PREFERRED STOCK PURCHASE AGREEMENT
 
This PREFERRED STOCK PURCHASE AGREEMENT, dated as of June 7, 2011 (this
“Agreement”), is entered into by and between Premier Power Renewable Energy,
Inc., a Delaware corporation (the “Company”) and Genalta Power Inc., a British
Columbia corporation (the “Purchaser”).
 
RECITALS
 
A.       The Company designs, develops, markets, sells, and installs, solar
energy systems (the “Business”).
 
B.       The Company desires to sell, and Purchaser desires to purchase, Two
Million Three Hundred and Fifty Thousand (2,350,000) shares of Series C
Preferred Stock, of the Company (the “Preferred Shares”) on the terms and
conditions set forth in this Agreement.
 
AGREEMENT
 
NOW, THEREFORE, for and in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
 
ARTICLE 1
DEFINITIONS
 
1.1       Definitions.  As used in this Agreement and the Exhibits and
Disclosure Schedule delivered pursuant to this Agreement, the following
definitions will apply:
 
  “Action” shall mean any action, claim, complaint, petition, investigation,
suit or other proceeding, whether administrative, civil or criminal, in Law or
in equity, or before any arbitrator or Governmental Authority.
 
“Affiliate” shall mean (a) an “affiliate” as defined under Rule 12b-2 of the
Securities Exchange Act of 1934, as amended, (b) a Person who directly or
indirectly controls, is controlled by or is under common control with the Person
specified and (c) any Person owning directly or indirectly at least Five Percent
(5%) of the outstanding equity interests of any other Person.  All Related
Persons shall be deemed Affiliates of one another.
 
“Agreement” shall have the meaning given to such term in the preamble.
 
“Applicable Law or Laws” shall mean all applicable provisions of all (a)
constitutions, treaties, statutes, Laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Authority, (b)
Consents of any Governmental Authority and (c) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any Governmental Authority.
 
 “Board” shall mean the board of directors of the Company.

 
 

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“Business” shall have the meaning given to such term in the Recitals.
 
“Business Day” shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
 
 “Certificate of Designation” has the meaning given to it in Section 2.2.
 
“Closing” or “Closing Date” shall have the meaning given to such term in Section
2.1.
 
“Code” shall mean the Internal Revenue Code of 1986, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
 
“Common Shares” shall mean the shares of Common Stock of the Company.
 
“Company” shall have the meaning given to such term in the preamble.
 
“Confidential Information” shall mean all proprietary or confidential property,
information or knowledge of, about or created by the Company and the Business
including without limitation: (a) all records concerning Products or services
provided to customers; (b) all information containing pricing policies, the
prices charged to customers, the volume or orders of customers and other
information concerning transactions with customers; (c) customer lists; (d)
financial information, forecasts, budgets, marketing information, research and
development, expansion plans, management policies and methods of operation; (e)
information concerning salaries or wages paid to, the work records of and other
personnel information relative to employees; (f) confidential information of
other Persons; (g) technical data specifications, programs, documentation and
analyses; (h) all Intellectual Property (whether owned or licensed), including
all source code and trade secrets within any such Intellectual Property; and (i)
trade secrets.
 
“Consent” shall mean any consent, approval, authorization, waiver, permit,
grant, franchise, license, exemption or order of, any registration, certificate,
qualification, declaration or filing with, or any notice to, any Person,
including, without limitation, any Governmental Authority.
 
“Disclosure Schedule” shall mean the disclosure schedule attached hereto
qualifying the representations and warranties of the Company contained herein.
 
“Employee Plans” shall have the meaning given to such term in Section 3.10(b).
 
“Environmental Liability” shall mean any and all Liabilities, obligations to
conduct cleanup, expenses, damages, deficiencies, fines, penalties, sanctions
and costs of any kind or nature whatsoever arising out of, relating to or
directly or indirectly associated with, the compliance with any Environmental
Protection Law.

 
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“Environmental Permit” shall mean any License required by or pursuant to any
Environmental Protection Laws.
 
“Environmental Protection Laws” shall mean all Applicable Laws now or hereafter
in effect relating to (i) the protection of the environment (including any
environmental laws relating to the protection of human health); (ii) the
investigation, cleanup and abatement, removal or remedial action, or any other
response to the release of Hazardous Substances to the environment; (iii) any
emission of air pollutants or direct or indirect discharge of pollutants or
waste; (iv) the generation, treatment, storage, disposal, transportation,
processing, handling, use, existence, spill, release, or threatened release, of
any Hazardous Substances; and (v) the manufacture, import, distribution or sale
of any Hazardous Substances, including, without limitation, (a) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), 42 U.S.C. §9601 et seq.; (b) the Resource Conservation and Recovery
Act (“RCRA”), 42 U.S.C. §6901 et seq.; (c) the Hazardous Materials
Transportation Act, 49 U.S.C. §1801 et seq.; (d) the Clean Water Act, 33 U.S.C.
§1251 et seq.; (e) the Clean Air Act, 42 U.S.C. §7401 et seq.; (f) the Toxic
Substances Control Act, 15 U.S.C. §2601 et seq.; and (g) corresponding or
similar state and local Applicable Laws, all as amended, modified or revised.
 
“Equity Incentive Plan” shall mean that certain 2008 Equity Incentive Plan,
approved on December 19, 2008.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
 
“Family Member” shall mean a parent, spouse, any natural or adoptive sibling or
any spouse thereof, and any direct lineal descendant (natural or adoptive) of
any of the foregoing.
 
“Financial Statements” shall have the meaning given to such term in Section 3.8.
 
“Fundamental Documents” shall mean the documents by which any Person (other than
an individual) establishes its legal existence or which govern its internal
affairs.  For example, the “Fundamental Documents” of a corporation would be its
charter and by-laws, the “Fundamental Documents” of a limited liability company
would be its articles or Articles of Incorporation or organization and operating
agreement, if any, and the “Fundamental Documents” of a limited partnership
would be its limited partnership certificate and its limited partnership
agreement, if any.
 
“GAAP” shall mean United States generally accepted accounting principles as in
effect at the time in question.
 
“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any governmental authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.

 
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“Hazardous Substance” shall mean any chemical, compound, pollutant, contaminant,
material or substance now or hereafter regulated under any Environmental
Protection Laws, including, without limitation, any “hazardous substance” or
“pollutant or contaminant,” as those terms are defined in CERCLA, any “hazardous
waste” as such term is defined in RCRA, and any other hazardous or toxic wastes,
substances or materials, the presence, existence or threat of which may at any
time give rise to any Environmental Liability, including, without limitation,
(a) trichloroethylene, tetrachloroethylene, perchloroethylene and other
chlorinated solvents, (b) any petroleum products or fractions thereof,
(c) asbestos in any form, (d) polychlorinated biphenyls, (e) flammables (f)
explosives, (g) urea formaldehyde and (h) radioactive materials and wastes.
 
“Indebtedness” shall mean all (a) obligations for borrowed money, (b) notes,
bonds, debentures, mortgages and similar obligations, (c) capital obligations
and Leases, (d) guaranties and contingent obligations for the debts or
obligations of another Person, (e) obligations to pay the deferred purchase or
acquisition price of property or services (including under conditional sale or
other title retention agreements), (f) accounts payable or other Liabilities not
arising in the Ordinary Course of Business, including accounts payable for
equipment purchases, or accounts payable that are more than sixty (60) calendar
days past their due dates, (g) obligations in respect of letters of credit,
bonds, guaranties, reimbursement agreements and similar instruments, (h)
obligations in respect of futures contracts, forward contracts, swaps, options
or similar arrangements, (i) off balance sheet financing transactions, (j) all
obligations under facilities for the discount or sale of Receivables and (k) all
obligations that are required to be classified as long term Liabilities on a
balance sheet under GAAP (in each case whether such obligations are contingent
or otherwise).
 
“Indemnitor” shall mean any Person required to provide indemnification pursuant
to the provisions of Article 7 of this Agreement.
 
“Indemnity Cap” shall have the meaning given to such term in Section 7.4.
 
“Intellectual Property” shall mean any intellectual or intangible property
(whether owned or licensed) including, without limitation, trademarks, trademark
registrations and applications, service marks, trade names, corporate names and
fictitious names, copyrights, copyright registrations, works of authorship,
patents, patent applications, industrial design registrations and applications,
integrated circuit topography applications and registrations, design rights,
inventions, trade secrets, data, technical information, Confidential
Information, designs, plans, specifications, formulas, processes, patterns,
compilations, devices, techniques, mask works, methods, shop rights, know-how,
show-how, and other business or technical confidential or proprietary
information in each case whether or not such rights are patentable,
copyrightable, or registrable, software and computer hardware programs and
systems, source code, object code, know-how, show-how, processes, formula,
specifications and designs, databases, and documentation relating to the
foregoing; all domain names and internet addresses, and content with respect to
internet websites including such content in its electronic form and other
proprietary information owned, controlled, created, under development or used by
or on behalf of any Person in whole or in part and whether or not registrable or
registered, and any registrations or applications for the foregoing.

 
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“Investor Rights Agreement” shall have the meaning given to such term in Section
5.2(g).
 
“IRS” shall have the meaning given to such term in Section 3.10(c).
 
“Lacey Investment” means the proposed equity investment in the Purchaser by
Peter Lacey totaling approximately Cdn.$2,300,000, and scheduled to be completed
on or around June 10, 2011.
 
“Law” shall mean all laws of any nation or political subdivision thereof,
including, without limitation, federal, state, provincial, local, or foreign
statutes, regulations, ordinances, orders, decrees, or any other laws, common
law theories, or reported decisions of any state, provincial, federal or other
court or tribunal.
 
“Leased Real Property” shall have the meaning given to such term in
Section 3.14.
 
“Leases” shall mean all leases, subleases, or other occupancy agreements,
licenses, and lease agreements for equipment, machinery, furnishings, vehicles
or tools, together with all amendments, supplements and non-disturbance
agreements pertaining thereto, under which the Company subleases, licenses,
occupies or uses any real or personal property.
 
“Liabilities” shall mean liabilities, obligations or commitments of any nature,
whether fixed, absolute, contingent or otherwise and whether liquidated, matured
or unmatured, known or unknown and regardless of whether such liability,
obligation or commitment is immediately due and payable.
 
“License” shall mean any license, permit, franchise, authorization, right,
privilege, variance, exemption, order or approval issued or granted by any
Governmental Authority.
 
“Lien” shall mean any lien, pledge, mortgage, claim, covenant, restriction,
security interest, charge, title defect, transfer restriction, easement, rights
of first refusal, preemptive right or other restriction or encumbrance of any
kind.
 
“Losses” shall have the meaning given to such term in Section 7.2.
 
“Material Adverse Effect” shall mean a material adverse effect on, or any event,
fact, circumstance, condition or change that, individually or in the aggregate,
is reasonably likely to have a material adverse effect on (a) the Properties,
business, operations or condition (financial or otherwise) of the Company or the
Business, (b) the validity or enforceability of this Agreement and/or any or all
of the Related Documents, or (c) the right or ability of the Company to
consummate the transactions contemplated hereby and/or thereby.
 
“Material Contracts” shall mean those contracts or agreements which are material
to the business and operations of the Company.

 
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“Ordinary Course of Business” shall mean in the ordinary course of the Business,
as conducted by the Company prior to the Closing Date, consistent with the
Company’s past custom and practice.
 
“OSHA Laws” shall mean the Occupational Safety and Health Act, 29 U.S.C. §651 et
seq., each state law corresponding thereto and all Applicable Laws, now or
hereafter in effect relating thereto.
 
 “Person” shall mean any corporation, partnership, limited liability company,
trust, individual, unincorporated organization or a governmental agency or
political subdivision thereof, as the context may require.
 
“Preferred Shares” shall have the meaning given to such term in the Recitals.
 
“Products” shall mean any and all products or services designed, fabricated,
manufactured, distributed, performed, provided or sold in connection with the
operation of the Business.
 
“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible of the Company.
 
“Purchase” shall have the meaning given to such term in Section 2.2.
 
“Purchase Price” shall have the meaning given to such term in Section 2.2.
 
“Purchaser” shall have the meaning given to such term in the preamble.
 
“Purchaser Indemnitee” shall have the meaning given to such term in Section 7.2.
 
“Real Property” shall mean any Leased Real Property and any other real property
currently or formerly owned, operated, leased or occupied by the Company (or any
predecessors thereof).
 
“Receivables” shall mean all notes, deposits and accounts receivable in favor of
the Company and all notes, bonds and other evidence of Indebtedness of and
rights to receive payments from any Person in favor of the Company.
 
“Related Documents” shall mean the Certificate of Determination, the Investor
Rights Agreement and all other agreements and documents contemplated hereunder
or thereunder, and any and all amendments or modifications thereto.
 
“Related Person” shall mean any Person in which a specified Person owns any
material economic interest, and any other Affiliate or Family Member of such
specified Person.

 
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 “SEC Reports” shall mean all forms, reports, statements, schedules, exhibits,
and certifications filed by the Company with the U.S. Securities and Exchange
Commission under the Securities Act or the Securities Exchange Act of 1934, as
amended.
 
“Securities” shall mean, with respect to any Person, such Person’s “securities”
as defined in Section 2(1) of the Securities Act and shall include such Person’s
capital stock, membership interests, partnership interests or other equity
interests or any options, warrants or other securities or rights that are
directly or indirectly convertible into, or exercisable or exchangeable for,
such Person’s capital stock, membership interests, partnership interests or
other equity interests.
 
“Securities Act” shall mean the Securities Act of 1933, as amended.
 
 “Survival Period” shall have the meaning given to such term in Section 7.1.
 
“Tax” and “Taxes” shall mean all taxes, charges, fees, levies, imposts, customs
duties or other assessments imposed by and required to be paid to any
Governmental Authority including any federal, state, municipal, local or foreign
taxing authority, including, without limitation, income, excise, real and
personal property, sales, transfer, import, export, ad valorem, payroll, use,
goods and services, value added, capital, capital gains, alternative, net worth,
profits, withholding, employer health and franchise taxes (including any
interest, penalties, fines or additions attributable to or imposed on or with
respect to any such assessment) and any similar charges in the nature of a tax
including, unemployment and employment insurance payments and workers
compensation premiums, together with any installments with respect thereto and
any estimated payments or estimated taxes and whether disputed or not.
 
“Tax Return” shall mean any return, report, information return, registration
form or other document (including any related or supporting information) related
to the obligations of any Person filed or required to be filed with any
Governmental Authority in connection with the determination of any Tax or the
administration of any Laws, regulations or administrative requirements relating
to any Tax.
 
“Third Party Claim” shall have the meaning given to such term in Section 7.6.
 
1.2       Interpretation.
 
(a)       When a reference is made in this Agreement to Articles or Sections,
such reference shall be to an Article or a Section of this Agreement unless
otherwise indicated.  Whenever the words “include,” “includes,” or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation”, whether or not so stated.  Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular.
 
(b)       The titles, captions and headings of the Articles and Sections herein,
and the use of a particular gender, are for convenience of reference only and
are not intended to be a part of or to affect or restrict the meaning or
interpretation of this Agreement.

 
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(c)       The Exhibits and Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
 
ARTICLE 2
THE CLOSING
 
2.1       The Closing.  The consummation of the transactions contemplated
hereby, including the execution of the Related Documents and the purchase and
sale of the Preferred Shares hereunder (the “Closing”) shall be held remotely
through the electronic exchange of signatures and documents, on or before June
24, 2011, or (a) on such later date on which all of the conditions precedent set
forth in Article 5 shall have been satisfied or waived in writing, or (b) at
such other time and place, including remotely, as the Company and the Purchaser
may otherwise mutually agree (the date of the Closing is hereinafter referred to
as the “Closing Date”).
 
2.2       Purchase and Sale of Preferred Shares.
 
(a)       Purchase Price.  At the Closing, the Company shall sell and issue to
the Purchaser the Preferred Shares and the Purchaser shall purchase and acquire
such Preferred Shares from the Company, free and clear of all Liens, in exchange
for a payment to the Company of One United States Dollar (US$1.00) per share of
Series C Preferred Stock, for an aggregate purchase price of Two Million Three
Hundred and Fifty Thousand United States Dollars (US$2,350,000) (the “Purchase
Price”).
 
(b)       Delivery of Preferred Shares.  The Company shall deliver a certificate
or certificates to the Purchaser, registered in the name of the Purchaser or its
nominee, representing the Preferred Shares, duly endorsed or with such
instruments of transfer necessary to transfer to the Purchaser all right, title
and interest in and to the Preferred Shares, against payment an amount equal to
the Purchase Price by wire transfer of immediately available funds to an account
designated by the Company.  The purchase by the Purchaser of the Preferred
Shares may be referred to herein as the “Purchase.”  The Preferred Shares shall
have the rights, privileges and preferences as set forth in the Certificate of
Designation (the “Certificate of Designation”) in the form attached to this
Agreement as Exhibit A.
 
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
 
Except as disclosed in any SEC Reports and, as set forth on the Disclosure
Schedule­(with the Schedule references below designated in the Disclosure
Schedule) concurrently delivered to the Purchaser herewith attached hereto,
which Disclosure Schedule may be amended by the Company and delivered to the
Purchaser up to and including the Closing Date, as of the date of this Agreement
and as of the Closing Date, the Company hereby makes the following
representations and warranties:

 
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3.1       Organization; Good Standing; Qualification.  The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority and has all Licenses and
other governmental authorizations necessary to (a) enter into this Agreement and
each of the Related Documents to which it is a party, (b) perform all of its
obligations hereunder and thereunder and (c) own, operate and lease its Property
and carry on the Business as now conducted and as proposed to be conducted.  The
Company is duly qualified or duly licensed to transact business and is in good
standing (including in good tax standing) in each jurisdiction set forth on
Schedule 3.1, which are all of the jurisdictions in which (a) the nature of the
Business conducted by the Company or (b) the ownership or leasing of any
Property by the Company makes such qualification necessary.  True and complete
copies of the Fundamental Documents of the Company have been delivered or made
available (either through the SEC Reports or otherwise) to the
Purchaser.  Schedule 3.1 sets forth the officers and directors of the Company.
 
3.2       Subsidiaries.  The Company does not own, directly or indirectly any
stock, partnership interest, membership interest, joint venture interest,
ownership interest or other security, investment or interest in any corporation,
partnership, limited liability company, joint venture, organization or other
entity.
 
3.3       Power and Authority; Indebtedness.  The Company has all requisite
corporate power and authority to own and operate its Properties and to carry on
the Business as presently conducted, to execute and deliver this Agreement and
the Related Documents to be executed by the Company and to carry out and perform
its obligations under the terms of this Agreement and the Related Documents.
 
3.4       Capitalization and Voting Rights of the Company; Title to the
Preferred Shares.
 
(a)       The capitalization of the Company is set forth on Schedule
3.4(a).  Immediately following the Closing, the Purchaser shall have valid and
marketable title to the Preferred Shares, free and clear of all Liens.  The
Preferred Shares have the rights, preferences, privileges and restrictions set
forth in the Certificate of Designation.
 
(b)       All of the Securities of the Company that will be issued and
outstanding as of the Closing Date have been duly and validly authorized and
issued, and fully paid and non-assessable.
 
(c)       Except as set forth on Schedule 3.4(c) or as contemplated by this
Agreement or the Related Documents, there are no (i) outstanding subscriptions,
preemptive rights, warrants, calls or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, Securities of the Company; (ii) Liens,
rights of first refusal, rights of first offer, proxies, voting trusts or voting
agreements with respect to the sale, issuance or voting of any Securities of the
Company (whether outstanding or issuable upon the conversion, exchange or
exercise of outstanding Securities); or (iii) obligations to redeem, repurchase
or otherwise acquire shares of capital stock or other Securities of the Company;
in each of clause (i), (ii) and (iii) above, pursuant to any Law, any
Fundamental Document of the Company or any Material Contract to which the
Company is a party or may be bound or is otherwise aware.

 
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(d)       All Securities issued by the Company have been issued in transactions
exempt from registration under the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or “blue sky” laws;
the sale and transfer of the Preferred Shares hereunder is exempt from
registration under the Securities Act and the rules and regulations promulgated
thereunder and all applicable state securities or “blue sky” laws; and the
Company has not violated the Securities Act or any applicable state securities
or “blue sky” laws in connection with any issuance, sale and or transfer of the
Preferred Shares.
 
3.5       Title to Assets.
 
(a)       The Company has good and marketable title to, or valid leasehold
interests in, all of its Properties, free and clear of Liens, except for such
nonmaterial Properties as are no longer used or useful in the conduct of its
businesses and except for minor defects in title, easements, restrictive
covenants and similar encumbrances that individually or in the aggregate could
not reasonably be expected to materially affect the ability of the Company to
use such Property in the conduct of the Business as presently conducted or as
currently proposed to be conducted.
 
(b)       The Properties and rights owned by the Company and its Subsidiaries
(including the Material Contracts to which the Company or a Subsidiary is a
party), comprise all the Properties and rights utilized by the Company in the
operation of the Business as presently conducted and as currently proposed to be
conducted, and are sufficient to permit the Company to operate the Business as
presently conducted and as currently proposed to be conducted.
 
3.6       Authorization; Execution and Delivery; No Conflicts.
 
(a)       The execution, delivery and performance of this Agreement and the
Related Documents by the Company and the consummation of all transactions
contemplated hereby or thereby, including but not limited to the sale of the
Preferred Shares, have been duly authorized by all required actions, corporate
or otherwise, of the Company.  This Agreement and the Related Documents have
been duly executed and delivered by the Company, as applicable.  This Agreement
and the Related Documents constitute valid and binding obligations of the
Company enforceable against it, in accordance with their respective terms.
 
(b)       The execution and delivery by the Company, as the case may be, of this
Agreement and the Related Documents, and the consummation of the transactions
contemplated hereby and thereby, including but not limited to the sale of the
Preferred Shares pursuant to this Agreement and the Related Documents, do not
and will not (with or without due notice, lapse of time, or both), (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any Lien upon the
Property of the Company or the Preferred Shares pursuant to, (iv) give any third
party the right to accelerate any obligation under, or (v) result in a violation
of, pursuant to (x) the Fundamental Documents of the Company, (y) any Law to
which the Company, or any of its Properties, is subject, or (z) any agreement or
instrument to which the Company is a party or any of their respective properties
is subject.

 
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3.7       Consents.  Except as set forth on Schedule 3.7, no Consent is required
to be obtained by the Company in connection with the execution, delivery or
performance by the Company of this Agreement and the Related Documents to which
it is a party or the consummation by the Company of the transactions
contemplated hereby or thereby (including, without limitation, in connection
with the sale of the Preferred Shares).  Specifically, except as set forth on
Schedule 3.7, no Consent of any other Person is required to be made or obtained
to permit the Company to conduct the lawful operation of the Business following
the Closing in substantially the same manner as the Business is currently
conducted.
 
3.8       Financial Statements.  The Company has provided Purchaser with access
to the audited consolidated balance sheets and income and cash flow statements
for the fiscal years ended December 31, 2009, and December 31, 2010
(collectively, the “Financial Statements”).  The Financial Statements (A) have
been prepared from the books and records kept by the Company, in conformity with
GAAP consistently applied with prior periods, and (B) are complete and correct
and fairly present the financial condition and results of operations of the
Company, as of the dates and for the periods indicated therein.  The books of
account, financial data, schedules and other records of the Company, including
any of the foregoing delivered or made available (either through the SEC Reports
or otherwise) to the Purchaser or its representatives or Affiliates in
connection with the transactions contemplated hereby, have been maintained
properly and regularly in accordance with sound business practices and in the
course of business of the Company, are accurate and complete and there are no
material misstatements, mistakes or omissions therein, and there have been no
transactions involving the Company that properly should have been reflected
therein in accordance with GAAP that have not been accurately and completely
reflected therein.
 
3.9       Absence of Certain Changes or Events.  Except as set forth on Schedule
3.9, since December 31, 2010, the Company has conducted the Business only in the
Ordinary Course of Business and there has been no Material Adverse
Effect.  Without limiting the foregoing, since December 31, 2010, except in the
Ordinary Course of Business, the Company has not:
 
(a)       entered into any transaction related to the Business;
 
(b)       amended, modified, supplemented, rescinded or terminated (and not
renewed) any existing Material Contract and no such Material Contract has
expired or terminated (and not been renewed) by its terms;
 
(c)       sold, transferred, disposed of, or agreed to sell, transfer or dispose
of, any Properties, Intellectual Property or rights related to the Business;
 
(d)       acquired any Property related to the Business, nor acquired or merged
with any other business related to the Business;
 
(e)       incurred or created, or permitted to be incurred or created, or
suffered to exist, any Lien on any of the Property of the Company;

 
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(f)       experienced any destruction, damage or other loss (whether or not
covered by insurance) of any Properties used in or necessary to the conduct of
the Business;
 
(g)       increased the level of benefits under any Employee Plan, the salary or
other compensation (including severance) payable or to become payable to any
Affiliate of the Company, or to any employee or obligated itself to pay any
bonus or other additional salary or compensation to any such Person, Affiliate
or employee other than as set forth on Schedule 3.9;
 
(h)       made any change related to the Business in any pricing, marketing,
purchasing, allowance or Tax or accounting practice, policy or method or any
method of calculating any bad debt, contingency or other reserve for accounting,
financial reporting or Tax purposes or made any Tax election or settled or
compromised any income Tax Liability with any Governmental Authority;
 
(i)       waived or amended any material right relating to the conduct of the
Business;
 
(j)       except as set forth on Schedule 3.9, made any capital expenditure (or
series of related capital expenditures) that is in excess of Twenty-Five
Thousand Dollars ($25,000);
 
(k)       declared any dividends, or authorized or made any distribution on its
Securities;
 
(l)       incurred any Indebtedness, other than as set forth on Schedule 3.9;
 
(m)       made any loans or advances to any Person or entity in excess of
Twenty-Five Thousand Dollars ($25,000);
 
(n)       issued any equity securities or any options, warrants or other rights
to purchase its equity securities, nor has the Company approved or adopted any
equity option or Equity Incentive Plan;
 
(o)       made any alteration or change in the Company’s credit guidelines or
policies, charge-off policies or accounting methods;
 
(p)       accelerated the collection of any Receivable or any indebtedness or
other material obligation owed to the Company before it is due or otherwise
owed; or
 
(q)       taken or agreed to take any action described in this Section 3.9.

 
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3.10       Employees; Employee Benefits.
 
(a)       The Company has no collective bargaining agreements with any of its
employees.  There is no labor union organizing activity pending or, to the
knowledge of the Company, threatened with respect to the Company.  The Company
is in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and the
Company has not engaged in any unfair labor practices.  There is no unfair labor
practice, charge, complaint, decision or any other matter against or involving
the Company pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any Governmental Authority.  There are no
charges, investigations, administrative proceedings or formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, national origin, religion, sexual preference, disability or handicap, or
veteran status) pending or, to the knowledge of the Company, threatened before
the Equal Employment Opportunity Commission or any other Governmental Authority
against the Company.  No Employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, consulting agreement, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the Business and the
continued employment by the Company of the Employees, and the performance of the
Company’s contracts with its independent contractors, will not result in any
such violation.  The Company has not received any written notice alleging that
any such violation has occurred or will occur.
 
(b)       Except as disclosed on Schedule 3.10, the Company does not sponsor or
maintain, nor has any obligation to contribute to or any liability, actual or
contingent, with respect to any “employee benefit plan,” as defined in
Section 3(3) of ERISA, or any other bonus, pension, stock option, stock
purchase, stock appreciation right, Equity Incentive Plan, welfare, profit
sharing, retirement, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation, compensation, fringe benefit or
other employee benefit plan, fund, trust, program, agreement or arrangement,
whether written or oral (the “Employee Plans”).
 
(c)       The Company has delivered, or provided access, to the Purchaser a true
and complete copy of the following documents, to the extent that they are
applicable:  (i) each Employee Plan and any related funding agreements (such as
trust agreements or insurance contracts), including all amendments, and, in the
case of any unwritten Employee Plan, a written summary thereof; (ii) the current
summary plan description and all subsequent summaries of material modifications
of each Employee Plan; (iii) the most recent determination letter from the
Internal Revenue Service (“IRS”) for each Employee Plan that is intended to
qualify for favorable income Tax treatment under Section 401(a) or 501(c)(9) of
the Code, which determination letter reflects all amendments that have been made
to the Employee Plan; and (iv) the two (2) most recent Form 5500s (including all
applicable schedules and the opinions of the independent accountants) that were
filed on behalf of the Employee Plan.

 
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(d)       All contributions and premium payments required to have been paid
under or with respect to any Employee Plan have been timely paid.
 
(e)       No event has occurred and no condition exists with respect to any
Employee Plan which could subject any Employee Plan, the Company, or any of
their respective trustees, fiduciaries, employees, agents, directors or officers
directly or indirectly (through an indemnification agreement or otherwise) to
any liability for a breach of fiduciary duty, a “prohibited transaction,” within
the meaning of Section 406 of ERISA or Section 4975 of the Code, or a Tax,
penalty or fine under Section 502 or 4071 of ERISA or Subtitle D, Chapter 43 of
the Code.
 
(f)       There are no Actions or audits (other than routine claims for benefits
in the Ordinary Course of Business) which are pending, or to the knowledge of
the Company, threatened, with respect to any Employee Plan, and there exist no
facts which could give rise to any such Actions.
 
3.11       Litigation; Restriction on Business Activities.
 
(a)       There are no Actions involving the Company pending or, to the
knowledge of the Company, threatened against the Company, or any of their
Properties or rights which could affect (i) the right or ability of the Company
to carry on the Business in substantially the same manner as it is conducted as
of the date of this Agreement, (ii) the right or ability of the Company to
consummate the sale of the Preferred Shares to the Purchaser or otherwise to
perform any of the obligations of the Company under this Agreement or any of the
Related Documents, or (iii) the condition, whether financial or otherwise, or
Properties of the Company, nor is there any reasonable basis for a claim
described in clauses (i), (ii) or (iii) above.  Neither the Company, nor any
Affiliate of the Company are subject to any judgment, order or decree entered in
any lawsuit or proceeding which could affect the Company’s operations or
business practices in connection with the Business, or the ability of the
Company to conduct the Business in substantially the same manner as the Business
is conducted as of the date of this Agreement.
 
(b)       There is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which the Company is a party or that
otherwise could be binding upon the Company or the Business which has or would
reasonably have the effect of prohibiting or impairing the operation of the
Business.  The Company has not entered into any agreement under which the
operations of the Business are restricted from selling, servicing or licensing
to customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market.
 
3.12       Material Contracts and Other Agreements.  The SEC Reports contain
copies of all of the Material Contracts of the Company.  Except as set forth on
Schedule 3.12, with respect to each Material Contract, (i) such Material
Contract is valid, binding and enforceable against the Company and each other
party thereto, and is in full force and effect, (ii) neither the Company nor any
other party to such Material Contract is, in breach thereof or default
thereunder, (iii) there does not exist any event that, with the giving of notice
or the lapse of time or both, would constitute a breach of or a default by the
Company or any other party to such Material Contract under such Material
Contract, and neither the Company nor any Affiliate thereof has received or
given notice of any such breach, default or event, (iv) true, complete and
correct copies of each Material Contract have been delivered or made available
(either through the SEC Reports or otherwise) to the Purchaser or its
representatives, (v) the Company has not waived any rights under any Material
Contract, (vi) no defense to the validity or enforceability of any Material
Contract exists, and (vii) the Company has not received or given notice of any
breach or default in connection with any Material Contract.

 
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3.13       Compliance with Laws; Licenses.
 
(a)       The Company is and at all times has been, and the Company has no
liability under, any Laws, including, without limitation, any applicable
franchise, building, zoning, employment, labor relations or other statute, Law,
ordinance or regulation, except where the failure to comply with any Laws would
not have a Material Adverse Effect.  No consent of any Governmental Authority is
required to be obtained and no registration or declaration is required to be
filed in connection with the execution and delivery of this Agreement, the sale
of the Preferred Shares by the Company, except such as has been duly and validly
obtained or filed, or with respect to any state or federal securities law
filings to be made by the Purchaser or the Company after the Closing.
 
(b)       The Company holds all Licenses necessary to conduct the Business as it
is now being conducted and as is proposed to be conducted, except where the
failure to hold any such License would not have a Material Adverse Effect.  The
Company possesses all such Licenses.  Neither the Company, nor any Affiliate
thereof has received any written notice to the effect that, or otherwise been
advised that, the Company is not in compliance with, or that it is in violation
of, any such License.
 
3.14       Leased Real Properties; No Owned Real Property.  Schedule 3.14
contains a complete and correct list of all real property Leases and Licenses
pursuant to which the Company is a lessor, lessee, sublessor, sublessee,
licensor or licensee of real property, setting forth the address, landlord and
tenant for each (the “Leased Real Property”).  The Company has delivered, or
made available (either through SEC Reports or otherwise), to the Purchaser
correct and complete copies of each of the agreements set forth in
Schedule 3.14, including all amendments thereto and all non-disturbance
agreements in connection therewith.  Each Lease and License set forth in
Schedule 3.14 is legal, valid, binding, enforceable and in full force and
effect.  No party is in default, violation or breach under any such Lease or
License and no event has occurred and is continuing thereunder that constitutes
or, with notice or the passage of time or both, would constitute a default,
violation or breach thereunder.  The Company has good and valid title to the
leasehold estate under each Lease and License or other agreement set forth in
Schedule 3.14, free and clear of all Liens.  All of the improvements situated in
whole or in part at any Leased Real Property are in good operating condition, in
a state of good maintenance and repair and are adequate and suitable for the
purposes of which they are presently being used.  The Company does not own any
real property or any interest in real property, other than the interests in the
Leased Real Property.
 
3.15       Taxes.  Except as set forth on Schedule 3.15, all Tax Returns of the
Company relating to the Business that are required by applicable Law to be filed
by the Company have been duly filed on a timely basis and all amounts set forth
thereon have been paid in full.  All such Tax Returns are correct and
complete.  All Taxes that are due and payable by the Company with respect to the
operations of the Business have been paid in full or adequate reserves therefor
have been established, and all deposits required by applicable law to be made
with respect to any such Taxes have been duly made.  The Properties of the
Company are and will be as of the Closing Date, free and clear of any Liens
arising out of any unpaid Taxes and there are no grounds for the assertion or
assessment of any Liens against the Properties of the Company in respect of any
Taxes (other than Liens for Taxes if payment thereof is not yet required, and
which are included as a current Tax liability on the Financial Statement, if
such Taxes accrued before or as of the date thereof).  The transactions
contemplated by this Agreement will not give rise to the assertion of any
additional Taxes against the Company.

 
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3.16       Environmental and Safety Laws.  Except as disclosed on Schedule 3.16:
 
(a)       The Company is, and at all times has been, in compliance with all, and
has or will have, as applicable, no liability under any, Environmental
Protection Laws or OSHA Laws, except where the failure to comply would not have
a Material Adverse Effect.
 
(b)       The Company has obtained all Environmental Permits that are required
in connection with the conduct of the Business, all of which are sufficient in
scope for the conduct of the Business as currently conducted, and are valid,
subsisting and in full force and effect.  The Company is in compliance with all
terms and conditions of such Environmental Permits, and no Action which could
reasonably be expected to result in the revocation or suspension or limitation
of any such Environmental Permits is pending or, to the knowledge of the
Company, threatened, and the Company has not engaged in any conduct which could
reasonably be expected to cause the revocation or suspension or limitation of
any such Environmental Permits.
 
3.17       Related Party Transactions.  Except as set forth on Schedule 3.17,
there are no agreements, understandings or proposed transactions between the
Company and or any of its employees, officers, directors, Affiliates or any
Affiliate thereof.  Schedule 3.17 sets forth (a) a correct and complete list or
description of all obligations of the Company to the Company’s Affiliates,
employees, officers or directors or to any Family Member thereof and of all
indebtedness of such Persons to the Company; and (b) a list of all dividends,
distributions, share repurchases, and redemptions made by the Company from and
after December 31, 2010.  Neither the Company, nor any of the Affiliate,
employee, officer or director of the Company, is indebted to the Company or has
any direct or indirect ownership interest in any entity with which the Company
is affiliated or with which the Company has a business relationship, or any
entity which competes with the Company.  Neither the Company, nor any Affiliate,
employee, officer or director of the Company is, directly or indirectly,
interested in any contract or agreement to which the Company is a party (other
than such contracts as relate to any such Person’s ownership of Securities of
the Company).
 
3.18       Brokers; Certain Expenses.  Except as set forth on Schedule 3.18, the
Company has not paid or become obligated to pay any fee or commission to any
broker, finder, investment banker or other intermediary in connection with this
Agreement or any of the Related Documents for which the Purchaser will be
responsible.
 
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
The Purchaser represents to the Company as follows:
 
4.1       Organization and Existence; Authorization; No Conflicts.
 
(a)       The Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.  The Purchaser has all
requisite power and authority to execute and deliver this Agreement and the
Related Documents to which it is a party, to purchase the Preferred Shares
hereunder, and to carry out and perform its obligations under the terms of this
Agreement and the Related Documents to which it is a party.

 
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(b)       The execution, delivery and performance of this Agreement and the
Related Documents by the Purchaser and the consummation of all transactions
contemplated hereby or thereby, including but not limited to the purchase of the
Preferred Shares, have been duly authorized by all required actions of the
Purchaser.
 
(c)       This Agreement and the Related Documents have been duly executed and
delivered by the Purchaser.  This Agreement and the Related Documents constitute
valid and binding obligations of the Purchaser enforceable against the Purchaser
in accordance with their respective terms.
 
4.2       Investment.  The Purchaser is acquiring the Preferred Shares for
investment for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof in violation of
Applicable Laws.  The Purchaser understands that the Preferred Shares to be
purchased have not been registered or qualified, as the case may be, under the
Securities Act or any applicable state securities laws by reason of a specific
exemption from the registration or qualification provisions of the Securities
Act or any applicable state securities laws.  Upon completion of the Lacey
Investment, the Purchaser will be an "accredited investor" as defined in SEC
Regulation D, and as defined in the equivalent Canadian laws, rules, and
regulations applicable to this transaction.
 
4.3       Brokers or Finders.   The Purchaser has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the Purchaser,
any liability for brokerage or finders’ fees or agents’ commissions or any
similar charges in connection with this Agreement for which the Company will be
responsible.
 
ARTICLE 5
CONDITIONS TO THE CLOSINGS
 
The obligations of the parties to this Agreement are subject to the following
conditions:
 
5.1       Conditions to the Obligations of the Parties at the Closing.  The
obligations of the parties to consummate the transactions contemplated hereby
shall be subject to the condition that (a) no injunction or order shall have
been issued by any court of competent jurisdiction or any other Governmental
Authority that would restrain or prohibit any of the transactions contemplated
by this Agreement or any of the Related Documents or that would impose damages
as a result thereof, and (b) no Action shall be pending before any court or
administrative agency or instrumentality of competent jurisdiction in which any
Person seeks such a remedy.
 
5.2       Conditions to the Obligations of the Purchaser at the Closing.  The
obligations of the Purchaser to purchase the Preferred Shares at the Closing as
contemplated hereby shall be subject to the fulfillment or satisfaction (or
waiver in writing by the Purchaser) at or prior to the Closing of each of the
following conditions:

 
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(a)       Representations; Performance by the Company.  Each of the
representations and warranties made by the Company in this Agreement and in each
Related Document shall be true and correct, in all material respects, as of the
Closing with the same force and effect as if made on such date, and the Company
shall have performed and satisfied its obligations required or contemplated by
this Agreement and the Related Documents to be performed and satisfied by it
prior to the Closing.
 
(b)       No Material Adverse Effect.  Since December 31, 2010, there has been
no Material Adverse Effect.
 
(c)       Authorizations.  All authorizations of the Company in connection with
this Agreement and the Related Documents and the transactions contemplated
hereby and thereby shall have been taken and shall be reasonably satisfactory in
form and substance to the Purchaser.
 
(d)       Filing of Certificate of Designation.  The Certificate of Designation
has been filed with the Secretary of State of the State of Delaware and shall
continue to be in full force and effect as of the Closing Date.
 
(e)       Closing Deliverables.  The Company shall have delivered, or caused to
be delivered, to the Purchaser on the Closing Date the following all in form and
substance satisfactory to the Purchaser:
 
(i)       an original certificate evidencing the Preferred Shares;
 
(ii)       a secretary’s certificate of the Company duly executed by the
Secretary, with incumbency, certifying as to the following matters:  (A) the
Certificate of Designation, (B) the bylaws, and (C) the authorizing resolutions
of the Board and the shareholders approving the transactions contemplated by
this Agreement; and
 
(iii)       a certificate of the Company, executed by the Chief Executive
Officer of the Company, dated the Closing Date, and certifying as to the
fulfillment of the conditions specified in Sections 5.2(a), 5.2(b) and 5.2(c) of
this Agreement.
 
(f)       Due Diligence.  The Purchaser shall have conducted a due diligence
investigation of the Company and shall be satisfied with the results thereof in
its absolute discretion.  The Purchaser’s performance of this due diligence
shall not limit, modify, or restrict the representations and warranties of the
Company as set forth in this Agreement or any Related Documents.
 
(g)       Investor Rights Agreement.  The Purchaser and the Company shall have
executed the investor rights agreement, attached hereto as Exhibit B (the
“Investor Rights Agreement”), by and between the Company and the Purchaser, in
form and substance satisfactory to the Company and Purchaser.
 
       (h)       Lacey Investment.   The Lacey Investment shall have been
completed and the funds underlying the Lacey Investment shall have been received
by the Purchaser.

 
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5.3       Conditions to the Obligations of the Company at the Closing.  The
obligations of the Company to sell the Preferred Shares at the Closing as
contemplated hereby shall be subject to the fulfillment or satisfaction (or
waiver in writing by the Company) at or prior to the Closing of each of the
following conditions:
 
(a)       Representations; Performance of the Purchaser.  Each of the
representations and warranties made by the Purchaser in this Agreement shall be
true and correct as of the Closing and the Purchaser shall have performed and
satisfied its obligations required or contemplated by this Agreement and in each
Related Document to be performed as of the Closing.
 
(b)       Authorizations.  All authorizations of the Purchaser in connection
with this Agreement and the Related Documents and the transactions contemplated
hereby and thereby including, but not limited to the waiver and consent of
Vision Opportunity Master Fund, Ltd., shall have been obtained and shall be
reasonably satisfactory in form and substance to the Company.
 
(c)       Purchase Price.  The Purchase Price shall have been paid, as provided
in Section 2.2(a).
 
ARTICLE 6
COVENANTS AND AGREEMENTS
 
6.1       Post-Closing Covenants.
 
(a)       Cooperation.  Each party shall cooperate with the other parties and
use its reasonable best efforts to consummate the transactions contemplated by
this Agreement and the Related Documents in accordance with the terms hereof and
thereof.
 
(b)       Publicity.  At any time on or after the Closing Date, no party (nor
any of its Affiliates) shall, directly or indirectly, make any press release or
other public announcement with respect to the transactions contemplated hereby
or under the Related Documents without the prior written consent of the other
party.  Notwithstanding the foregoing, the Company shall have the right to file
all applicable SEC Reports related to, or referencing, the transaction
contemplated herein without having to obtain the consent of Purchaser.
 
ARTICLE 7
INDEMNIFICATION
 
7.1       Survival of Representations and Warranties.  The representations and
warranties made by the Company in this Agreement shall survive the Closing and
shall continue in effect for a period of twelve (12) months (the "Survival
Period") following the Closing Date.  Notwithstanding the foregoing, the
obligations of the Company to indemnify any Purchaser Indemnitee for Losses
arising out of or resulting from any fraud or intentional misrepresentation
shall survive indefinitely.

 
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7.2       Indemnification by the Company.  Subject to the terms and provisions
of Section 7.1, the Company (“Indemnitor”) agrees to indemnify and hold harmless
the Purchaser, and its officers, directors, managers, members, partners, agents,
Affiliates, and representatives (each a “Purchaser Indemnitee”) from and
against, and shall reimburse each Purchaser Indemnitee for, any and all direct
or indirect claims, suits, actions, proceedings, Liabilities, obligations,
judgments, fines, penalties, claims, losses, damages, diminution in value, lost
profits, costs and expenses of any kind (including, without limitation, the
reasonable fees and disbursements of counsel, accountants and other experts
whether incurred in connection with any of the foregoing or in connection with
any investigative, administrative or adjudicative proceeding, whether or not
such Purchaser Indemnitee shall be designated a party thereto), together with
any and all reasonable costs and expenses associated with the investigation of
the same and/or the enforcement of the provisions hereof and thereof
(collectively, “Losses”), which may be incurred by such Purchaser Indemnitee
relating to, based upon, resulting from or arising out of:
 
(a)       the breach of any representation or warranty made by the Company in
this Agreement or in any Related Document as of the date hereof and as of the
Closing Date;
 
(b)       the breach of any agreement, covenant or obligation of the Company
contained in this Agreement or in any Related Document;
 
(c)       any Liability incurred by the Company to pay any fee or commission to
any broker, finder, investment banker or other intermediary in connection with
the transactions contemplated by this Agreement for which the Purchaser becomes
liable;
 
(d)       any misrepresentation contained in any certificate or other document
furnished by or on behalf of the Company pursuant to this Agreement or in any
Related Document or in connection with the transactions contemplated hereby or
thereby or any other Losses arising out of or resulting from any fraud or
intentional or willful misrepresentation; or
 
(e)       the operation of the Business on or prior to the Closing Date,
including any suit, action or other proceeding against the Company brought by or
on behalf of (i) any current or former (as of the Closing Date) employee,
officer, director, agent, consultant or independent contractor of the Company
with respect to any act or omission by the Company prior to the Closing or (ii) 
any Person as a result of a purported breach of contract or tort committed by
the Company prior to the Closing.
 
7.3       Conditions to and Limitations on Indemnification.  No party to this
Agreement shall be entitled to indemnification pursuant to this Article 7 for
breaches of representations and warranties made hereunder unless a claim is
submitted in writing by a Purchaser Indemnitee within the period specified in
Section 7.1 of this Agreement.
 
7.4       Indemnity Cap.  Notwithstanding anything in this Agreement to the
contrary, the aggregate rights of Purchaser Indemnitees to indemnification
payments pursuant to Section 7.2 shall not exceed the Purchase Price (the
“Indemnity Cap”); providedhowever, that the parties agree that the Indemnity Cap
in this Section 7.4 shall not apply  to any claim for Losses arising out of or
relating to any fraud or intentional misrepresentation by the Company.

 
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7.5       Claims for Indemnity; Exclusive Remedy.  Whenever a claim for Losses
shall arise for which a Purchaser Indemnitee shall be entitled to
indemnification hereunder, the Purchaser Indemnitee shall notify the Indemnitor
in writing describing the claim and the basis therefor; provided however, that
the failure to give notice shall not affect the right of the Purchaser
Indemnitee to indemnification hereunder except to the extent (and only to the
extent) that the Indemnitor is materially prejudiced by such failure.  The right
of the Purchaser Indemnitee to indemnification, as set forth in such notice,
shall be deemed agreed to by the Indemnitor unless, within thirty (30) calendar
days after the mailing of such notice, the Indemnitor shall notify the Purchaser
Indemnitee in writing that it disputes the right of the Purchaser Indemnitee to
indemnification.  If the Purchaser Indemnitee shall be duly notified of such
dispute, the parties shall attempt in good faith, for a period of thirty (30)
calendar days, to settle and compromise such dispute.  The rights granted to the
Purchaser Indemnitees in this Article 7 shall constitute the sole and exclusive
remedy of any Purchaser Indemnitee for Losses arising out of, resulting from, or
incurred in connection with any claims related to this Agreement and the other
documents referenced herein or arising from the transactions contemplated
herein.
 
7.6       Defense of Claims by Third Parties.  If any Purchaser Indemnitee shall
receive notice of any third party claim, suit, arbitration or other legal
proceeding giving rise to indemnity under this Agreement (a “Third Party
Claim”), the Purchaser Indemnitee shall give the Indemnitor prompt written
notice of the same; provided, however, that failure to provide such written
notice shall not release the Indemnitor from any of its obligations under this
Article 7, except to the extent (and only to the extent) the Indemnitor is
materially prejudiced by such failure.  If such Third Party Claim seeks only
recovery of a sum of money, the Indemnitor may, but shall not be obligated to,
upon prompt written notice furnished to the Purchaser Indemnitee, assume the
defense of any such claim, suit, arbitration or other proceeding, with counsel
reasonably satisfactory to the Purchaser Indemnitee, if the Indemnitor
acknowledges to the Purchaser Indemnitee in writing its obligations to indemnify
the Purchaser Indemnitee with respect to all elements of such claim.  If the
Indemnitor furnishes such written acknowledgment, the Indemnitor will be
entitled to assume and control the defense of such claim, suit, arbitration or
other or proceeding, and the Purchaser Indemnitee shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense.  The notice to the Indemnitor shall specify, if
known, the amount or an estimate of the amount of the liability arising
therefrom.  Neither the Indemnitor nor the Purchaser Indemnitee shall settle or
compromise any claim by a third party without the prior written consent of the
other party (which shall not be unreasonably withheld).  If the Indemnitor does
not assume the defense of any such claim, suit, arbitration or other proceeding
as provided above, (a) the Purchaser Indemnitee may defend against the same, in
such manner as it may deem appropriate and at the Indemnitor’s cost and expense,
including, without limitation, settling such matter; provided that such
settlement shall be subject to the Indemnitor’s prior written consent (which
shall not be unreasonably withheld), and (b) the Indemnitor shall be entitled to
participate in (but not control) the defense of such action, with its own
counsel and at its own expense. Notwithstanding the foregoing, if a Purchaser
Indemnitee determines in good faith that there is a reasonable probability that
a Third-Party Claim may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the Purchaser Indemnitee may, by notice to the Indemnitor,
assume the exclusive right to defend, compromise, or settle such Third-Party
Claim, but the Indemnitor will not be bound by any compromise or settlement
effected without its consent (which may not be unreasonably withheld).

 
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ARTICLE 8
MISCELLANEOUS
 
8.1       Termination. This Agreement may be terminated by action of the board
of directors of the Company if the Purchaser fails to deliver the Purchase Price
to the Company, as required by Section 5.3(c) hereof, by June 24, 2011.
 
8.2       Successors and Assigns.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided that no such succession, assignment or
delegation of obligations by the Company, on the one hand, or Purchaser, on the
other hand, may occur without the express approval of the other party.  Nothing
in this Agreement, express or implied, is intended to confer upon any party,
other than the parties hereto or their respective successors and assigns, any
rights, remedies, obligations or Liabilities under or by reason of this
Agreement.
 
8.3       Governing Law.  This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to principles
of conflicts of laws.
 
8.4       Jurisdiction; Waiver of Jury Trial.
 
(a)       Any suit, action or proceeding seeking to enforce any provision of, or
based on any dispute or matter arising out of or in connection with, this
Agreement, the Related Documents or the transactions contemplated hereby or
thereby, must be brought in the courts of the State of California, in Placer
County, or the federal courts in the Eastern District of California.  Each of
the parties (a) consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding, (b) irrevocably waives, to the fullest extent permitted by Law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum, (c) will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (d) will
not bring any action relating to this Agreement, the Related Documents or any of
the transactions contemplated hereby or thereby in any other court, and (e) to
the fullest extent permitted by Law, voluntarily, knowingly, irrevocably and
unconditionally waives any right to have a jury participate in the resolution of
any such dispute or matter.  Process in any such suit, action or proceeding may
be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court.  Without limiting the foregoing, each party
agrees that service of process on such party in accordance with the notice
provisions of Section 8.4 below will be deemed effective service of process on
such party.

 
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(b)       If the jury waiver set forth in this Section 8.3 is not enforceable,
then any dispute, controversy or claim arising out of or relating to this
Agreement or any of the transactions contemplated therein shall be settled by
final and binding arbitration held in Placer County, State of California in
accordance with the then applicable Commercial Arbitration Rules of the American
Arbitration Association.  Judgment upon any award resulting from arbitration may
be entered into and enforced by any state or federal court having jurisdiction
thereof.
 
8.5       Counterparts.  This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument.
 
8.6       Notices.  Any notices hereunder shall be deemed sufficiently given by
one (1) party to the other only if in writing and if and when delivered by
personal delivery or as of five (5) Business Days after deposit in the mail in a
sealed envelope, registered or certified, with postage prepaid, twenty-four (24)
hours after deposit with an overnight courier if such day is a Business Day (or
the next Business Day if it is not), addressed as follows (or at such other
address for a party as shall be specified by like notice):
 
If to the Purchaser:
Genalta Power Inc.
.
1000, 407-2 Street S.W
 
(Canada Place Tower)
 
Calgary AB T2P 2Y3 Canada
 
Attention: CEO

 
With a copy to (which shall not
   
constitute notice):
Genalta Power Inc.
   
1000, 407-2 Street S.W.
   
(Canada Place Tower)
   
Calgary AB T2P 2Y3 Canada
   
Attention: Corporate Secretary,

If to the Company:
Premier Power Renewable Energy
 
4961 Windplay Drive, Suite 100
 
El Dorado Hills, CA  95762
 
Attention:  Chief Executive Officer

 

 
With a copy to (which shall not
constitute notice):
Downey Brand, LLP
   
621 Capitol Mall, 18th Floor
   
Sacramento, CA 95814
   
Attention:  Jeffrey M. Koewler, Esq

 
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this Section
8.6.  Any party may unilaterally change any one (1) or more of the addresses to
which a notice to the party or its representative is to be delivered or mailed,
by ten (10) calendar days written notice to the other parties hereto given in
the manner stated above.

 
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8.7       Fees and Expenses.  Each party will pay their respective costs and
expenses, including the costs and expenses of counsel, accountants and other
advisors, incurred by the respective parties relating to the transactions
contemplated hereby and in the Related Documents.
 
8.8       Severability.  If one (1) or more provisions of this Agreement is held
to be unenforceable under Applicable Law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
8.9       Entire Agreement.  This Agreement and the Related Documents and the
Exhibits and Disclosure Schedule attached hereto and thereto constitute the
entire agreement among the parties hereto pertaining to the subject matter
hereof and thereof and supersede all prior agreements, term sheets, letters,
discussions and understandings of the parties in connection therewith.
 
8.10       Assurances.  Each party to this Agreement shall execute all
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement, whether before, concurrent with or after the
consummation of the transactions contemplated hereby.
 
8.11       Amendments and Waivers.  This Agreement may be amended only in
writing with the prior approval of the Company and the Purchaser.  Unless
otherwise provided herein, any waiver hereunder may be granted only with the
prior written approval of the Company and the Purchaser.
 
[The Remainder of this Page is Intentionally Left Blank -- Signature Page
Follows]
 

 
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[Signature Page to Preferred Stock Purchase Agreement]

 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
 
“PURCHASER”
GENALTA POWER INC., a British Columbia corporation
       
 
By:
/s/ Graham Illingworth    
Name:   Graham Illingworth
   
Title:     CEO
            Address:  
Genalta Power, Inc.
     
1000, 407-2 St S.W.
     
(Canada Place Tower)
      Calgary AB T2P 2Y3       Canada     Attention: Chief Executive Officer

 
“COMPANY”
PREMIER POWER RENEWABLE ENERGY, INC.
a Delaware corporation
       
 
By:
/s/ Dean Marks    
Name:   Dean Marks
   
Title:     Chief Executive Officer
            Address:  
4961 Windplay Drive, Suite 100
     
El Dorado Hills, California 95762
    Attention: Chief Executive Officer

 

 

 
S-1

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EXHIBIT A
 
CERTIFICATE OF DESIGNATION
 

 

 

 

 

 

 

 

 

 

 

 

 

 
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PREMIER POWER RENEWABLE ENERGY, INC.
 
CERTIFICATE OF DESIGNATION OF PREFERENCES,
 
RIGHTS AND LIMITATIONS
 
OF
SERIES C CONVERTIBLE PREFERRED STOCK
 
PURSUANT TO SECTION 151 OF THE
 
DELAWARE GENERAL CORPORATION LAW
 
The undersigned, Dean R. Marks and Miguel de Anquin, do hereby certify that:
 
1.        They are the Chairman and Secretary, respectively, of Premier Power
Renewable Energy, Inc., a Delaware corporation (the “Corporation”),
 
2.        The Corporation is authorized to issue 20,000,000 shares of preferred
stock, 5,000,000 of which has been designated and 3,500,000 issued as “Series A
Preferred Stock”, and 2,800,000 of which has been designated and issued as
“Series B Preferred Stock”.
 
3.        The following resolutions were duly adopted by the board of directors
of the Corporation (the “Board of Directors”):
 
WHEREAS, the Certificate of Incorporation, as amended, of the Corporation
provides for a class of its authorized stock known as preferred stock, comprised
of 20,000,000 shares, $0.0001 par value per share, issuable from time to time in
one or more series;
 
WHEREAS, the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms of redemption
and liquidation preferences of any wholly unissued series of preferred stock and
the number of shares constituting any series and the designation thereof, of any
of them; and
 
WHEREAS, it is the desire of the Board of Directors, to fix the rights,
preferences, restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set forth in the
Purchase Agreement, of up to 2,600,000 shares of the preferred stock which the
Corporation has the authority to issue, as follows:
 
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide
for the issuance of a series of preferred stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of preferred
stock as follows:

 
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TERMS OF PREFERRED STOCK
 
Section 1.       Definitions.  Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement.  For the purposes hereof, the following
terms shall have the following meanings:
 
“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“Buy-In” shall have the meaning set forth in Section 6(b)(iii).
 
"Change of Control" means either (a) a sale, lease, or other transfer of all or
substantially all of the assets of the Corporation, (b) a reorganization,
merger, or consolidation of the Corporation with or into another corporation,
limited liability company, partnership, Person or other entity, (c) a
transaction (or series of transactions) in which the common shareholders of the
Corporation prior to such transaction own less than or equal to seventy percent
(70%) of the Common Stock of the Corporation, or of a surviving company, after
completion of the transaction(s), (d) a Change of Control Transaction, or (e) a
Fundamental Transaction.
 
“Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual, legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Corporation, by contract or otherwise) of in excess of fifty
percent (50%) of the voting securities of the Corporation (other than by means
of conversion or exercise of Preferred Stock and the Securities issued together
with the Preferred Stock), or (ii) the Corporation merges into or consolidates
with any other Person, or any Person merges into or consolidates with the
Corporation and, after giving effect to such transaction, the stockholders of
the Corporation immediately prior to such transaction own less than fifty
percent (50%) of the aggregate voting power of the Corporation or the successor
entity of such transaction, or (iii) the Corporation sells or transfers all or
substantially all of its assets to another Person and the stockholders of the
Corporation immediately prior to such transaction own less than fifty percent
(50%) of the aggregate voting power of the acquiring entity immediately after
the transaction, or (iv) a replacement at one time or within a one year period
of more than one-half of the members of the Corporation’s board of directors
which is not approved by a majority of those individuals who are members of the
board of directors on the date hereof (or by those individuals who are serving
as members of the board of directors on any date whose nomination to the board
of directors was approved by a majority of the members of the board of directors
who are members on the date hereof),  or (v) the execution by the Corporation of
an agreement to which the Corporation is a party or by which it is bound,
providing for any of the events set forth in clauses (i) through (iv) above.
 
“Common Stock” means the Corporation’s common stock, par value $0.0001 per
share, and stock of any other class of securities into which such securities may
hereafter be reclassified or changed into.

 
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“Common Stock Equivalents” means any securities of the Corporation or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
“Conversion Amount” means the sum of the Stated Value at issue.
 
“Conversion Date” shall have the meaning set forth in Section 6(a).
 
“Conversion Price” shall have the meaning set forth in Section 6(b).
 
“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms
hereof.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Fundamental Transaction” shall have the meaning set forth in Section 7(d).
 
“Holder” shall have the meaning given such term in Section 2.
 
“Liquidation” shall have the meaning set forth in Section 5.
 
“Notice of Conversion” shall have the meaning set forth in Section 6(a).
 
“Original Issue Date” means the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares
of Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
 
“Preferred Stock” shall have the meaning set forth in Section 2.
 
“Purchase Agreement” means the Preferred Stock Purchase Agreement, dated as of
the Original Issue Date, to which the Corporation and the original Holders are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Share Delivery Date” shall have the meaning set forth in Section 6(d).
 
“Stated Value” shall have the meaning set forth in Section 2.
 
“Trading Day” means a day on which the principal Trading Market is open for
business.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 
4

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“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
 
Section 2.       Designation, Amount and Par Value.  The series of preferred
stock shall be designated as its Series C Convertible Preferred Stock (the
“Preferred Stock”) and the number of shares so designated shall be up to
2,600,000 (which shall not be subject to increase without the written consent of
all of the holders of the Preferred Stock (each, a “Holder” and collectively,
the “Holders”).  Each share of Preferred Stock shall have a par value of $0.0001
per share and a stated value equal to $1.30 (the “Stated Value”).
 
Section 3.       Dividends.  The Preferred Stock shall participate in any
dividends declared and paid by the Corporation on its Common Stock on an
as-converted basis.  In lieu of the foregoing, if a Change of Control involving
the Corporation has not occurred on or before June ___, 2012, then commencing on
December ___, 2012 (and only going forward from December ___, 2012, and without
any payments due or accruing prior to this date), Company shall pay holders of
Preferred Stock a dividend equal to Twenty Cents ($0.20) per year (the
"Preferred Dividend"), adjusted on a pro-rata basis for any stock splits,
reverse stock splits, stock dividends, or similar adjustments to the number of
Preferred Stock outstanding.  This dividend shall be paid monthly at the rate of
$0.01667 per month per share of Preferred Stock.  This dividend may, at the
option of the Corporation, be paid in Common Stock of the Corporation, with the
stock value of any dividend payment calculated on the basis of a volume weighted
trailing thirty (30) day average of the Common Stock on the applicable Trading
Market.
 
Section 4.       Voting Rights.  Except as otherwise provided herein or as
otherwise required by law, the Preferred Stock shall have no voting
rights.  However, as long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of a majority
of the then outstanding shares of the Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or
alter or amend this Certificate of Designation, (b) authorize or create any
class of stock ranking as to dividends, or distribution of assets upon a
Liquidation (as defined in Section 5) senior to or otherwise pari passu with the
Preferred Stock, (c) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the Holders, (d)
increase the number of authorized shares of Preferred Stock, or (e) enter into
any agreement with respect to any of the foregoing.
 
Section 5.       Liquidation.  Upon any liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary (a “Liquidation”), after
payment of amounts owed to creditors and senior classes of preferred stock, the
Holders shall be entitled to receive, in preference to any holder of Common
Stock, the assets, whether capital or surplus, of the Corporation, legally
available for distribution to its shareholders, up to the Purchase Price plus
any Preferred Dividend, if any, due to the Holder, in a pro rata manner on a
pari passu basis with holders of  Series A Preferred Stock and Series B
Preferred Stock.  A Fundamental Transaction or Change of Control Transaction
shall not be deemed a Liquidation.  The Corporation shall mail written notice of
any such Liquidation, not less than forty-five (45) days prior to the payment
date stated therein, to each Holder.

 
5

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Section 6.       Conversion.
 
a)        Conversions at Option of Holder.  During the period commencing on June
__, 2012, through and including June __, 2016, each share of Preferred Stock
shall be convertible, at the option of the Holder thereof, into that number of
shares of Common Stock that is equal to the quotient obtained by dividing the
Stated Value of such share of Preferred Stock by the Conversion Price.  Holders
shall effect conversions by providing the Corporation with the form of
conversion notice attached hereto as Annex A (a “Notice of Conversion”).  Each
Notice of Conversion shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the conversion
at issue, the number of shares of Preferred Stock owned subsequent to the
conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by
facsimile such Notice of Conversion to the Corporation (such date, the
“Conversion Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
to the Corporation is deemed delivered hereunder.  The calculations and entries
set forth in the Notice of Conversion shall control in the absence of manifest
or mathematical error.  To effect conversions of shares of Preferred Stock, a
Holder shall not be required to surrender the certificate(s) representing such
shares of Preferred Stock to the Corporation unless all of the shares of
Preferred Stock represented thereby are so converted, in which case such Holder
shall deliver the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue.  Shares of Preferred Stock
converted into Common Stock or redeemed in accordance with the terms hereof
shall be canceled and shall not be reissued.  Notwithstanding any conversion in
accordance with the above and in addition to the dividend payment due to the
Holder in accordance with Section 6(b)(i), the Corporation shall remain
obligated to pay to the Holder, and shall pay the Holder on or before the Share
Delivery Date, any earned or accrued interest due pursuant to the Investor
Rights Agreement between the Corporation and Genalta Power Inc. (“Investor
Rights Agreement”) and payments otherwise due to the Holder.  The conversion
price for the Preferred Stock shall equal to $1.00, subject to adjustments as
provided herein (the “Conversion Price”).
 
b)        Mechanics of Conversion
 
i)        Delivery of Certificate Upon Conversion.  Not later than five (5)
Trading Days after each Conversion Date (the “Share Delivery Date”), the
Corporation shall deliver, or cause to be delivered, to the converting Holder
(A) a certificate or certificates representing the number of Conversion Shares
being acquired upon the conversion of shares of Preferred Stock, and (B) a bank
check in the amount of any payments owed to the Holder under the Investor Rights
Agreement or otherwise (including any dividends if the Corporation has elected
or is required to pay accrued dividends in cash).

 
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ii)       Obligation Absolute; Partial Liquidated Damages.  The Corporation’s
obligation to issue and deliver the Conversion Shares upon conversion of
Preferred Stock in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by a Holder to enforce the
same, the recovery of any judgment against any Person or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation of law by
such Holder or any other person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Corporation to such Holder in
connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Corporation of any such
action that the Corporation may have against such Holder.  In the event a Holder
shall elect to convert any or all of the Stated Value of its Preferred Stock,
the Corporation may not refuse conversion based on any claim that such Holder or
any one associated or affiliated with such Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and/or enjoining conversion of all or
part of the Preferred Stock of such Holder shall have been sought and obtained,
and the Corporation posts a surety bond for the benefit of such Holder in the
amount of 150% of the Stated Value of Preferred Stock which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to such Holder to the extent it obtains judgment.  In the absence of
such injunction, the Corporation shall issue Conversion Shares and, if
applicable, cash, upon a properly noticed conversion. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.
 
iii)       Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Conversion.  If the Corporation fails to deliver to a Holder the applicable
certificate or certificates by the Share Delivery Date pursuant to Section
6(b)(i), and if after such Share Delivery Date such Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise), or the
Holder’s brokerage firm purchases, shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which such Holder
was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in
addition to any other remedies available to or elected by such Holder) the
amount by which (x) such Holder’s total purchase price (including any brokerage
commissions) for the shares of Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder was
entitled to receive from the conversion at issue, multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions), and (3) at the option of such
Holder, either reissue (if surrendered) the shares of Preferred Stock equal to
the number of shares of Preferred Stock submitted for conversion or deliver to
such Holder the number of shares of Common Stock that would have been issued if
the Corporation had timely complied with its delivery requirements under Section
6(b)(i).  For example, if a Holder purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the actual sale
price (including any brokerage commissions) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Corporation shall be required to pay such Holder $1,000.  The
Holder shall provide the Corporation written notice indicating the amounts
payable to such Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the shares
of Preferred Stock as required pursuant to the terms hereof.

 
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iv)       Reservation of Shares Issuable Upon Conversion.  The Corporation
covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance
upon conversion of the Preferred Stock and payment of dividends on the Preferred
Stock, each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holders of the Preferred
Stock, not less than such aggregate number of shares of the Common Stock as
shall (subject to the terms and conditions in the Purchase Agreement) be
issuable (taking into account the adjustments of Section 7) upon the conversion
of all outstanding shares of Preferred Stock and payment of dividends
hereunder.  The Corporation covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly authorized, validly issued, fully paid
and non-assessable.
 
v)        Fractional Shares.  No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the Preferred
Stock.  As to any fraction of a share which a Holder would otherwise be entitled
to purchase upon such conversion, the Corporation shall at its election, either
pay a cash adjustment in respect of such final fraction in an amount equal to
such fraction multiplied by the Conversion Price or round up to the next whole
share.
 
vi)       Transfer Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Preferred Stock shall be made without charge to any
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holders of such shares of Preferred
Stock and the Corporation shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
 
Section 7.       Certain Adjustments.
 
a)        Stock Dividends and Stock Splits.  If the Corporation, at any time
while this Preferred Stock is outstanding: (A) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of Common
Stock on shares of Common Stock or any other Common Stock Equivalents (which,
for avoidance of doubt, shall not include any shares of Common Stock issued by
the Corporation upon conversion of, or payment of a dividend on, this Preferred
Stock); (B) subdivides outstanding shares of Common Stock into a larger number
of shares; (C) combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares; or (D) issues, in the
event of a reclassification of shares of the Common Stock, any shares of capital
stock of the Corporation, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding any treasury shares of the Corporation) outstanding immediately
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event.  Any adjustment made
pursuant to this Section 7(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 
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b)        (Intentionally Omitted].
 
c)        Pro Rata Distributions.  The Corporation shall not, at any time while
this Preferred Stock is outstanding, distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security)
without distributing evidences of such indebtedness or assets or rights or
warrants to Holders on an as-converted to Common Stock basis.
 
d)        Fundamental Transaction.  If, at any time while this Preferred Stock
is outstanding, (A) the Corporation effects any merger or consolidation of the
Corporation with or into another Person, (B) the Corporation effects any sale of
all or substantially all of its assets in one transaction or a series of related
transactions, (C) any tender offer or exchange offer (whether by the Corporation
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Corporation effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Preferred Stock in accordance with this Certificate of
Designation, the Holders shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion immediately prior to
the occurrence of such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of Common Stock (the
“Alternate Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holders shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Preferred
Stock following such Fundamental Transaction.  Nothing in this Section 7
(including this subsection (d)) is intended to modify, limit, or restrict, or
should be construed as modifying, limiting, or restricting, any rights of the
Corporation contained in this Certificate of Designation, or in any other
Agreement between the Corporation and the Holder including, but not limited to,
the right of the Corporation to acquire the Preferred Stock pursuant to the
terms of that certain Investor Rights Agreement, dated June ___, 2011, by and
between the Corporation and Genalta Power Inc.
 
e)        Calculations.  All calculations under this Section 7 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.  For
purposes of this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Corporation) issued
and outstanding.

 
9

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f)        Notice to the Holders.
 
i)        Adjustment to Conversion Price.  Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 7, the Corporation shall
promptly deliver to each Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
 
ii)       Notice to Allow Conversion by Holder.  If (A) the Corporation shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Corporation shall declare a special non-recurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall authorize the
granting to all holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights,  (D)
the approval of any stockholders of the Corporation shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of all or
substantially all of the assets of the Corporation, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property, or (E) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Corporation, then,
in each case, the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of this Preferred Stock, and shall
cause to be delivered to each Holder at its last address as it shall appear upon
the stock books of the Corporation, at least ten (10) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) and receive any other payments due pursuant
to the Investor Rights Agreement and any payments otherwise due to the Holder
during the 15-day period commencing on the date of such notice through the
expected effective date of the event triggering such notice.
 
Section 8.       Redemption.
 
a)        Optional Redemption.  On or after June __, 2016, the Corporation, at
its option, may redeem, in whole or in part, at any time and from time to time,
out of funds legally available therefor, the shares of Preferred Stock at the
time outstanding, upon notice given as provided in Section 8(c) below, at a
redemption price equal to the sum of One Dollar ($1.00) per share plus any
payments due pursuant to the Investor Rights Agreement and any payments
otherwise due to the Holder.  This redemption price shall be adjusted on a
pro-rata basis for any stock split, reverse stock split, stock dividends, or
similar adjustments to the number of Preferred Stock outstanding.

 
10

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The redemption price for any shares of Preferred Stock and any payments due
pursuant to the Investor Rights Agreement and any payments otherwise due to the
Holder shall be payable on the redemption date to the holder of such shares
against surrender of the certificate(s) evidencing such shares to the
Corporation or its agent.
 
b)        No Sinking Fund.  The Preferred Stock will not be subject to any
mandatory redemption, sinking fund or other similar provisions.  Holders of
Preferred Stock will have no right to require redemption or repurchase of any
shares of Preferred Stock.
 
c)        Notice of Redemption.  Notice of every redemption of shares of
Preferred Stock shall be given by first class mail, postage prepaid, addressed
to the holders of record of the shares to be redeemed at their respective last
addresses appearing on the books of the Corporation.  Such mailing shall be at
least fifteen (15) days before the date fixed for redemption.  Any notice mailed
as provided in this Section shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice, but failure duly to give
such notice by mail, or any defect in such notice or in the mailing thereof, to
any holder of shares of Preferred Stock designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares of
Preferred Stock.  Notwithstanding the foregoing, if shares of Preferred Stock
are issued in book-entry form through an exchange agent, depository or any other
similar facility, notice of redemption may be given to the holders of Preferred
Stock at such time and in any manner permitted by such facility.  Each notice of
redemption given to a holder shall state: (1) the redemption date; (2) the
number of shares of Preferred Stock to be redeemed and, if less than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price.
 
d)        Partial Redemption.  In case of any redemption of part of the shares
of Preferred Stock at the time outstanding, the shares to be redeemed shall be
selected either pro rata or in such other manner as the Board of Directors or a
duly authorized committee thereof may determine to be fair and
equitable.  Subject to the provisions hereof, the Board of Directors or a duly
authorized committee thereof shall have full power and authority to prescribe
the terms and conditions upon which shares of Preferred Stock shall be redeemed
from time to time.  If fewer than all the shares represented by any certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares without charge to the holder thereof.
 
e)        Effectiveness of Redemption.  If notice of redemption has been duly
given and if on or before the redemption date specified in the notice all funds
necessary for the redemption have been deposited by the Corporation, in trust
for the pro rata benefit of the holders of the shares called for redemption,
with a bank or trust company selected by the Board of Directors, so as to be and
continue to be available solely therefor, then, notwithstanding that any
certificate for any share so called for redemption has not been surrendered for
cancellation, on and after the redemption date dividends shall cease to accrue
on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares
shall forthwith on such redemption date cease and terminate, except only the
right of the holders thereof to receive the amount payable on such redemption
from such bank or trust company, without interest. Any funds unclaimed at the
end of three years from the redemption date shall, to the extent permitted by
law, be released to the Corporation, after which time the holders of the shares
so called for redemption shall look only to the Corporation for payment of the
redemption price of such shares.

 
11

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f)        Status of Redeemed Shares.  Shares of Preferred Stock that are
redeemed, repurchased or otherwise acquired by the Corporation shall revert to
authorized but unissued shares of Preferred Stock.
 
Section 9.       Intentionally Omitted.
 
Section 10.       Miscellaneous.
 
a)        Notices.  Any and all notices or other communications or deliveries to
be provided by the Holders hereunder including, without limitation, any Notice
of Conversion, shall be in writing and delivered personally, or sent by a
nationally recognized overnight courier service, addressed to the Corporation,
at 4961 Windplay Drive, Suite 100 , El Dorado Hills, California, 95762,
Attention: Chief Executive Officer or such other address as the Corporation may
specify for such purposes by notice to the Holders delivered in accordance with
this Section 10.  Any and all notices or other communications or deliveries to
be provided by the Corporation hereunder shall be in writing and delivered
personally, or sent by a nationally recognized overnight courier service
addressed to each Holder at the address of such Holder appearing on the books of
the Corporation, or if no such address appears on the books of the Corporation,
at the principal place of business of the Holders.  Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the second Business Day following the date of mailing, if sent
by nationally recognized overnight courier service, or (ii) upon actual receipt
by the party to whom such notice is required to be given.
 
b)        Absolute Obligation.  Except as expressly provided herein, no
provision of this Certificate of Designation shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to pay
liquidated damages, accrued dividends, if any, and accrued interest, as
applicable, on the shares of Preferred Stock at the time, place, and rate, and
in the coin or currency, herein prescribed.
 
c)        Lost or Mutilated Preferred Stock Certificate.  If a Holder’s
Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the
Corporation shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of’ such loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the Corporation.
 
d)        Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of California, without regard to the principles of conflict of laws
thereof.  All legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
shall be commenced in the state and federal courts sitting in the City of
Sacramento, California (the “California Courts”).

 
12

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e)        Waiver.  Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a waiver by any
other Holders.  The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more
occasions shall not be considered a waiver or deprive that party (or any other
Holder) of the right thereafter to insist upon strict adherence to that term or
any other term of this Certificate of Designation.  Any waiver by the
Corporation or a Holder must be in writing.
 
f)        Severability.  If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances.  If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable law.
 
g)        Next Business Day.  Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
 
h)        Headings.  The headings contained herein are for convenience only, do
not constitute a part of this Certificate of Designation and shall not be deemed
to limit or affect any of the provisions hereof.
 
i)        Status of Converted or Redeemed Preferred Stock.  Shares of Preferred
Stock may only be issued pursuant to the Purchase Agreement.  If any shares of
Preferred Stock shall be converted, redeemed or reacquired by the Corporation,
such shares shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series C Preferred Stock.
 
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and
the secretary or any assistant secretary, of the Corporation be and they hereby
are authorized and directed to prepare and file a Certificate of Designation of
Preferences, Rights and Limitations in accordance with the foregoing resolution
and the provisions of Delaware law.
 
IN WITNESS WHEREOF, the undersigned have executed this Certificate this ___ day
of June, 2011.
 
/s/ Dean R.
Marks                                                                    
 
/s/ Miguel de
Anquin                                                                    
Name: Dean R. Marks
Title:   Chairman and Chief Executive Officer
 
Name: Miguel de Anquin
Title:   Secretary and President

 
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ANNEX A
 
NOTICE OF CONVERSION
 
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
STOCK)
 
The undersigned hereby elects to convert the number of shares of Series C
Convertible Preferred Stock indicated below into shares of common stock, par
value [$________ per share (the “Common Stock”), of Premier Power Renewable
Energy, Inc., a Delaware corporation (the “Corporation”), according to the
conditions hereof, as of the date written below.  If shares of Common Stock are
to be issued in the name of a Person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as may be required by the Corporation in
accordance with the Purchase Agreement.  No fee, stamp or other documentary
taxes will be charged to the Holders for any conversion, except for any such
transfer taxes. Notwithstanding any conversion in accordance with the above and
in addition to the dividend payment due to the Holder in accordance with Section
6(b)(i), the Corporation shall remain obligated to pay to the Holder, and shall
pay the Holder any payments due pursuant to the Investor Rights Agreement and
any payments otherwise due to the Holder in accordance with the Certificate of
Designation of Preferences, Rights and Limitations to which this notice relates.
 
Conversion calculations:
 
Date to Effect Conversion:
     
Number of shares of Preferred Stock owned prior to Conversion:
     
Number of shares of Preferred Stock to be Converted:
     
Stated Value of shares of Preferred Stock to be Converted:
     
Number of shares of Common Stock to be Issued:
     
Applicable Conversion Price:
     
Number of shares of Preferred Stock subsequent to Conversion:
     
Address for Delivery:
     
or
     
DWAC Instructions:
     
Broker no:
     
Account no:
 

 
[HOLDER]
 

               
By:
        Name        Title           

 

 
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EXHIBIT B
 
INVESTOR RIGHTS AGREEMENT
 

 

 

 
 

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PREMIER POWER RENEWABLE ENERGY, INC.
 
INVESTOR RIGHTS AGREEMENT
 
This Investor Rights Agreement (this “Agreement”) is made and entered into as of
June __, 2011 (the “Effective Date”), by and among Premier Power Renewable
Energy, Inc., a Delaware corporation (the “Company”), and Genalta Power Inc., a
British Columbia corporation (the “Investor”).
 
RECITALS
 
A.        The Company and the Investor have entered into a Preferred Stock
Purchase Agreement of even date herewith (the “Series C Purchase Agreement”),
whereby Investor is purchasing 2,350,000 shares of Series C Preferred Stock of
the Company (the “Series C Preferred Stock”).
 
B.        In order to induce the Company and the Investor to enter into the
Purchase Agreement and invest funds in the Company pursuant thereto, the Company
and the Investor have agreed to enter into this Agreement.
 
NOW THEREFORE, in consideration of the mutual promises, covenants and conditions
set forth herein, the parties hereto agree as follows:
 
1.       Rights to Purchase Additional Stock.
 
1.1       Right to Purchase.  Subject to applicable securities laws, from the
Effective Date through and including the date which is six (6) months after the
Effective Date (the “Expiry Date”), Investor shall have the right to purchase
250,000 shares of Series C Preferred Stock (“Additional Shares”) at the purchase
price of One Dollar ($1.00) per share (the “Purchase Right”).
 
1.2       Notice; Exercise of Right.  In order to exercise this Purchase Right,
Investor shall be required to provide written notice of its election to purchase
all or any portion of the Additional Shares to the Company prior to the Expiry
Date.  The closing of the sale of the Additional Shares shall occur within
fifteen (15) calendar days of the date that this notice is given.

 
 

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2.        Put and Call Rights.
 
(a)       In the event of the occurrence of a Change of Control (as defined in
the Certificate of Designation) in respect of the Company within twelve (12)
months after the Effective Date, Company shall have the right (the “Company Call
Right”) to purchase all or any portion of, the Series C Preferred Stock held by
Investor, or any subsequent holder (including all Series C Preferred Stock
purchased by Investor pursuant to the Series C Purchase Agreement, any Series C
Preferred Stock purchased after the date hereof, and any other shares of Series
C Preferred Stock acquired by Investor in any other manner), at a price equal to
One Dollar ($1.00) (“Base Price”) plus the Call Premium (together, the “Exercise
Price”) for each share called by the Company pursuant to this Section
2.  Company (or its successor in the transaction) may exercise the Company Call
Right by delivering a written notice to Investor within thirty (30) days after,
or prior to or contemporaneously with, the closing of such transaction involving
a Change of Control.  Upon delivering such notice, the right of the holder(s) of
the Series C Preferred Stock to convert these Series C Preferred Stock into
Common Stock shall be suspended for that period, which will not exceed  60 days
following the date of the delivery of the notice, until the Exercise Price has
been delivered to the Investor.  If the Exercise Price has not been delivered
during such sixty (60) day period, the Investor conversion rights shall no
longer be suspended.  Subject to the foregoing, the rights of Investor, or any
subsequent holder, to convert the Series C Preferred Stock into Common Stock
shall terminate once the Investor has received the applicable aggregate Exercise
Price.  Such notice shall specify the date for completion of the purchase, which
may not be later than sixty (60) days following the date of such notice.
 
For the purposes of this Agreement, “Call Premium” shall be equal to the greater
of (i) Ten Cents (US) (US$0.10), or (ii) twenty percent (20%) per annum,
calculated initially on the Base Price and compounded annually thereafter, pro
rated to the date of purchase of the Series C Preferred Stock.  Notwithstanding
the foregoing, if the Change of Control involves Peter Lacey or Investor, any
person or company identified by Peter Lacey or Investor prior to May 1, 2011 as
a possible person or entity for a transaction involving a Change of Control, any
person or entity associated with, or related to, Peter Lacey or Investor, or any
affiliate or related party to any of the foregoing, the Call Premium shall be
equal to the greater of (i) Ten Cents (US) (US$0.10) or (ii) ten percent (10%)
per annum, calculated initially on the Base Price and compounded annually
thereafter, pro rated to the date of purchase of the Series C Preferred Stock.
 
 (b)       In the event there is a closing of a transaction involving a Change
in Control within twelve (12) months after the Effective Date, Investor shall
have the right (the “Investor Put Right”) to require the Company to purchase
all, or any portion, of the Series C Preferred Stock held by Investor and its
affiliates, at a price equal to the Exercise Price.  Investor may exercise the
Investor Put Right by delivering written notice to Company within thirty
(30) days after, or contemporaneously with, the closing of such transaction
involving a Change of Control.  Upon delivering such notice, the rights of the
holder(s) of the Series C Preferred Stock to convert these shares into Common
Stock shall be suspended for that period, which will not exceed 60 days
following the date of such notice, until the Exercise Price has been delivered
to the Investor.  If the Exercise Price has not been delivered during such sixty
(60) day period, the Investor conversion rights shall no longer be suspended.
Subject to the foregoing, the rights of the Investor, or any subsequent holder,
to convert the Series C Preferred Stock into Common Stock shall terminate once
the Investor has received the applicable aggregate Exercise Price.  Such notice
shall specify the date for completion of the purchase, which may not be later
than sixty (60) days following the date of such notice.

 
 

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3.        Additional Company Covenant.
 
3.1       Warrant.  The Company shall grant to Investor the right to purchase up
to an additional Two Million (2,000,000) shares of Common Stock of the Company,
at a price of One Dollar ($1.00) per share, pursuant to the terms and conditions
of a warrant in the form attached hereto as Exhibit A (the “Warrant”). The
Warrant shall expire pursuant to the terms and conditions of the Warrant.
 
4.        Miscellaneous.
 
4.1       Notices.  Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, one business day after delivery to a nationally
recognized overnight delivery service, or otherwise upon receipt, addressed at
the address set forth below:
 
Company:
Premier Power Renewable Energy, Inc.
4961 Windplay, Suite 100
El Dorado Hills, CA  95762
Attn:  Chief Executive Officer
 
 
with a copy to:
 
 
Downey Brand LLP
621 Capitol Mall, 18th Floor
Sacramento, CA  95814
Attn:  Jeffrey M. Koewler, Esq.
 
Investor:
Genalta Power Inc.
Suite 1000, 407 – 2St S.W.
Calgary, Albert Canada T2P 2Y3
Attn: CEO
 
with a copy to:
   
Genalta Power Inc.
Suite 1000, 407 – 2St S.W.
Calgary, Albert Canada T2P 2Y3
Attn: Corporate Secretary

 
Any party hereto may, by ten (10) days’ prior notice so given, change its
address for future notices hereunder.

 
 

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4.2       Successors and Assigns.  Each Investor agrees that it may not assign
any of its rights or obligations hereunder unless such assignment is approved in
advance by the Company.  Except as otherwise provided herein, the provisions of
this Agreement shall inure to the benefit of, and shall be binding upon, the
successors and permitted assigns of the parties hereto.
 
4.3       Amendments and Waivers.  Any provision of this Agreement may be
amended and the observance thereof may be waived, either generally or in a
particular instance and either retroactively or prospectively, only with the
written consent of the Company and the Investor.
 
4.4       Entire Agreement.  This Agreement, together with all the exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
 
4.5       Governing Law.  This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Delaware,
exclusive of its choice of law rules or principles.
 
4.6       Severability.  If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
4.7       Delays or Omissions.  No delay or omission to exercise any right,
power or remedy accruing to any party under Agreement upon any breach or default
of any other party under this Agreement shall impair any such right, power or
remedy of the nonbreaching or nondefaulting party, nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or waiver
of or acquiescence in any similar breach or default theretofore or thereafter
occurring, nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring.  All
remedies, either under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.
 
4.8       Captions.  The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
 
4.9       Counterparts.  This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
 
4.10       Costs and Attorneys’ Fees.  In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party’s costs and attorneys’ fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.

 
 

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

 
 
4.11       Adjustments for Recapitalization Events.  Wherever in this Agreement
there is a reference to a specific number of shares of Common Stock or Series C
Preferred Stock of the Company or a specific dollar amount per share, then, upon
the occurrence of any stock split, stock dividend, reverse stock split or
similar recapitalization event affecting such shares, the specific number of
shares or dollar amount so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the effect on the outstanding shares of such
class or series of stock of such recapitalization event.
 
[Remainder of This Page Intentionally Left Blank]
 
 
 
 
 
 
 

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IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement as of the date and year first above written.
 
Investor:
 
Company:
 
GENALTA POWER INC.
 
 
By:       
 
PREMIER POWER RENEWABLE ENERGY, INC.
 
 
By:       
Name: Graham Illingworth
Title: Chief Executive Officer
 
Name:  Dean Marks
Title:    Chief Executive Officer

 
 

 
 

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Exhibit A
 
Warrant
 

 
 
 
 

 

 
 

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DISCLOSURE SCHEDULE
 
 
 
 
 
 
 

 

 
 

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PREFERRED STOCK PURCHASE AGREEMENT
 
BY AND BETWEEN
 
PREMIER POWER RENEWABLE ENERGY, INC.,
 
AND
 
GENALTA POWER, INC.
 
JUNE 7, 2011