any of the consequences referred to in Section 4.01(c).

(e) There shall be available exemptions from the registration requirements of
the Securities Act and all applicable blue sky laws for the offer and issuance
of the Merger Shares pursuant to the Merger.

36

--------------------------------------------------------------------------------

(f) The Board of Directors of the Buyer shall have approved of the issuance by
the Buyer to the order and direction of the Shareholders of the Company of the
Merger Shares, the Loan Shares and the Shares for Debt, and, in addition, such
Board of Directors having also approved and received any required notice of:

(i) the Loan by the Buyer and/or Lenders to the Company of not less than the
Principal Sum of $300,000;

(ii) the issuance by the Buyer to the Company's Creditors of the Shares For
Debt, if any;

(iii) the change in board of directors and officers of the Buyer;

(iv) the Private Placement, if any; and

(v) such other matters as may be agreed to as between the parties hereto prior
the completion of the transactions contemplated by this Agreement.

5.02 Conditions to Obligations of the Buyer and Merger Sub.

Notwithstanding any other provision of this Agreement, the obligations of the
Buyer and Merger Sub to consummate the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction or waiver, at or prior
to the Effective Date, of the following conditions:

(a) The Company shall have delivered to the Buyer financial statements for any
interim quarterly periods subsequent to the closing date of the Balance Sheet
and pro forma statements evidencing the financial and operational performance of
the Company.

(b) Since the date of this Agreement, the Company shall have continued to
conduct its operations in accordance with the provisions of Article 6.

(c) The representations and warranties of the Company contained in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Effective Time, in all respects (in the case of any representation
containing any materiality qualification) or in all material respects (in the
case of any representation without any materiality qualification) as if made on
the Closing Date. The Company shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.

(d) The Company shall have obtained all consents and approvals necessary to
consummate the transactions contemplated by this Agreement, including without
limitation, those set forth on Schedule 2.02, in order that the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of the Company's assets pursuant to the provisions of, any agreement,
arrangement or undertaking of or affecting the Company or any license, franchise
or permit of or affecting the Company except as provided in this Agreement.

37

--------------------------------------------------------------------------------

(e) The Company shall have received from a majority of its Shareholders, in a
form acceptable to the Buyer in its sole discretion, a waiver of their
respective dissenters' rights. A copy of such waivers shall be provided to the
Buyer at or prior to the Closing.

(f) The Company shall have furnished to the Buyer a certificate of the Chief
Executive Officer or the Chief Financial Officer of the Company, dated as of the
Effective Date, in which such officer shall certify that, to his best knowledge,
the conditions set forth in Sections 4.02(a), (b), (c) and (d) have been
fulfilled.

(g) The Company shall have executed the Articles of Merger.

(h) The Company Voting Agreements, Loan Agreement and Debt Conversion Agreement
shall have been executed and delivered.

(i) The Company shall have furnished to the Buyer (i) copies of the text of the
resolutions by which the corporate action on the part of the Company necessary
to approve this Agreement, the Articles of Merger and the transactions
contemplated hereby and thereby were taken, (ii) a copy of the Company's
articles of incorporation, certified by the Secretary of State of Indiana and
one or more certificates from the Secretary of State of Indiana and any other
jurisdictions evidencing the good standing of the Company in such jurisdictions
in which it transacts business, and (iii) a certificate dated as of the
Effective Date executed on behalf of the Company by its corporate secretary or
one of its assistant corporate secretaries certifying to the Buyer that such
copies are true, correct and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded, and
certifying that the certified copy of the Company's certificate of incorporation
is true, correct and complete as received from such governmental office, and
attaching and certifying the Company's bylaws to be true, correct and complete.

(j) The Company shall have made all filings with, any securities regulatory
authority from whom any such authorization, approval or other action is required
to be obtained or to be made in connection with the transactions contemplated
herein, and all such authorizations, approvals and other actions shall be in
full force and effect and all such filings shall have been accepted and the
Company shall be in compliance with, and has not committed any breach of, any
securities laws, regulations or policies of any securities regulatory authority
to which the Company may be subject.

(k) All matters which, in the reasonable opinion of counsel for the Buyer, are
material in connection with the transactions contemplated by this Agreement
shall be subject to the favourable opinion of such counsel, and all relevant
records and information shall be supplied to such counsel for that purpose.

38

--------------------------------------------------------------------------------

(l) No material loss or destruction of or damage to either of the Company, any
of its assets, any of the Company's business or the Company Common Shares shall
have occurred.

(m) No Action or proceeding at law or in equity shall be pending or threatened
by any person, company, firm, governmental authority, regulatory body or agency
to enjoin or prohibit:

(i) the purchase or transfer of any of the Company Common Shares contemplated by
this Agreement or the right of the Company to dispose of any of the Company
Common Shares; or

(ii) the right of the Company to conduct its operations and carry on, in the
normal course, its business and operations as it has carried on in the past.

(n) The delivery to the Buyer by the Company, on a confidential basis, of all
remaining material documentation and information and including, without
limitation, updated Schedules hereto and:

(i) a copy of all material contracts, agreements, reports and information of any
nature respecting the Company, its assets and business; and

(ii) details of any lawsuits, claims or potential claims relating to either of
the Company, its assets, business or the Company Common Shares of which the
Company is aware and the Buyer is unaware.

(o) The delivery to the Buyer by the Company of such security and supporting
documentation and instruments respecting the granting by the Buyer to the
Company of the Loan as the Buyer's solicitors may reasonably require;

(p) an acceptable form of final Release respecting any and all claims which
either of such parties had, or may have had, against any such other party.

(q) The delivery to the Buyer by the Company of an acceptable form of final
Release respecting any and all claims which either of such parties had, or may
have had, against any such other party.

(r) The completion by the Buyer and its professional advisors of a due diligence
and operations review of both the Company's business and the operations of the
Company together with the transferability of the Company Common Shares as
contemplated by this Agreement.

(s) A certified copy of an ordinary resolution of the shareholders of the
Company approving the terms and conditions of this Agreement and the
transactions contemplated hereby, or of the Shareholders of the Company holding
over 50% of the issued shares of the Company providing written consent
resolutions evidencing their approval to the terms and conditions of this
Agreement and all of the transactions contemplated hereby, together with
certification of any required notice to all Shareholders of the Company of such
written consent resolutions, shall be executed and delivered.

39

--------------------------------------------------------------------------------

(t) Certificate(s) representing the Company Common Shares registered in the name
of the Shareholders of the Company, duly endorsed for transfer to the Buyer or
irrevocable stock powers transferring the Company Common Shares to the Buyer,
shall be delivered.

(u) A certificate representing the Company Common Shares registered in the name
of the Buyer shall be delivered.

(v) A certified copy of the resolutions of the board of directors of the Company
authorizing the transfer by the Shareholders of the Company to the Buyer of the
Company Common Shares shall be delivered.

(w) Consents to act and similar documentation required in order to effect the
change in Board of Directors and officers of the Buyer shall be delivered.

(x) A copy of all corporate records and books of account for the Company and its
subsidiaries and including, without limiting the generality of the foregoing, a
copy of all minute books, share register books, share certificate books and
annual reports of the Company and its respective subsidiaries, shall be
delivered.

(y) An opinion of counsel to the Company, dated as at the Closing Date, and
addressed to the Buyer and its counsel, in form and substance satisfactory to
each of the parties and their counsel, acting reasonably, respecting each of the
matters material to the Merger contemplated hereby, shall be delivered.

(z) The Company shall have delivered to the Buyer such documents as may be
reasonably requested by the Buyer or Merger Sub.

2.03 Conditions to Obligations of the Company.

Notwithstanding any other provision of this Agreement, the obligations of the
Company to consummate the Merger and the other transactions contemplated hereby
shall be subject to the satisfaction or waiver at or prior to the Effective
Date, of the following conditions:

(a) The representations and warranties of the Buyer and Merger Sub contained in
this Agreement shall be accurate as of the date of this Agreement and as of the
Effective Time, in all respects (in the case of any representation containing
any materiality qualification) or in all material respects (in the case of any
representation without any materiality qualification). The Buyer and Merger Sub,
respectively, shall in all material respects have performed each obligation and
agreement and complied with each covenant to be performed and complied with by
them hereunder at or prior to the Effective Date.

40

--------------------------------------------------------------------------------

(b) The Buyer and Merger Sub shall have obtained all consents and approvals
necessary to consummate the transactions contemplated by this Agreement,
including without limitation those set forth on Schedule 2.02, in order that the
transactions contemplated herein not constitute a breach or violation of, or
result in a right of termination or acceleration of, or creation of any
encumbrance on any of the Buyer's or Merger Sub's assets pursuant to the
provisions of, any agreement, arrangement or undertaking of or affecting the
Buyer or any license, franchise or permit of or affecting the Buyer.

(c) There shall be available exemptions from the registration requirements of
the Securities Act and all applicable blue sky laws for the offer and issuance
of the Merger Shares pursuant to the Merger. The Buyer and Merger Sub shall have
obtained all authorizations, approvals and other actions by, and have made all
filings with, any securities regulatory authority from whom any such
authorization, approval or other action is required to be obtained or to be made
in connection with the transactions contemplated herein, and all such
authorizations, approvals and other actions are in full force and effect and all
such filings have been accepted and the Buyer and Merger Sub are in compliance
with, and have not committed any breach of, any securities laws, regulations or
policies of any securities regulatory authority to which the Buyer and Merger
Sub may be subject.

(d) Merger Sub shall have executed the Articles of Merger.

(e) The Buyer shall have furnished to the Company a certificate of the Chief
Executive Officer and the Chief Financial Officer of the Buyer, dated as of the
Effective Date, in which such officers shall certify that, to their best
knowledge, the conditions set forth in Sections 4.03(a) and (b) have been
fulfilled.

(f) The Buyer and Merger Sub shall have furnished to the Company (i) copies of
the text of the resolutions by which the corporate action on the part of the
Buyer and Merger Sub necessary to approve this Agreement and the Articles of
Merger and the transactions contemplated hereby and thereby were taken, (ii) a
copy of the certificate of incorporation of the Buyer and the Articles of
Incorporation of Merger Sub, certified by the Secretary of State of Nevada and
the Secretary of the State of Indiana, respectively, and one or more
certificates from the Secretary of State of Nevada or Secretary of State of the
State of Indiana, as the case may be, and any other jurisdictions, evidencing
the good standing of the Buyer and Merger Sub in such jurisdictions in which it
transacts business, and (iii) a certificate of the corporate secretary of the
Buyer and Merger Sub dated as of the Effective Date certifying to the Company
that copies of the resolution referred to in clause (i) above are true, correct
and complete copies of such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded, and certifying that the
certificates furnished pursuant to clause (ii) above are true, correct and
complete as received from such governmental offices, and attaching and
certifying the Buyer's and Merger Sub's bylaws to be true, correct and complete.

41

--------------------------------------------------------------------------------

(g) All matters which, in the opinion of counsel for the Company, are material
in connection with the transactions contemplated by this Agreement shall be
subject to the favourable opinion of such counsel, and all relevant records and
information shall be supplied to such counsel for that purpose.

(h) No material loss or destruction of or damage to the Buyer shall have
occurred.

(i) The Buyer shall have raised and delivered to the Company on behalf of itself
and/or the Lenders and such Company Creditors who may subscribe directly for
convertible loans of the Company, if any, funding of up to US$2,000,000.

(j) The completion by the Company, and by its professional advisors, of a due
diligence and operations review of both the business and operations of the
Company.

(k) The Buyer shall have obtained all authorizations, approvals and other
actions by, and have made all filings with, any securities regulatory authority
from whom any such authorization, approval or other action is required to be
obtained or to be made in connection with the transactions contemplated herein,
and all such authorizations, approvals and other actions are in full force and
effect and all such filings have been accepted and the Buyer is in compliance
with, and has not committed any breach of, any securities laws, regulations or
policies of any securities regulatory authority to which the Buyer may be
subject.

(l) Share certificates representing all of the Merger Shares issued and
registered in the names of the Shareholders shall be delivered.

(m) Shares For Debt common share certificates representing all of the Shares For
Debt issued to the Company's Creditors shall be delivered.

(n) Private Placement common share certificates representing the conversion of
all of the Private Placement shares issued to Private Placement subscribers
shall be delivered.

(o) A certified copy of the resolutions of the board of directors of the Buyer
accepting the proposed change in board and officers of the Buyer shall be
delivered.

(p) An opinion of counsel to the Buyer, dated as at the Closing Date, and
addressed to the Company, the Shareholders and their counsel, in form and
substance satisfactory to each of the parties and their counsel, acting
reasonably, respecting each of the matters material to the Merger contemplated
herein at Closing.

(q) The Release shall have been executed and delivered by the Buyer.

(r) The Buyer shall have delivered to the Company such documents as may be
requested by the Company.

42

--------------------------------------------------------------------------------

ARTICLE 6
COVENANTS OF THE COMPANY AND THE BUYER

6.01 Covenants of the Company and the Buyer.

During the period commencing on the date hereof and continuing through the
Effective Date or the earlier termination of this Agreement, the Company and
Buyer agree to:

(a) Use all commercially reasonable efforts to comply promptly with all
requirements that applicable Legal Requirements impose upon it with respect to
the transactions contemplated by this Agreement, and shall cooperate promptly
with, and furnish information to, the other party in connection with any such
requirements imposed upon the other party or upon any of its Affiliates in
connection therewith or herewith.

(b) Use its commercially reasonable efforts to obtain (and to cooperate with the
other party in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by the party in
connection with the transactions contemplated by this Agreement.

(c) Use its commercially reasonable efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Sections 4.01, 4.02, and 4.03
of this Agreement.

(d) Promptly advise the other party orally and, within three business days
thereafter, in writing of any change in the Company's business or condition that
has had or may have a Material Adverse Effect on the Company, Buyer, or Merger
Sub, as the case may be; provided, however, that such notification, by itself,
shall not constitute an admission that such change constitutes a Material
Adverse Effect.

(e) Deliver to the other party prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Exhibit, Annex or
Schedule hereto (or supplement thereto) or document furnished pursuant hereto,
promptly upon the discovery of such untrue statement or omission, accompanied by
a written supplement to any Exhibit, Annex or Schedule to this Agreement that
may be affected thereby; provided, however, that the disclosure of such untrue
statement or omission shall not prevent the Buyer or the Company, as
appropriate, from terminating this Agreement pursuant to Section 7.01(b) or (c),
as applicable, at any time within five Business Days of receipt of such
notification in respect of any original untrue or misleading statement which
would give the Buyer or the Company the right not to complete the Merger. If the
Buyer or the Company shall not terminate within such five day period, the Buyer
or the Company shall be deemed to have waived its right to terminate this
Agreement for such breach; provided, however, that such five Business Day period
shall be tolled for up to 20 Business Days during the time a party is
investigating such untrue statement or omission. The Company or the Buyer, as
the case may be, shall cooperate with and provide to the other party all
information reasonably requested by the requesting party to conduct such
investigation.

43

--------------------------------------------------------------------------------

6.02 Expenses.

Each party to this Agreement shall bear its own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby,
including, without limitation, all legal fees and fees of any brokers, finders
or similar agents.

6.03 Publicity; Confidentiality.

Without limiting any other provision of this Agreement, the Buyer and the
Company will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with, and agree on any press
release or public statement with respect to this Agreement and the transactions
contemplated hereby, including the Merger, and will not issue any such press
release or make any such public statement prior to such consultation and
agreement, except as may be required by law.

6.04 Further Assurances.

Subject to the terms and conditions of this Agreement, each of the parties
hereto agrees to use all reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Legal Requirements or otherwise to consummate and
make effective the transactions contemplated by this Agreement. The Company
covenants and agrees to provide to the Buyer such documents and instruments, and
to do such acts and things, as requested by the Buyer in connection with the
filings required to be made by the Buyer with the SEC or any other Governmental
Entity, both before and after the Effective Time of the Merger, in respect of
the Merger.

6.05 Competing Offers; Merger or Liquidation.

(a) From the date hereof through the earlier to occur of the termination of this
Agreement and the Effective Date: (i) the Company shall not, directly or
indirectly, through any officer, director, agent or otherwise (A) encourage,
solicit, respond to any solicitation or inquiry concerning, initiate, engage, or
participate in any discussions or negotiations with any Person (other than the
Buyer) concerning, any merger, consolidation, sale of material assets, tender
offer, recapitalization, purchase or accumulation of Shares, proxy solicitation
or other business combination involving the Company, or any division of the
Company or (B) provide any non-public information concerning the business,
properties or assets of the Company to any Person (other than the Buyer); (ii)
the Company shall notify the Buyer of, and shall disclose to the Buyer the
material details of, any inquiries after the date hereof of the nature described
in the first sentence of this paragraph; and (iii) the Company will not engage
any broker, financial advisor or other consultant on a basis which might provide
such broker, financial advisor or consultant with an incentive to initiate or
encourage proposals or offers from other parties with respect to the Company,
the Company's Shares or the Company's assets or any interest therein.

44

--------------------------------------------------------------------------------

6.06 Notification of Certain Matters.

From the date hereof through the earlier of the Closing or the termination of
this Agreement, (a) the Company shall give prompt notice to the Buyer of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty made by the Company contained
in this Agreement or in any Exhibit, Annex or Schedule hereto to be untrue or
inaccurate in any material respect, or that has or would likely have a Material
Adverse Effect on the Company and including, without limitation, any material
acquisition or disposition of assets, and (ii) any failure of the Company or any
of its Affiliates, or of any of their respective shareholders or
representatives, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it in any material respect under this
Agreement or any Exhibit, Annex or Schedule hereto, and (b) the Buyer shall give
prompt notice to the Company of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any representation or
warranty of the Buyer contained in this Agreement or in any Annex or Schedule
hereto to be untrue or inaccurate in any material respect, and (ii) any failure
of the Buyer, or any of its Affiliates, or of any of its shareholders or
representatives, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it in any material respect under this
Agreement or any Annex or Schedule hereto. The foregoing notwithstanding any
such disclosure by either party shall not be deemed to cure any breach of a
representation, warranty, covenant or agreement or to satisfy any condition. The
Company shall promptly notify the Buyer of the commencement of any Action, or
any development that occurs before the Closing that could reasonably be expected
to have a Material Adverse Effect on the Company. The Buyer shall promptly
notify the Company of the commencement of any Action, or any development that
occurs before the Closing that could reasonably be anticipated in any way to
have a Material Adverse Effect on the Buyer. In no event shall any notice
delivered pursuant to this Section 6.06 by itself, be deemed to constitute an
admission that the any representation or warranty is or will become false or
that a Material Adverse Effect has occurred or will occur.

6.07 Governmental Filings.

Each party will use all reasonable efforts and will cooperate with the other
party in the preparation and filing, as soon as practicable, of all filings,
applications or other documents required under applicable laws, including but
not limited to the United States Exchange Act of 1934, as amended, to consummate
the transactions contemplated by this Agreement. Prior to submitting each
filing, application, registration statement or other document with the
applicable regulatory authority, each party will, to the extent practicable,
provide the

45

--------------------------------------------------------------------------------

other party with a meaningful opportunity to review and comment on each such
application, registration statement or other document to the extent permitted by
applicable law. Each party will use all reasonable efforts and will cooperate
with the other party in taking any other actions necessary to obtain such
regulatory or other approvals and consents at the earliest practicable time,
including participating in any required hearings or proceedings. Subject to the
terms and conditions herein provided, each party will use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.

6.08 Due Diligence; Access to Information; Confidentiality.

(a) Between the date hereof and the Effective Date, the Company shall afford to
the Buyer and its authorized representatives the opportunity to conduct and
complete a due diligence investigation of the Company as described herein. In
light of the foregoing, the Company shall permit the Buyer full access on
reasonable notice and at reasonable hours to its properties and shall disclose
and make available (together with the right to copy) to the Buyer and its
officers, employees, attorneys, accountants and other representatives, all
books, papers and records relating to the assets, stock, properties, operations,
obligations and liabilities of such party and its subsidiaries and including,
without limitation, all books of account (including, without limitation, the
general ledger), tax records, minute books of directors' and stockholders'
meetings, organizational documents, bylaws, contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files
(including, without limitation, legal research memoranda), attorney's audit
response letters, documents relating to assets and title thereto (including
without limitation abstracts, title insurance policies, surveys, environmental
reports, opinions of title and other information relating to the real and
personal property), plans affecting employees, securities transfer records and
stockholder lists, and any books, papers and records relating to other assets or
business activities in which such party may have a reasonable interest, and
otherwise provide such assistance as is reasonably requested in order that each
party may have a full opportunity to make such investigation and evaluation as
it shall reasonably desire to make of the business and affairs of the other
party; provided, however, that the foregoing rights granted to the Buyer shall,
whether or not and regardless of the extent to which the same are exercised, in
no way affect the nature or scope of the representations, warranties and
covenants of the Company set forth herein.

(b) Prior to Closing and if, for any reason, the transactions contemplated by
this Agreement are not consummated, neither the Buyer nor the Company nor any of
their respective officers, employees, attorneys, accountants and other
representatives shall disclose to third parties or otherwise use any
confidential information received from the other party in the course of
investigating, negotiating, and performing the transactions contemplated by this
Agreement; provided, however, that nothing shall be deemed to be confidential
information which:

46

--------------------------------------------------------------------------------

(i) is known to the party receiving the information at the time of disclosure,
unless any individual who knows the information is under an obligation to keep
that information confidential;

(ii) becomes publicly known or available without the disclosure thereof by the
party receiving the information in violation of this Agreement; or

(iii) is received by the party receiving the information from a third party not
under an obligation to keep that information confidential.

This provision shall not prohibit the disclosure of information required to be
made under federal or state securities laws, rules and regulations or by order
of any federal, state or local regulatory agency or as otherwise required to be
disclosed under applicable law. If any disclosure is so required, the party
making such disclosure shall consult with the other party prior to making such
disclosure, and the parties shall use all reasonable efforts, acting in good
faith, to agree upon a text for such disclosure which is satisfactory to both
parties.

6.09 Private Placement.

Each of the Company and the Buyer shall take all necessary action on its part
such that the issuance of the Merger Shares to the Company's stockholders
constitutes a valid "private placement" under the Securities Act. Without
limiting the generality of the foregoing, the Buyer and the Company shall
provide each Company shareholder with a stockholder qualification questionnaire
and such other documents as may be required to comply with applicable law as
provided by Buyer.

6.10 Monthly Financial Statements.

The Company covenants that prior to the Effective Time it will deliver to the
Buyer an unaudited balance sheet and income statement (and such other
statements, including pro forma statements as may be required by Buyer) as of
and for (a) the one-month period ending the last day of each month subsequent to
the date of this Agreement, which financial statements will be delivered within
15 days following the end of each such month, and (b) the three month period
ending on the last day of each fiscal quarter, which quarterly financial
statements will be delivered within 30 days following the end of each such
quarter.

6.11 Business Plan

The Company shall deliver, or cause to be delivered to the Buyer prior to the
Closing Date, an independent assessment report and business plan respecting the
Company's business and assets together with such corporate and asset status
reports and/or opinions respecting the Company's business and assets, as may be
required by either the Buyer or any regulatory authority, prepared, at a
minimum, in accordance with the applicable rules and reporting guidelines of the
appropriate regulatory authorities.

47

--------------------------------------------------------------------------------

6.12 Releases

At Closing, each of the Company and the Buyer will have executed and provided
each other with an acceptable form of final release and indemnification
respecting any and all claims which either of such parties have, or may have
had, against any such other party prior to Closing (the "Release").

ARTICLE 7
CONDUCT OF BUSINESS PENDING CLOSING

During the period commencing on the date hereof and continuing through the
earlier of the Closing Date or the termination of this Agreement, the Company
and Buyer covenant and agree (except as expressly contemplated by this Agreement
or to the extent that the Company or Buyer shall otherwise expressly consent in
writing) that:

7.01 Ordinary Course.

The Company and Buyer shall conduct its business in, and only in, the Ordinary
Course and shall preserve intact its current business organizations, use its
commercially reasonable to keep available the services of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and going
business value shall be unimpaired at the Closing Date. The Company shall
maintain its properties and assets in good condition and repair.

7.02 Organic Changes.

Except as contemplated by this Agreement, neither the Company nor Buyer shall
(a) amend its articles of incorporation or bylaws (or equivalent documents), (b)
acquire by merging or consolidating with, or agreeing to merge or consolidate
with, or purchase substantially all of the stock or assets of, or otherwise
acquire any business or any corporation, partnership, association or other
business organization or division thereof, (c) enter into any partnership or
joint venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock, (e) sell any shares of its capital
stock or any options, warrants, conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such shares of
capital stock (other than pursuant to the exercise of any right to acquire
Shares existing on the date hereof and disclosed on the Schedules hereto), (f)
liquidate or dissolve or obligate itself to do or (g) take any other action
identified in Section 2.19, as applicable.

7.03 Indebtedness.

Neither the Company nor Buyer shall incur any Indebtedness, sell any debt
securities or lend money to or guarantee the Indebtedness of any Person;
provided, however, that the Company may secure additional bridge financing on
terms approved by the Buyer.

48

--------------------------------------------------------------------------------

7.04 Accounting.

Neither the Company nor Buyer shall make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates theretofore adopted by it. The Company and Buyer
shall maintain their books, records and accounts in accordance with United
States GAAP.

7.05 Compliance with Legal Requirements.

The Company and Buyer shall comply promptly, in all material respects, with all
requirements that applicable law may impose upon it and its operations and with
respect to the transactions contemplated by this Agreement, and shall cooperate
promptly with, and furnish information to, the other party in connection with
any such requirements imposed upon the other party, or upon any of its
affiliates, in connection therewith or herewith.

7.06 Disposition of Assets.

The Company shall not sell, transfer, license, lease or otherwise dispose of, or
suffer or cause the encumbrance by any Lien upon any of, its material properties
or assets, tangible or intangible, or any interest therein, other than the sale
of inventory in the Ordinary Course.

7.07 Compensation.

The Company shall not (a) adopt or amend in any material respect any collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other plan, agreement, trust,
fund or arrangement for the benefit of employees (whether or not legally
binding) other than to comply with any Legal Requirement, or (b) pay, or make
any accrual or arrangement for payment of, any increase in compensation, bonuses
or special compensation of any kind, or any severance or termination pay to, or
enter into any employment (other than an agreement terminable at will) or loan
or loan guarantee agreement with, any current or former officer or director of
the Company.

7.08 Modification or Breach of Agreements; New Agreements.

Except in the Ordinary Course, the Company shall not terminate or modify, or
commit or cause or suffer to be committed any act that will result in a breach
or violation of any material term of, or (with or without notice or passage of
time, or both) constitute a default under or otherwise give any person a basis
for non-performance under, any indenture, mortgage, deed of trust, loan or
credit agreement, or other agreement, instrument, lease, license, arrangement or
understanding, written or oral, disclosed in this Agreement or the Schedules
hereto. The Company shall refrain from becoming a party to any contract or
commitment other than in the Ordinary Course. The Company shall, in all material
respects, meet all of its contractual obligations in accordance with their
respective terms.

49

--------------------------------------------------------------------------------

7.09 Capital Expenditures.

Except for capital expenditures or commitments necessary to maintain its
properties and assets in good condition and repair (the amount of which shall
not exceed US$5,000 in the aggregate) and except for the transactions described
on Schedule 7.09, neither the Company nor Buyer shall purchase or enter into any
contract to purchase any capital assets.

7.10 Maintain Insurance.

The Company shall use its reasonable commercial efforts to maintain all of its
insurance policies in full force and effect (or obtain comparable replacement
policies having terms no less favourable to the Company).

7.11 Discharge.

Neither the Company nor Buyer shall cancel, compromise, release or discharge any
material claim of the Company or Buyer outside the Ordinary Course and without
the consent of the Company or Buyer, as the case may be, upon or against any
Person or waive any right of the Company or Buyer of material value.

7.12 Actions.

Neither the Company nor Buyer shall institute, settle or agree to settle any
Action before any Governmental Entity; provided, however, that the foregoing
shall not prohibit the Company or Buyer from taking any such action where the
Company or Buyer reasonably believes exigent circumstances exist which require
immediate action on the part of the Company or Buyer and of which the Company or
Buyer give prompt notice in writing to the other.

7.13 Permits.

The Company shall use its reasonable commercial efforts to maintain in full
force and effect, and comply in all material respects with, all Permits.

7.14 Tax Assessments and Audits.

The Company and Buyer shall furnish promptly to the other party a copy of all
notices of proposed assessment or similar notices or reports that are received
from any taxing authority and which relate to its operations for periods ending
on or prior to the Closing Date. The Company and Buyer shall promptly inform the
other of, and permit the participation by the other in, any investigation, audit
or other proceeding by a Governmental Entity in connection with any Taxes,
assessment, governmental charge or duty and shall not consent to any settlement
or final determination in any proceeding without the prior written consent of
the other.

50

--------------------------------------------------------------------------------

7.15 Board Observation Rights.

The Company shall permit a representative of the Buyer (the "Observer") to
attend all meetings of the Company's Board of Directors (the "Board") and all
committees thereof (whether in person, telephonic or other) in a non-voting,
observer capacity and shall provide to the Buyer, concurrently with the members
of the Board, and in the same manner, notice of such meetings and a copy of all
materials provided to such members. The Observer shall have the right to offer
and provide input to, and communicate with, the Board in writing, orally, or
otherwise. Notwithstanding the foregoing, the Company shall have the right to
(a) exclude the Observer from those portions of Board meetings wherein this
Agreement and the Merger or confidential proprietary information is discussed,
and (b) not distribute materials to the Observer regarding this Agreement and
the Merger or that contain confidential proprietary information. The Observer
shall hold in trust and confidence and shall not use or disclose any
confidential information provided to or learned by it in connection with its
rights under this Section 6.15. The Observer shall execute a confidentiality
agreement in form and substance satisfactory to the Company and its counsel.

7.16 Existing Asset Purchase Agreements

The notwithstanding anything in this Agreement to the contrary, the Company may
exercise its rights and remedies and continue performing its obligations under
the agreements described in Schedule 7.16.

ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER

8.01 Termination.

This Agreement may be terminated at any time prior to the Closing:

(a) by mutual consent of the Buyer, Merger Sub and the Company;

(b) by the Company, on the one hand, or by the Buyer and the Merger Sub, on the
other hand, by written notice to the other party or parties hereto if the Merger
shall not have been consummated on or before the date which is 90 days after the
date hereof (or such later date as the Buyer and the Company may agree in
writing), provided that in the case of a termination under this clause, the
party terminating this Agreement shall not then be in material breach of any of
its obligations under this Agreement;

(c) by the Buyer and Merger Sub if: (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by the Company under
this Agreement and such breach shall not have been cured, if susceptible to
cure, within 20 Business Days of receipt by the Company of written notice of
such breach; (ii) any of the conditions precedent to Closing set forth in
Section 4.01 or 4.02 have not been met by the Company on the Closing Date, and,
in each case, the Buyer is not then in material default of its obligations
hereunder; or (iii) the Company or its officers, directors, employees or
representatives have materially breached or violated the restrictions of Article
7; or

51

--------------------------------------------------------------------------------

(d) by the Company if: (i) there has been a material misrepresentation, breach
of warranty or breach of covenant by the Buyer or Merger Sub under this
Agreement and such breach shall not have been cured, if susceptible to cure,
within 20 Business Days of receipt by the Buyer of written notice of such
breach; or (ii) any of the conditions precedent to Closing set forth in
Section 4.01 or 4.03 have not been met on the Closing Date, and, in each case,
the Company is not then in material default of its obligations hereunder.

8.02 Effect of Termination.

In the event of termination of this Agreement as provided in Section 7.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the Buyer, Merger Sub or the Company or their
respective officers, directors, stockholders or affiliates, except to the extent
that such termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided
that, notwithstanding the above, (i) the provisions of Section 5.03, this
Section 7.02 and Section 7.03 shall remain in full force and effect and survive
any termination of this Agreement.

8.03 Expenses and Termination Fees.

(a) Subject to the terms of this Section 7.03, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, the
fees and expenses of its advisers, accountants and legal counsel) shall be paid
by the party incurring such expense.

(b) If the Buyer terminates this Agreement pursuant to Section 7.01(c), the
Company shall promptly pay to the Buyer a cash fee equal to US$10,000 by wire
transfer of immediately available funds to an account designated in writing by
the Buyer.

(c) If the Company terminates this Agreement pursuant to Section 7.01(d), the
Buyer shall promptly pay to the Company a cash fee equal to US$10,000 by wire
transfer of immediately available funds to an account designated in writing by
the Company.

(d) The Company and the Buyer acknowledge that the agreements contained in this
Section 7.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Company and the Buyer would
not enter into this Agreement. The Company and the Buyer further agree that if
the Company or the Buyer, as the case may be, fails to pay the fees required
hereunder, and, in order to obtain such payment, the Company or the Buyer
commences a suit against the other that results in a judgment against the
Company or the Buyer, as the case may be, for such fees, the Company or the
Buyer, as the case may be, shall pay to the other interest on such required fees
from and including the date payment of the applicable fees ware originally due
to (but excluding) the date of actual payment, at the prime rate of Bank of
America, National Association in effect on the date such fee payment was
originally required to be made.

52

--------------------------------------------------------------------------------

ARTICLE 9
SURVIVAL, INDEMNIFICATION AND ARBITRATION

9.01 Survival.

The representations and warranties of the parties hereto contained in this
Agreement or in any writing delivered pursuant hereto or at the Closing shall
survive the execution and delivery of this Agreement and the Closing and the
consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the date which is 18
months after the Closing Date (the "Survival Period"). Notwithstanding the
foregoing, (a) any obligation in respect of a claim for indemnity as a result of
a breach of any representation or warranty of any party that is asserted in
writing with reasonable specificity as to the nature and, if then determinable,
amount of the claim prior to the end of the Survival Period shall survive past
such date until finally resolved or settled, and (b) any obligation in respect
of a claim for indemnity as a result of a breach of a representation or warranty
arising or resulting from fraud or intentional misrepresentation shall survive
until the expiration of the applicable statute of limitations (except for claims
in respect thereof pending at such time, which shall survive until finally
resolved or settled).

9.02 Indemnification of the Company and the Buyer.

(a) The Buyer and Merger Sub shall defend, indemnify and hold the Company, its
Affiliates, and their respective directors, officers, employees and agents
harmless from and against all liability, demands, Damages, including expenses
(including reasonable attorneys fees) or losses including death, personal
injury, illness or property damage (collectively, "Losses") arising directly or
indirectly out of any breach of this Agreement by the Buyer, its Affiliates, or
permitted assigns or transferees; other than liability resulting from the
Company's gross negligence, recklessness or wilful misconduct (which liability
shall be the Company's for all purposes).

(b) The Company shall defend, indemnify and hold the Buyer, Merger Sub. their
Affiliates and their respective directors, officers, employees and agents
harmless from and against all Losses arising directly or indirectly out of any
breach of this Agreement by the Company, its Affiliates, or permitted assigns or
transferees; other than liabilities resulting from the Buyer's gross negligence,
recklessness or wilful misconduct (which liability shall be the Buyer's for all
purposes).

9.03 Indemnification Procedure.

(a) The indemnified party shall give the indemnifying party prompt written
notice of any Losses or discovery of fact upon which such indemnified party
intends to base a request for indemnification under Section 8.02, but in no
event shall the indemnifying party be liable to the extent such Losses result
from any delay in providing such notice. Each claim notice must contain a
description of the claim and the nature and amount of such Loss (to the extent
that the nature and amount of such Loss is known at such time). The indemnified
party shall furnish promptly to the indemnifying party copies of all papers and
official documents received in respect of any Losses. All indemnification claims
in respect of a party, its Affiliates or their respective directors, officers,
employees and agents shall be made solely by such party to this Agreement.

53

--------------------------------------------------------------------------------

(b) The obligations of an indemnifying party under this Article 8 with respect
to Losses arising from claims of any third party that are subject to
indemnification as provided for in Section 8.02 (a "Third-Party Claim") shall be
governed by and be contingent upon the following additional terms and
conditions:

(i) at its option, the indemnifying party may assume the defence of any
Third-Party Claim by giving written notice to the indemnified party within 30
days after the indemnifying party's receipt of a claim notice as described in
paragraph (a) above. The assumption of the defence of a Third-Party Claim by the
indemnifying party shall not be construed as an acknowledgment that the
indemnifying party is liable to indemnify any indemnified party in respect of
the Third-Party Claim, nor shall it constitute a waiver by the indemnifying
party of any defences it may assert against any indemnified party's claim for
indemnification. Upon assuming the defence of a Third-Party Claim, the
indemnifying party may appoint as lead counsel in the defence of the Third-Party
Claim any legal counsel selected by the indemnifying party and approved by the
indemnified party which approval shall not be unreasonably withheld. In the
event the indemnifying party assumes the defence of a Third-Party Claim, the
indemnified party shall immediately deliver to the indemnifying party all
original notices and documents (including court papers) received by any
indemnified party in connection with the Third-Party Claim. Should the
indemnifying party assume the defence of a Third-Party Claim, the indemnifying
party shall not be liable to the indemnified party or any other indemnified
party for any legal expenses subsequently incurred by such indemnified party in
connection with the analysis, defence or settlement of the Third-Party Claim.
The foregoing sentence notwithstanding, in the event that it is ultimately
determined that the indemnifying party is not obligated to indemnify, defend or
hold harmless an indemnified party from and against the Third-Party Claim, the
indemnified party shall reimburse the indemnifying party for any and all costs
and expenses (including attorneys' fees and costs of suit) and any Losses
incurred by the indemnifying party in its defence of the Third-Party Claim with
respect to such indemnified party;

(ii) without limiting Section 8.03(b)(i), an indemnified party shall be entitled
to participate in, but not control, the defence of such Third-Party Claim and to
employ counsel of its choice for such purpose; provided, however, that such
employment shall be at the indemnified party's own expense unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, or (ii) the indemnifying party has failed to assume the defence and
employ counsel in accordance with Section 8.03(b)(i) (in which case the
indemnified party shall control the defence);

54

--------------------------------------------------------------------------------

(iii) with respect to any Losses relating solely to the payment of money damages
in connection with a Third-Party Claim and that will not result in the
indemnified party's becoming subject to injunctive or other relief or otherwise
adversely affect the business of the indemnified party in any manner, and as to
which the indemnifying party shall have acknowledged in writing the obligation
to indemnify the indemnified party hereunder, the indemnifying party shall have
the sole right to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Loss, on such terms as the indemnifying
party, in its sole discretion, shall deem appropriate. With respect to all other
Losses in connection with Third-Party Claims, where the indemnifying party has
assumed the defence of the Third-Party Claim in accordance with
Section 8.03(b)(i), the indemnifying party shall have authority to consent to
the entry of any judgment, enter into any settlement or otherwise dispose of
such Loss provided it obtains the prior written consent of the indemnified party
(which consent shall not be unreasonably withheld or delayed). The indemnifying
party shall not be liable for any settlement or other disposition of a Loss by
an indemnified party that is reached without the written consent of the
indemnifying party. Regardless of whether the indemnifying party chooses to
defend or prosecute any Third-Party Claim, no indemnified party shall admit any
liability with respect to, or settle, compromise or discharge, any Third-Party
Claim without the prior written consent of the indemnifying party;

(iv) regardless of whether the indemnifying party chooses to defend or prosecute
any Third-Party Claim, the indemnified party shall, and shall cause each other
indemnified party to, cooperate in the defence or prosecution thereof and shall
furnish such records, information and testimony, provide such witnesses and
attend such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection therewith. Such cooperation shall
include access during normal business hours afforded to indemnifying party to,
and reasonable retention by the indemnified party of, records and information
that are reasonably relevant to such Third-Party Claim, and making indemnified
parties and other employees and agents available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder, and the indemnifying party shall reimburse the indemnified party for
all its reasonable out-of-pocket expenses in connection therewith; and

(v) except as provided above, the costs and expenses, including fees and
disbursements of counsel, incurred by the indemnified party in connection with
any claim shall be reimbursed on a calendar quarter basis by the indemnifying
party, without prejudice to the indemnifying party's right to contest the
indemnified party's right to indemnification and subject to refund in the event
the indemnifying party is ultimately held not to be obligated to indemnify the
indemnified party.

55

--------------------------------------------------------------------------------

9.04 Arbitration.

(a) Any controversy, claim or dispute involving the parties (or their
Affiliates) directly or indirectly concerning this Agreement or the subject
matter hereof, including any issues and matters arising under the federal and
state securities laws and questions concerning the scope and applicability of
this Section 8.04 shall be finally settled by arbitration held in Carmel,
Indiana or Indianapolis, Indiana, in accordance with the rules of commercial
arbitration then followed by the American Arbitration Association or any
successor to the functions thereof. The arbitrator shall have the right and
authority to determine how his decision or determination as to each issue or
matter in dispute may be implemented or enforced. Any decision or award of the
arbitrator shall be final and conclusive on the parties to this Agreement and
their respective affiliates, and there shall be no appeal therefrom other than
from gross negligence or wilful misconduct.

(b) The parties hereto agree that any action to compel arbitration pursuant to
this Agreement may be brought in any Indiana state court situated in Hamilton
County or Marion County or in the United States District Court for the Southern
District of Indiana and in connection with such action to compel the laws of the
State of Indiana shall control. Application may also be made to such court for
confirmation of any decision or award of the arbitrator, for an order of the
enforcement and for any other remedies which may be necessary to effectuate such
decision or award. The parties hereto hereby consent to the jurisdiction of the
arbitrator and the exclusive jurisdiction of such court and waive any objection
to the jurisdiction of such arbitrator and court.

(c) Notwithstanding the foregoing in this Section 8.04, however, nothing
contained herein shall require arbitration of any issue arising under this
Agreement for which injunctive relief is successfully sought by any party
hereto.

ARTICLE 10
GENERAL PROVISIONS

10.01 Notices.

All notices and other communications under or in connection with this Agreement
shall be in writing and shall be deemed given (a) if delivered personally, upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three Business Days after
being mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy (or, if such confirmation does not occur during normal business hours
on a Business Day then on the next Business Day), in each case to the parties at
the following addresses (or such other address as such Parties may specify in
writing in a notice delivered in accordance with this Section 9.01):

56

--------------------------------------------------------------------------------

(a) If to the Buyer or Merger Sub, addressed to:

Omnicity Corp.
1110 Nelson Street, Suite 306,
Vancouver, British Columbia, Canada, V6B 2S2
Telecopy: 1-604-646-1571
Attention: Donald M. Prest.

With copies to:

Lang Michener LLP, Patent & Trade Mark Agents
Barristers and Solicitors
1500 Royal Centre, 1055 West Georgia Street, P.O. Box 11117
Vancouver, British Columbia, Canada, V6E 4N7
Telecopy: (604) 691-7445
Attention: Thomas J. Deutsch.

(b) If to the Company, addressed to:

Omnicity, Inc.
720 N. Rangeline Road, Carmel, Indiana, U.S.A., 46032
Telecopy: 1-866-567-3897
Attention: Richard Beltzhoover, CEO

With a copy to:
Dann Pecar Newman & Kleiman, P.C.
One American Square, Suite 2300
Indianapolis, Indiana 46282
Telecopy: 317-632-2962
Attention: Jeffrey Kosc.

10.02 Severability.

If any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable such term or provision in any other
jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.

57

--------------------------------------------------------------------------------

10.03 Entire Agreement.

This Agreement, including the Exhibits, Annexes and Schedules attached hereto
and other documents referred to herein, contain the entire understanding of the
parties hereto in respect of their subject matter and supersede all prior and
contemporaneous agreements and understandings, oral and written, among the
parties with respect to such subject matter.

10.04 Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and their respective successors, heirs and assigns; provided,
however, that no party may assign either this Agreement or any of its rights,
interests or obligations hereunder in whole or in part without the prior written
consent of the other parties hereto and any such transfer or assignment without
said consent shall be void, ab initio. Subject to the immediately preceding
sentence, this Agreement is not intended to benefit, and shall not run to the
benefit of or be enforceable by, any other person or entity other than the
parties hereto and their permitted successors and assigns.

10.05 Amendment.

This Agreement may be amended only by a written instrument executed by each of
the parties hereto. Any amendment effected pursuant to this Section 9.05 shall
be binding upon all parties hereto and their respective successors and assigns.

10.06 Waiver.

Any term or provision of this Agreement may be waived in writing at any time by
the party or parties entitled to the benefits thereof. No failure to exercise
and no delay in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude the exercise of any other right, power or privilege. No
waiver of any breach of any covenant or agreement hereunder shall be deemed a
waiver of any preceding or subsequent breach of the same or any other covenant
or agreement. The rights and remedies of each party under this Agreement are in
addition to all other rights and remedies, at law or in equity, that such party
may have against the other parties.

10.07 Counterparts.

This Agreement may be one or more counterparts, each of which shall be deemed an
original, but all such counterparts together shall constitute but one and the
same Agreement.

10.08 Schedules and Annexes.

The Exhibits, Annexes and Schedules to this Agreement are incorporated herein
and, by this reference, made a part hereof as if fully set forth at length
herein.

58

--------------------------------------------------------------------------------

10.09 Construction.

(a) The article, section and subsection headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

(b) As used in this Agreement, the masculine, feminine or neuter gender, and the
singular or plural, shall be deemed to include the others whenever and wherever
the context so requires.

10.11 Governing Law.

This Agreement shall be governed by and construed in accordance with the
internal laws (and not the law of conflicts) of the State of Indiana.

[Signature pages follows]

59

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have duly executed, or have caused this
Agreement to be duly executed on their behalf, as of the day and year first
above written.

OMNICITY CORP.,

a Nevada corporation

By: /s/ Donald M. Prest
Name: Donald M. Prest
Title: President and CEO

OMNICITY ACQUISITION CO.,
an Indiana corporation

By: /s/ Donald M. Prest
Name: Donald M. Prest
Title: President and CEO

OMNICITY, INCORPORATED,
an Indiana corporation

By: /s/ Richard Beltzhoover
Name: Richard Beltzhoover
Title: Chief Executive Officer

60

--------------------------------------------------------------------------------

EXHIBIT A

COMPANY VOTING AGREEMENT

 

__________

--------------------------------------------------------------------------------

EXHIBIT B

LOAN AGREEMENT

 

__________

--------------------------------------------------------------------------------

EXHIBIT C

DEBT CONVERSION AGREEMENT

 

__________

--------------------------------------------------------------------------------

EXHIBIT D

LETTER OF TRANSMITTAL

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.01(a)

JURISDICTIONS OF INCORPORATION

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.02

MATERIAL AGREEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.03

CAPITALIZATION

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.04(a)

BALANCE SHEET AND FINANCIAL STATEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.05(b)

LEINS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.05(c)

TANGIBLE PERSONAL PROPERTY

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.05(d)

TITLE TO PROPERTY

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.05(d)

LEASES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.06

ACCOUNTS RECEIVABLE

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.07(b)

INTELLECTUAL PROPERTY

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.07(c)

LIENED INTELLECTUAL PROPERTY

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.07(d)

LICENSES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.07(h)

EMPLOYEE IP AGREEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.08(a)

BANKING INFORMATION

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.08(b)

INSURANCE POLICIES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.09(a)

INDEBTEDNESS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.09(b)

GUARANTIES OF INDEBTEDNESS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.10

JUDGMENTS; LITIGATION

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.11

INCOME AND OTHER TAXES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.13(a)

EMPLOYEE BENEFIT PLANS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.14

UNDISCLOSED LIABILITIES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.15

PERMITS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(a)

MATERIAL SALES CONTRACTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(b)

PURCHASE ORDERS AND COMMITMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(c)

SALES CONTRACTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(d)

NON-COMPETITION AGREEMENTS AND COVENANTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(e)

OTHER MATERIAL CONTRACTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.18(f)

CONTRACTS IN POTENTIAL DEFAULT

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.19

CHANGES NOT IN THE ORDINARY COURSE

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.20(a)

EMPLOYEE INFORMATION

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.20(b)

LABOUR AGREEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.21

AFFILIATIONS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.22(a)

PRINCIPAL CUSTOMERS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.22(b)

PRINCIPAL SUPPLIERS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.23

WARRANTY LIABILITY

 

__________

--------------------------------------------------------------------------------

SCHEDULE 3.24

BROKER FEES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.05

BROKER FEES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.12

MATERIAL AGREEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.13

BUYER FINANCIAL STATEMENTS

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.14

BANKING AND INSURANCE

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.15

INDEBTEDNESS AND GUARANTEES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.15(b)

BUYER GUARANTEES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 4.16

TAXES

 

__________

--------------------------------------------------------------------------------

 

SCHEDULE 4.17

LIABILITIES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 7.09

CAPITAL EXPENDITURES

 

__________

--------------------------------------------------------------------------------

SCHEDULE 7.16

ASSET PURCHASE AGREEMENTS

 

__________

--------------------------------------------------------------------------------