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Exhibit 10.1
 
FIRST AMENDED AND RESTATED
 
AGREEMENT AND PLAN OF MERGER
 
by and among
 
NEAH POWER SYSTEMS, INC.,
 
NEAH POWER ACQUISITION CORP.,
 
SOLCOOL ONE, LLC, AND
 
MARK WALSH

 
Dated as of July 27, 2009
 

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TABLE OF CONTENTS
 

     
Page
       
ARTICLE I
THE MERGER
1
       
Section 1.1
 
The Merger
1
       
Section 1.2
 
Effect of the Merger; Closing
1
       
Section 1.3
 
Articles of Incorporation
2
       
Section 1.4
 
Bylaws
2
       
Section 1.5
 
Board of Directors and Officers
2
       
Section 1.6
 
Conversion of Membership Interests
2
       
Section 1.7
 
Surrender of Membership Interests; Transfer Books.
2
       
Section 1.8
 
The Financing
3
       
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND MEMBERS
3
       
Section 2.1
 
Organization, Qualification and Corporation Power
3
       
Section 2.2
 
Membership Interests; Subsidiaries.
4
       
Section 2.3
 
Ownership of Membership Interests.
4
       
Section 2.4
 
Authority Relative to this Agreement
5
       
Section 2.5
 
No Conflict; Required Filings and Consents.
5
       
Section 2.6
 
Financial Statements; Debt.
6
       
Section 2.7
 
Absence of Certain Changes
6
       
Section 2.8
 
Tax Matters.
8
       
Section 2.9
 
Title to Properties
9
       
Section 2.10
 
Environmental Matters.
9
       
Section 2.11
 
Intellectual Property.
10
       
Section 2.12
 
Material Agreements.
11
       
Section 2.13
 
Insurance.
13
       
Section 2.14
 
Litigation.
14
       
Section 2.15
 
Employees.
14
       
Section 2.16
 
Employee Benefits.
15
       
Section 2.17
 
Permits
16
       
Section 2.18
 
Broker’s Fees
16
       
Section 2.19
 
Books and Records.
16

 
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TABLE OF CONTENTS
(continued)
 

     
Page
       
Section 2.20
 
Banking Relationships and Investments
16
       
Section 2.21
 
Disclosure
17
       
Section 2.22
 
Investment Representations of Members
17
       
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUB
18
       
Section 3.1
 
Organization, Qualification and Corporation Power
18
       
Section 3.2
 
Authority Relative to this Agreement
18
       
Section 3.3
 
No Conflict; Required Filings and Consents.
19
       
Section 3.4
 
Broker’s Fees
19
       
Section 3.5
 
Section 3.25 Disclosure
19
       
ARTICLE IV
CONDITIONS OF MERGER
24
       
Section 4.1
 
Conditions to Obligations of Buyer and Buyer Sub to Effect the Merger
24
       
Section 4.2
 
Conditions to Obligations of the Company and the Members to Effect the Merger
25
       
ARTICLE V
FURTHER ASSURANCES AND COVENANTS
25
       
Section 5.1
 
Non-Competition and Other Covenants.
26
       
Section 5.2
 
Escrow of Common Stock Shares
26
       
Section 5.3
 
Adjustment for Dilutive Issuances
26
       
Section 5.4
  Spin-off of the Company
27
       
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
27
       
Section 6.1
 
Survival of Representations
27
       
Section 6.2
 
Indemnification of Buyer and Buyer Sub
27
       
Section 6.3
 
Indemnification of Members and Company
28
       
Section 6.4
 
Limitations on Indemnity Obligations.
29
       
Section 6.5
 
Escrow
29
       
ARTICLE VII
COVENANTS OF THE COMPANY PRIOR TO CLOSING
29
       
Section 7.1
 
Access and Investigation
29
       
Section 7.2
 
Operation of the Business of Seller
30
       
Section 7.3
 
Negative Covenant
31

 
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TABLE OF CONTENTS
(continued)
 

     
Page
       
Section 7.4
 
Notification
31
       
Section 7.5
 
No Negotiation
31
       
Section 7.6
 
Best Efforts
32
       
Section 7.7
 
Payment of Liabilities
32
       
ARTICLE VIII
GENERAL AND MISCELLANEOUS PROVISIONS
32
       
Section 8.1
 
Notices
32
       
Section 8.2
 
Expenses
33
       
Section 8.3
 
Amendment
33
       
Section 8.4
 
Entire Agreement
33
       
Section 8.5
 
Public Announcements
33
       
Section 8.6
 
No Third-Party Beneficiaries
33
       
Section 8.7
 
Assignment
33
       
Section 8.8
 
Severability
34
       
Section 8.9
 
Governing Law
34
       
Section 8.10
 
Consent to Jurisdiction
34
       
Section 8.11
 
Headings; Interpretation
34
       
Section 8.12
 
Construction
34
       
Section 8.13
 
Counterparts
34
       
Section 8.14
 
Confidentiality
35
       
Section 8.15
 
Termination
35

 
 
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FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
 
THIS FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated as of July 27, 2009 (the “Closing Date”), is made by and among Neah Power
Systems, Inc., a Nevada corporation (“Buyer”), Neah Power Acquisition Corp., a
Nevada corporation, a direct and wholly owned subsidiary of Buyer (“Buyer Sub”),
SolCool One, LLC, a California limited liability company (the “Company”), and
Mark Walsh (“Walsh”), Manager and founder of the Company, and a resident of the
State of California.
 
WHEREAS, the Board of Directors of Buyer, Buyer Sub and the Company have
determined that it is in the best interests of their respective companies and
their stockholders to amend and restate the Agreement and Plan of Merger dated
November 26, 2008 among the parties hereto pursuant to which the Company will,
subject to the terms and conditions set forth herein, merge with and into the
Buyer Sub, with the Buyer Sub being the surviving entity (the “Merger”) ; and
 
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
 
ARTICLE I
The Merger
 
Section 1.1           The Merger.  Subject to the terms and conditions of this
Agreement, in accordance with the General Corporation Law of the State of Nevada
(the “Nevada Law”) and the Beverly-Killea Limited Liability Company Act of the
State of California (the “California Law”), upon the execution of this Agreement
and concurrent with the filing of the Articles of Merger (the “Articles of
Merger”) with the Secretary of State of the State of Nevada and the Certificate
of Merger (the “Certificate of Merger”) with the Secretary of State of the State
of California (in accordance with the relevant provisions of Nevada Law and
California Law, respectively), the Company shall merge with and into the Buyer
Sub.  The separate corporate existence of the Company will cease upon the filing
of the Articles of Merger and the Certificate of Merger (the “Effective Time”),
and the Buyer Sub will continue as the surviving corporation (hereinafter
sometimes referred to as the “Surviving Corporation”) in the Merger.  The Buyer
Sub, as the surviving corporation after the Merger, will be governed by the laws
of the State of Nevada.
 
For purposes of this Agreement, the actions taken in connection with the
execution of this Agreement and the filing of the Articles of Merger and the
Certificate of Merger shall be known as the “Closing.”
 
Section 1.2            Effect of the Merger; Closing.  At and after the
Effective Time, the Merger shall have the effects set forth in this Agreement
and the applicable provisions of California Law and Nevada Law.  Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Buyer Sub will vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Buyer Sub (including any personal guarantees of
the Members executed in the ordinary course of business prior to Closing and
identified on Schedule 1.2) will become the debts, liabilities and duties of the
Surviving Corporation.

 
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Section 1.3            Articles of Incorporation.  At the Effective Time, the
Articles of Incorporation of the Buyer Sub, as in effect immediately prior to
the Effective Time and set forth on Exhibit A, shall be the Articles of
Incorporation of the Surviving Corporation, provided, however, that Article I of
the Articles of Incorporation of the Surviving Corporation will be amended to
reflect that the name of the Surviving Corporation will be “SolCool, One, Inc.”
 
Section 1.4            Bylaws.  At the Effective Time, the bylaws of Buyer Sub,
as in effect immediately prior to the Effective Time and set forth on Exhibit B,
shall be the Bylaws of the Surviving Corporation, provided, however, that the
bylaws of the Surviving Corporation will be amended to reflect that the name of
the Surviving Corporation will be “SolCool, One, Inc.”
 
Section 1.5            Board of Directors and Officers.  The directors and
corporate officers of Buyer Sub immediately prior to the Effective Time, shall
be the directors and corporate officers of the Surviving Corporation.
 
Section 1.6            Conversion of Membership Interests.  At the Closing, by
virtue of the Merger and without any action on the part of the holder of any
membership interests of the Company, the Buyer shall issue to the Company the
aggregate sum of $500,000 in the form of common stock, par value $.001 per share
(“Common Stock”), or 4,166,166 shares of Common Stock, at a price of $.12 per
share (the “Common Stock Consideration” or the “Merger Consideration”).  The
Common Stock shall vest as follows: 50% upon execution and the remaining 50% 24
months from date of this Agreement; provided, however, that such vesting shall
be subject to Mark Walsh remaining an employee of the Company and using his best
efforts to achieve the Company’s business plan.
 
Section 1.7        Surrender of Membership Interests; Transfer Books.
 
(a)           At the Closing, the Members will surrender Members’ Certificate(s)
to Buyer.  Until so surrendered, such Certificates will represent solely the
right to receive the Merger Consideration relating thereto.
 
(b)           At the Effective Time, the transfer books of the Company will be
closed and there will not be any further registration of transfers of any
membership interests or options thereafter on the records of the Company.  If,
at or after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, they will be canceled and exchanged for Merger
Consideration as provided in Section 1.6.
 
For purposes of this Agreement, the term “Person” shall mean any individual,
firm, corporation, partnership, limited liability company, trust, joint venture,
Governmental Entity or other entity.

 
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 Section 1.8            The Financing.  The Buyer shall provide to the Surviving
Corporation a minimum of $100,000 to fund only operations and shipments. This
funding will be made within fourteen (14) days from the Closing Date.
 
ARTICLE III
Representations and Warranties of Company and Members
 
Except as set forth in the Company Disclosure Letter which is attached to and
incorporated into this Agreement for all purposes (the “Company Disclosure
Letter”), the Company and Walsh, jointly and severally, represent and warrant to
the Buyer as of the Closing Date as follows:
 
Section 2.1            Organization, Qualification and Corporation Power.  The
Company (a) is a limited liability company duly formed, validly existing and in
good standing under the Laws of California and has the requisite power and
authority to own, operate or lease its properties and to carry on its business
as is now being conducted and proposed to be conducted, except where the failure
to be so organized, existing and in good standing or to have such power and
authority would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (as defined below) on the Company, and (b)
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, other than in such jurisdictions where the
failure so to qualify or to be in good standing would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.  The Company has furnished to Buyer true, correct and complete copies
of its Articles of Organization, Operating Agreement and bylaws.
 
For purposes of this Agreement, the term “Material Adverse Effect” when used in
connection with an entity means any change, event, circumstance or effect
whether or not such change, event, circumstance or effect is caused by or arises
in connection with a breach of a representation, warranty, covenant or agreement
of such entity in this Agreement that is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations,
employees or prospects of such entity taken as a whole with its subsidiaries,
except to the extent that any such change, event, circumstance or effect is
caused by results from (i) changes in general economic conditions, (ii) changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity in a substantially disproportionate
manner) or (iii) changes in the trading prices for such entity’s capital stock.
 
For purposes of this agreement, the term “Law” shall mean any applicable
foreign, federal, state or local law, statute, code, ordinance, regulation,
rule, principle of common law or  other legally enforceable obligation imposed
by a court or other Governmental Entity (as defined in Section 2.5 below) in the
applicable jurisdiction.

 
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Section 2.2            Membership Interests; Subsidiaries.
 
(a)           The membership interest ownership of the Company (the “Membership
Interests”) is set forth on Schedule 2.2 (collectively, the “Members”).  The
Members hold good and valid title to such Membership Interests, free and clear
of all liens, agreements, voting trusts, proxies and other arrangements or
restrictions of any kind whatsoever (other than normal restrictions on transfer
under applicable federal and state securities laws).  All issued and outstanding
Membership Interests have been duly authorized and were validly issued, are
fully paid and nonassessable, are not subject to any right of rescission, are
not subject to preemptive rights by statute, the Articles of Organization,
Operating Agreement or bylaws of the Company, or any agreement or document to
which the Company is a party or by which it is bound and have been offered,
issued, sold and delivered by the Company in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws.  The Company is not under any obligation to
register under the Securities Act of 1933, as amended (the “Securities Act”) or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any of its
presently outstanding Membership Interests or any securities that may be
subsequently issued.  There is no liability for dividends or distribution of
profits accrued but unpaid with respect to the Company’s outstanding Membership
Interests.
 
(b)           There are no existing (i) options, warrants, calls, preemptive
rights (except for the claim by Michael Kinsey for 10% of any payments made by
GreenCore Air, Inc. .in the cases styled SolCool One, LLC v. GreenCore Air,
Inc., No. CIVRS 802866  (Cal. Super. Ct., San Bernardino County) and GreenCore
Air, Inc., Chapter 7, Case No. 08-1262 (Bankr. D. Del.), subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating the Company to issue, transfer or sell any membership interests or
other equity interest in, the Company or securities convertible into or
exchangeable for such membership interests or equity interests, (ii) contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
membership interests of the Company or (iii) voting trusts or similar agreements
to which the Company is a party with respect to the voting of the membership
interests of the Company.
 
(c)           The Company does not have any direct or indirect Subsidiaries or
any interest, direct or indirect, in any corporation, partnership, joint venture
or other business entity.
 
For purposes of this Agreement, the term “Subsidiary” of a Person means any
corporation or other legal entity of which such Person (either alone or through
or together with any other Subsidiary) owns, directly or indirectly, more than
50% of the membership interests or other equity interests the holders of which
are generally entitled to vote for the election of the board of managers or
other governing body of such corporation or other legal entity.
 
Section 2.3            Ownership of Membership Interests.
 
(a)           The Members are the record and beneficial owner of, and have good
and valid title to, all of the Membership Interests, which Membership Interests
(i) are free and clear of all liens, mortgages, encumbrances, pledges, claims,
options, charges, easements, restrictions, covenants, conditions of record,
encroachments, security interests and claims of every kind and character (each,
a “Lien”) and (ii) are free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such membership interests or
other ownership interests).  Except for those Members’ Certificates surrendered
in accordance with 0 there are no other Members’ Certificates issued or
outstanding.

 
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(b)           There are no outstanding existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character to which such Members are a party
obligating the Members to issue, transfer or sell any Membership Interests or
other equity interest in the Company or securities convertible into or
exchangeable for such membership interests or equity interests or (ii) voting
trusts, members’ agreements or similar agreements to which such Members are a
party with respect to the voting of the Membership Interests owned by such
Members.
 
Section 2.4            Authority Relative to this Agreement.  The Company has
the necessary power and authority to enter into this Agreement and, subject to
the filing of the Articles of Merger and the Certificate of Merger, to carry out
its obligations hereunder.  The Members have the necessary competency, power and
authority to enter into this Agreement and carry out the obligations
hereunder.  The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Company and the
Members and, subject to the filing of the Articles of Merger and the Certificate
of Merger, no other corporate proceeding is necessary for the execution and
delivery of this Agreement by the Company, the performance by the Company of its
obligations hereunder and the consummation by the Company of the transactions
contemplated hereby.  This Agreement has been duly executed and delivered by the
Company and the Members and, assuming the due authorization, execution and
delivery of this Agreement by Buyer and Buyer Sub, constitutes a legal, valid
and binding obligation of the Company and the Members, enforceable against them
in accordance with its terms, except that (a) the enforceability hereof may be
subject to applicable bankruptcy, insolvency or other similar Laws, now or
hereinafter in effect, affecting creditors’ rights generally, and (b) the
general principles of equity (regardless of whether enforceability is considered
at a proceeding at Law or in equity).
 
Section 2.5            No Conflict; Required Filings and Consents.
 
(a)           The execution and delivery of this Agreement by the Company and
the Members does not, and the consummation by the Company and the Members of the
transactions contemplated hereby will not, (i) conflict with or violate any Law,
court order, judgment or decree applicable to the Company, its Subsidiaries or
the Members or by which any of their property is bound, (ii) violate or conflict
with the Articles of Organization, Operating Agreement or Bylaws (or comparable
organizational documents) of the Company or its Subsidiaries, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time of both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a Lien on any of
the properties or assets of the Company or its Subsidiaries pursuant to, any
contract, instrument, Permit or license to which the Company or its Subsidiaries
is a party or by which the Company or its Subsidiaries or any of their property
is bound, except in the case of clauses (i) and (iii) for conflicts, violations,
breaches or defaults which, individually or in the aggregate, would not have or
result in a Material Adverse Effect on the Company.
 

 
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(b)           Except for the filing of the Articles of Merger and the
Certificate of Merger and applicable requirements, if any, under “takeover” or
“blue sky” Laws of various states, neither the Company nor any of its
Subsidiaries is required to submit any notice, report or other filing with any
federal, state or local or foreign government, political subdivision thereof,
any court, administrative, regulatory or other governmental agency, commission
or authority or any non-governmental United States or foreign self-regulatory
agency, commission or authority or any arbitral tribunal (each, a “Governmental
Entity”) in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby the
failure of which to submit would, individually or in the aggregate, have or
result in a Material Adverse Effect on the Company.  No waiver, consent,
approval or authorization of any Governmental Entity or any third party is
required to be obtained or made by the Company or its Subsidiaries in connection
with its execution, delivery or performance of this Agreement the failure of
which to obtain or make, individually or in the aggregate, would have or result
in a Material Adverse Effect on the Company.
 
Section 2.6            Financial Statements; Debt.
 
(a)           Attached as Section 2.6(a) of the Company Disclosure Letter are
(i) the Company’s unaudited balance sheet, and statement of cash flows and
income statement for the year ending December 31, 2008 and (ii) the Company’s
unaudited balance sheet (the “Company Balance Sheet”), statement of cash flows
and income statement each dated as of June 30, 2009 (the “Balance Sheet Date”)
(all such financial statements being collectively referred to herein as the
“Company Financial Statements”).  The Company Financial Statements (a) are in
accordance with the books and records of the Company and (b) fairly present the
financial condition of the Company at the date therein indicated and the results
of operation for the period therein specified.
 
(b)           The Company has no material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Company
Financial Statements in the ordinary course of its business, consistent with
past practice and that are material in amount either individually or
collectively.
 
Section 2.7            Absence of Certain Changes.  Since the Balance Sheet
Date, there has not been with respect to the Company or any Subsidiary:
 
(a)           any change in the financial condition, properties, assets,
liabilities, business or operations thereof which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had or will have a material adverse effect thereon;
 

 
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(b)           any material loss of customers.  Set forth on Section 2.7(b) of
the Company Disclosure Letter is a true, correct and complete list of all
customers lost in the preceding twelve (12) months, including the billing
address and phone number for the respective customer;
 
(c)           any notice of impending cancellation, or a material price
increase, from any supplier or vendor;
 
(d)           any contingent liability incurred thereby as guarantor or
otherwise with respect to the obligations of others;
 
(e)           any mortgage, encumbrance or lien placed on any of the properties
thereof;
 
(f)           any material obligation or liability incurred thereby other than
obligations and liabilities incurred in the ordinary course of business;
 
(g)           any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets thereof other than in the ordinary course of business;
 
(h)           any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
thereof;
 
(i)           any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the membership interests
thereof, any split, combination or recapitalization of the membership interests
thereof or any direct or indirect redemption, purchase or other acquisition of
the membership interests thereof;
 
(j)           any labor dispute or claim of unfair labor practices, any change
in the compensation payable or to become payable to any of its officers,
employees or agents, or any bonus payment or arrangement made to or with any of
such officers, employees or agents;
 
(k)           any change with respect to the management, supervisory or other
key personnel thereof;
 
(l)           any payment or discharge of a material lien or liability thereof
which lien was not either shown on the Company Balance Sheet or incurred in the
ordinary course of business thereafter; or
 
(m)           any obligation or liability incurred thereby to any of its
officers, managers or members or any loans or advances made thereby to any of
its officers, managers or members except normal compensation and expense
allowances payable to officers.
 

 
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Section 2.8            Tax Matters.

 
(a)           The Company and its Subsidiaries have timely filed all Tax Returns
that they were required to file, and all such Tax Returns were correct and
complete in all material respects.  All Tax liabilities of the Company and its
Subsidiaries for all taxable periods or portions thereof ending on or prior to
the Effective Time have been, or will be prior to the Effective Time, timely
paid or are adequately reserved for in the Company Financial Statements, other
than such Tax liabilities as are being contested in good faith by the Company or
its Subsidiaries.  There are no ongoing federal, state, local or foreign audits
or examination of any Tax Return of the Company or its Subsidiaries.  Neither
the Company nor its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time, nor has any such waiver or
extension been required with respect to a Tax assessment or deficiency.  No
claim has ever been made by an authority in a jurisdiction where the Company and
its Subsidiaries do not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.  There are no Liens on any of the assets of the
Company or its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
 
(b)           The Company and its Subsidiaries have withheld or collected and
paid or deposited in accordance with law all Taxes required to have been
withheld or collected and paid or deposited by the Company or its Subsidiaries
in connection with amounts paid or owing to any employee, independent
contractor, creditor, members, or other third party.
 
(c)           There is no dispute or claim concerning any Tax liability of the
Company or its Subsidiaries either (i) claimed or raised by any authority in
writing or (ii) as to which the Company has Knowledge.
 
(d)           For purposes of this Agreement:
 
(i)           “Knowledge” or words of similar import means all information that
is actually known, following reasonable investigation, and in the case of the
Company by the individuals set forth on Section 2.15 of the Company Disclosure
Letter.
 
(ii)           “Taxes” means all taxes, charges, fees, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll and franchise taxes imposed by a
Governmental Entity, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection with
any tax or any contest or dispute thereof, and any amounts of Taxes of a third
Person that a Person or any Subsidiary of such Person is liable to pay by law or
otherwise; and
 
(iii)           “Tax Returns” means all reports, returns, declarations,
statements or other information supplied or required to be supplied to a taxing
authority in connection with Taxes including any schedules, attachments or
amendments thereto.

 
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Section 2.9            Title to Properties.  The Company has good and marketable
title to all of its assets as shown on the Company Balance Sheet, free and clear
of all liens, charges, restrictions or encumbrances (other than for Taxes not
yet due and payable).  All machinery and equipment included in such properties
is in good condition and repair, normal wear and tear excepted, and all leases
of real or personal property to which Company or any its Subsidiaries is a party
are fully effective and afford Company or its Subsidiaries peaceful and
undisturbed possession of the subject matter of the lease.  Neither Company nor
any of its Subsidiaries is in violation of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties (the violation of
which would have a material adverse effect on its business), or has received any
notice of violation with which it has not complied.
 
Section 2.10          Environmental Matters.
 
(a)           During the period that the Company has leased or owned its
properties or owned or operated any facilities, there have been no disposals,
releases or threatened releases of Hazardous Materials (as defined below) on,
from or under such properties or facilities.  The Company has no Knowledge of
any presence, disposals, releases or threatened releases of Hazardous Materials
on, from or under any of such properties or facilities, which may have occurred
prior to the Company having taken possession of any of such properties or
facilities.  For the purposes of this Agreement, the terms “disposal,”
“release,” and “threatened release” shall have the definitions assigned thereto
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. § 9601 et seq., as amended (“CERCLA”).  For the purposes of this
Agreement “Hazardous Materials” shall mean any hazardous or toxic substance,
material or waste which is or becomes prior to the Closing regulated under, or
defined as a “hazardous substance,” “pollutant,” “contaminant,” “toxic
chemical,” “hazardous materials,” “toxic substance” or “hazardous chemical”
under (1) CERCLA; (2) any similar federal, state or local law; or
(3) regulations promulgated under any of the above laws or statutes.
 
(b)           None of the properties or facilities of the Company is in
violation of any federal, state or local law, ordinance, regulation or order
relating to industrial hygiene or to the environmental conditions on, under or
about such properties or facilities, including, but not limited to, soil and
ground water condition.  During the time that the Company has owned or leased
its properties and facilities, to the Company’s Knowledge, no third party, has
used, generated, manufactured or stored on, under or about such properties or
facilities or transported to or from such properties or facilities any Hazardous
Materials.
 
(c)           During the time that the Company has owned or leased its
properties and facilities, there has been no litigation brought or threatened
against the Company by, or any settlement reached by the Company with, any party
or parties alleging the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such properties or facilities.

 
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Section 2.11          Intellectual Property.

 
(a)           The term “Intellectual Property” means any (i) patents, (ii)
trademarks, service marks, trade names, brand names, trade dress, slogans, logos
and internet domain names, (iii) inventions, discoveries, ideas, processes,
formulae, designs, models, industrial designs, know-how, proprietary
information, trade secrets, and confidential information (including customer
lists, training materials and related matters, research and marketing and sales
plans), whether or not patented or patentable, (iv) copyrights, writings and
other copyrightable works and works in progress, databases and software, (v) all
other intellectual property rights and foreign equivalent or counterpart rights
and forms of protection of a similar or analogous nature or having similar
effect in any jurisdiction throughout the world, (vi) all registrations and
applications for registration of any of the foregoing, (vii) all common law
trademarks and service marks used by the Company or its Subsidiaries and (viii)
any renewals, extensions, continuations, divisionals, reexaminations or reissues
or equivalent or counterpart of any of the foregoing in any jurisdiction
throughout the world.  The term “Company IP” means any Intellectual Property
used or held for use by the Company or its Subsidiaries, in the conduct of their
businesses as currently conducted and currently proposed to be conducted.
 
(b)           Section 2.11(b) of the Company Disclosure Letter sets forth a
true, correct and complete list (including, the owner, title, registration or
application number and country of registration or application, as applicable) of
all of the following Company IP:  (i) registered trademarks, (ii) applications
for trademark registration, (iii) domain names, (iv) patents, (v) applications
for patents, (vi) registered copyrights (vii) applications for copyright
registration and (viii) licenses of all Intellectual Property (other than
off-the-shelf business productivity software that is the subject of a shrink
wrap or click wrap software license agreement (“Desktop Software”)) to or from
the Company.  The Company has delivered or made available to Buyer prior to the
execution of this Agreement true, complete and correct copies of all licenses of
Company IP both to and from the Company and its Subsidiaries, except Desktop
Software.
 
(c)           The Company IP set forth on Section 2.11(b) of the Company
Disclosure Letter constitutes all of the Intellectual Property used by and
necessary for the Company and its Subsidiaries to operate their respective
business as currently conducted and currently proposed to be conducted.  The
Company or its Subsidiaries owns all legal and beneficial right, title and
interests in the Company IP, and the Company or its Subsidiaries has the valid,
sole and exclusive right to use, assign, transfer and license all such Company
IP for the life thereof for any purpose, free from (i) any Liens, and (ii) any
requirement of any past, present or future royalty payments, license fees,
charges or other payments, or conditions or restrictions whatsoever.
 
(d)           All patent, trademark, service mark, copyright, patent and domain
name registrations or applications set forth on Section 2.11(b) of the Company
Disclosure Letter are in full force and effect and have not been abandoned,
dedicated, disclaimed or allowed to lapse for non-payment of fees or taxes or
for any other reason.

 
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(e)           None of the Company IP owned by the Company or its Subsidiaries
has been declared or adjudicated invalid, null or void, unpatentable or
unregistrable in any judicial or administrative proceeding.  To the Knowledge of
the Company, none of the Company IP used (but not owned) by the Company or its
Subsidiaries has been declared or adjudicated invalid, null or void,
unpatentable or unregistrable in any judicial or administrative proceeding.
 
(f)           Neither the Company nor its Subsidiaries has received any written
notices of, or has Knowledge of, any infringement or misappropriation by or of,
or conflict with, any third party with respect to the Company IP or Intellectual
Property owned by any third party.  Neither the Company nor its Subsidiaries has
infringed, misappropriated or otherwise violated or conflicted with any
Intellectual Property of any third party.  The operation of the Company and its
Subsidiaries does not, as currently conducted and currently proposed to be
conducted, infringe, misappropriate or otherwise violate or conflict with the
Intellectual Property of any third party.
 
(g)           The transactions contemplated by this Agreement will not affect
the right, title and interest of the Company or its Subsidiaries in and to the
Company IP, and each of the Company and its Subsidiaries has taken all necessary
action to maintain and protect the Company IP set forth on Section 2.11(b) of
the Company Disclosure Letter and, until the Effective Time, will continue to
maintain and protect such Company IP so as to not materially adversely affect
the validity or enforceability of such Company IP.
 
(h)           To the Knowledge of the Company, no officer, employee or manager
or the Company or its Subsidiaries is obligated under any contract (including
any license, covenant or commitment of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency,
that would conflict or interfere with the performance of such person’s duties as
an officer, employee or manager of the Company or its Subsidiaries, the use of
such person’s best efforts to promote the interests of the Company and its
Subsidiaries or the Company’s or its Subsidiary’s business as conducted or as
currently proposed to be conducted by the Company and its Subsidiaries.  No
prior employer of any current or former employee of the Company or its
Subsidiaries has any right, title or interest in the Company IP and to the
Knowledge of the Company, no person or entity has any right, title or interest
in any Company IP.  It is not and will not be with respect to the business as
currently proposed to be conducted necessary for the Company or its Subsidiaries
to use any inventions of any of its employees  made prior to their employment by
the Company or its Subsidiaries.
 
Section 2.12          Material Agreements.
 
(a)           Section 2.12 of the Company Disclosure Letter sets forth a true,
correct and complete list of the following agreements (whether written or oral
and including all amendments thereto) to which the Company or its Subsidiaries
is a party or a beneficiary or by which the Company or its Subsidiaries or any
of their respective assets are bound (collectively, the “Material Agreements”):
 
(i)           any real estate leases;.

 
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(ii)           any other agreement for the provision of services by the Company
or its Subsidiaries that have accounted for revenues of more than $5,000.00 per
annum during any month since the Balance Sheet Date;
 
(iii)          any agreement creating, evidencing, securing, assuming,
guaranteeing or otherwise relating to any debt for which the Company or its
Subsidiaries is liable or under which it has imposed (or may impose) a Lien on
any of the assets, tangible or intangible, of the Company or its Subsidiaries;
 
(iv)         any capital or operating leases or conditional sales agreements
relating to personal property of the Company or its Subsidiaries;
 
(v)          any supply or manufacturing agreements or arrangements pursuant to
which the Company or its Subsidiaries is entitled or obligated to acquire any
assets from a third party with a fair market value in excess of $5,000;
 
(vi)          any insurance policies;
 
(vii)         any employment, consulting, noncompetition, or separation
agreements or arrangements;
 
(viii)       any agreement with or for the benefit of any Members, officer,
manager or employee of the Company, or any Affiliate of the Company, or any
Person controlled by such individual or family member thereof;
 
(ix)          any license to which the Company or its Subsidiaries is a party;
 
(x)           any agreement in which the Company or its Subsidiaries has granted
rights to license, sublicense or copy, “most favored nation” pricing provisions
or exclusive marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity of goods or services or
has agreed to purchase goods or services exclusively from a certain party;
 
(xi)          any written arrangement establishing a partnership or joint
venture;
 
(xii)         a list of all parties to any written arrangement concerning
confidentiality, non-disclosure or noncompetition;
 
(xiii)        any written arrangement under which the consequences of a default
or termination could have a Material Adverse Effect on the Company; and
 
(xiv)        any other agreement or arrangement pursuant to which the Company or
its Subsidiaries could be required to make or entitled to receive aggregate
payments in excess of $5,000.00 or entered into outside of the ordinary course
of business.
 
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For purposes of this Agreement, “Affiliate” means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, any Person.
 
(b)           The Company has delivered to or made available to Buyer a true,
correct and complete copy of each Material Agreement and a written summary of
each oral Material Agreement.  With respect to each Material Agreement:
 
(i)           each Material Agreement is legal, valid, binding and enforceable
and in full force and effect with respect to the Company or its Subsidiaries
and, to the Knowledge of the Company, the written arrangement is legal, valid,
binding and is enforceable and in full force and effect with respect to each
other party thereto (in each case except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting the enforcement of creditor’s rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought);
 
(ii)           each Material Agreement will continue to be legal, valid, binding
and enforceable and in full force and effect against the Company, and to the
Knowledge of the Company against each other party thereto, immediately following
the Closing in accordance with the terms thereof (in each case except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of
creditor’s rights generally, and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought) as in effect prior to
the Closing; and
 
(iii)          neither the Company nor its Subsidiaries is in breach or default,
and, to the Knowledge of the Company, no other party thereto is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement.
 
Section 2.13         Insurance.
 
(a)           Section 2.13 of the Company Disclosure Letter sets forth a true,
correct and complete list of each insurance policy (including fire, theft,
casualty, general liability, director and officer, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company is a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past year.  Section 2.13 of the Company Disclosure Letter sets forth a true,
correct and complete list of each person or entity required to be listed as an
additional insured under each such policy.  Each such policy is in full force
and effect and by its terms and with the payment of the requisite premiums
thereon will continue to be in full force and effect following the Closing.
 
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(b)           The Company is not in breach or default, and does not anticipate
being in breach or default after Closing (including with respect to the payment
of premiums or the giving of notices) under any such policy, and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration, under such
policy; and the Company has not received any written notice or, to the Knowledge
of the Company, oral notice, from the insurer disclaiming coverage or reserving
rights with respect to a particular claim or such policy in general.  The
Company has not incurred any material loss, damage, expense or liability covered
by any such insurance policy for which it has not properly asserted a claim
under such policy.
 
Section 2.14         Litigation.
 
(a)           Except as set forth and described Section 2.14 of the Company
Disclosure Letter, there are no claims, actions, suits, proceedings or
investigations of any nature pending or, to the Knowledge of the Company,
threatened against the Company or any properties or rights of the Company,
before any court, administrative, governmental or regulatory authority or
body.  The Company is not subject to any order, judgment, injunction or decree.
 
(b)           There are no agreements or other documents or instruments settling
any material claim, complaint, action, suit or other proceeding against the
Company.
 
Section 2.15         Employees.
 
(a)           Set forth on Section 2.15(a) of the Company Disclosure Letter is a
true, correct and complete list of all current employees of Company and its
Subsidiaries, including date of employment, current title and compensation
(including commissions, bonus and other compensation), and date and amount of
last increase in compensation.  None of the Company’s employees are members of a
labor union.  The Company is not a party to any collective bargaining, union or
labor agreements, contracts or other arrangements with any group of employees,
labor union or employee representative and to the Knowledge of the Company,
there is no organization effort currently being made by or on behalf of any
labor union with respect to employees of the Company or its Subsidiaries.  The
Company has not experienced, and to the Knowledge of the Company, there is no
basis for, any strike, grievances, claims of unfair labor practices, material
labor trouble, work stoppage, slow down or other interference with or impairment
of the business of Company.
 
(b)           To the Knowledge of the Company, no employee has any plans to
terminate employment with the Company within six months of the date hereof.
 
(c)           The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting wages, hours, occupational
safety, or health, fair employment practices, and discrimination in employment
terms and conditions, and is not engaged in any unfair labor practice.  There
are no pending claims against the Company under any workers compensation plan or
policy or for long term disability.  There are no proceedings pending or, to the
Knowledge of the Company, threatened, between the Company and its employees.
 
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(d)           Section 2.15(d) of the Company Disclosure Letter sets forth a
true, correct and complete list of Persons whose employment has been terminated
by the Company in the 90 days prior to Closing.
 
Section 2.16         Employee Benefits.
 
(a)           Neither the Company, its Subsidiaries nor any predecessor in
interest thereof has maintained, or currently maintain, any Employee Benefit
Plan.  At no time has the Company, its Subsidiaries or any ERISA Affiliate been
obligated to contribute to any “multi-employer plan” (as defined in Section
4001(a)(3) of ERISA).  Neither the Company its Subsidiaries nor any predecessor
in interest thereof has any liabilities or obligations with respect to any
Employee Benefit Plan.
 
(b)           Section 2.16(b) of the Company Disclosure Letter discloses each:
(i) agreement with any manager, executive officer or other key employee of the
Company or its Subsidiaries, including (A) the benefits of which are contingent,
or the terms of which are altered, upon the occurrence of a transaction
involving the Company or its Subsidiaries of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such manager, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Company or its Subsidiaries that may be
subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the “Code”) or included in the determination of such person’s
“parachute payment” under Section 280G(b)(1) of the Code; and (iii) agreement or
plan binding the Company or its Subsidiaries, including any option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
 
(c)           For purposes of this Agreement:
 
(i)           “Employee Benefit Plan” means any “employee pension benefit plan”
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended), any “employee welfare benefit plan” (as defined in Section
3(1) of ERISA), and any other written or oral plan, agreement or arrangement
involving direct or indirect compensation, including insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses,
options, or other forms of incentive compensation or post-retirement
compensation; and
 
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(ii)           “ERISA Affiliate” means any entity which is a member of (i) a
controlled group of corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades or businesses under common control (as defined in Section
414(c) of the Code), or (iii) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes the Company or its Subsidiaries.
 
Section 2.17         Permits.  Section 2.17 of the Company Disclosure Letter
sets forth a true, correct and complete list of all material permits, licenses,
registrations, certificates, orders or approvals from any Governmental Entity
(including those issued or required under applicable export laws or regulations)
(“Permits”) issued to or held by the Company and its subsidiaries.  Such listed
Permits are the only Permits that are required for the Company and its
subsidiaries to conduct their business as presently conducted.  Each such Permit
is in full force and effect and to the Knowledge of the Company, no suspension
or cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration.  Each such Permit will
continue in full force and effect following the Closing.
 
Section 2.18         Broker’s Fees.  Neither the Company nor any of its
subsidiaries has any liability or obligation to pay any fees or commissions to
any broker, investment banking firm, finder or agent with respect to the
transactions contemplated by this Agreement.
 
Section 2.19         Books and Records.
 
(a)           The books, records and accounts of the Company (a) are in all
material respects true, complete and correct, (b) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of the Company, and (d) accurately
and fairly reflect the basis for the Financial Statements.
 
(b)           The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management’s general or
specific authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements, and
(ii) to maintain accountability for assets, and (c) the amount recorded for
assets on the books and records of the Company is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
 
Section 2.20         Banking Relationships and Investments.  Section 2.20 of the
Company Disclosure Letter sets forth sets forth a true, correct and complete
list of all banks and financial institutions in which the Company has an
account, deposit, safe-deposit box or borrowing relationship, factoring
arrangement or other loan facility or relationship, including the names of all
persons authorized to draw on those accounts or deposits, or to borrow under
loan facilities, or to obtain access to such boxes.  Section 2.20 of the Company
Disclosure Letter sets forth a true, correct and complete list of all
certificates of deposit, debt or equity securities and other investments owned,
beneficially or of record, by the Company (the “Investments”).  The Company has
good and legal title to all Investments.
 
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Section 2.21         Disclosure.  No representation or warranty by the Company
contained in this Agreement, including any statement contained in the Company
Disclosure Letter or any document delivered in connection herewith, contains any
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein not misleading.
 
Section 2.22         Investment Representations of Members.  Each Member hereby
represents and warrants only with respect to himself:
 
(a)           The Common Stock (the “Issuable Securities”) will be acquired for
investment for Member’s own account in accordance with the percentage ownership
set forth in Schedule 2.22, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and the Member has no present
intention of selling, granting any participation in, or otherwise distributing
the same.  The Member does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation in any of
the Securities to such person or to any third person.
 
(b)           The Investor has had an opportunity to ask questions and receive
answers from Buyer regarding the terms and conditions of the offering and sale
of the Securities.
 
(c)           The Member acknowledges that he has (i) such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the investment in the Securities, (ii) had such risks
explained to him and has determined that such investment is suitable for him in
view of his financial circumstances and available investment opportunities,
(iii) sufficient net worth and income to bear the economic risk of this
investment, and (iv) no need for liquidity of the investment and no reason to
anticipate any change in the his financial circumstances which may cause or
require any sale, transfer or other distribution of the Securities.
 
(d)           The Member is an “accredited investor” within the meaning of the
Securities and Exchange Rule 501(a) of Regulation D, as presently in effect.
 
(e)           The Member understands that the Securities it is acquiring are
characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired from Buyer in a transaction not involving a
public offering and that, under such laws and applicable regulations, such
securities may be resold without registration under the Securities Act only in
certain limited circumstances.  In this connection, the Member is familiar with
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.  The Member understands that reliance by
Buyer on such exemptions is predicated in part on the Member’s representations
contained in this Agreement.
 
(f)           The Member understands and agree that the certificates evidencing
the Securities may bear a one or all of the following legends:
 
(i)           A legend in substantially the following form:
 
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(ii)           “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD,  TRANSFERRED OR ASSIGNED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.”
 
(iii)           Any additional legend required by the laws of the State of
California or any other applicable state.
 
ARTICLE III
Representations and Warranties of Buyer and Buyer Sub
 
Except as set forth in the Buyer Disclosure Letter which is attached to and
incorporated into this Agreement for all purposes (the “Buyer Disclosure
Letter”), Buyer and Buyer Sub, jointly and severally, represent and warrant to
the Company and the Members as of the Closing Date as follows:
 
Section 3.1           Organization, Qualification and Corporation Power.  Each
of Buyer and Buyer Sub as of the Effective Time (a) is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority and any necessary governmental authority to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted and proposed to be conducted, and (b) is
duly qualified as a foreign corporation to do business, and is in good standing,
in each other jurisdiction where the character of its properties owned, operated
or leased or the nature of its activities makes such qualification necessary,
except in the case of clause (b) for failures which, when taken together with
all other such failures, would not have a Material Adverse Effect on
Buyer.  Buyer Sub is a wholly owned Subsidiary of Buyer.
 
Section 3.2           Authority Relative to this Agreement.  Each of Buyer and
Buyer Sub has the necessary corporate power and authority to enter into this
Agreement and, subject to the filing of the Articles of Merger and the
Certificate of Merger, to carry out its obligations hereunder.  The execution
and delivery of this Agreement by Buyer and Buyer Sub and the consummation by
them of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Buyer and Buyer Sub and, subject to
the filing of the filing of the Articles of Merger and the Certificate of
Merger, no other corporate proceeding is necessary for the execution and
delivery of this Agreement by Buyer and Buyer Sub, the performance by them of
their respective obligations hereunder and the consummation by them of the
transactions contemplated hereby.  As of the Effective Time this Agreement has
been duly executed and delivered by Buyer and Buyer Sub and, assuming the due
authorization, execution and delivery of this Agreement by the Company and the
Members, constitutes a legal, valid and binding obligation of each of Buyer and
Buyer Sub, enforceable against each in accordance with its terms, except that
(a) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar Laws, now or hereinafter in effect, affecting
creditors’ rights generally, and (b) the general principles of equity
(regardless of whether enforceability is considered at a proceeding at Law or in
equity).
 
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Section 3.3           No Conflict; Required Filings and Consents.
 
(a)           The execution and delivery of this Agreement by each of Buyer and
Buyer Sub do not, and the consummation by each of them of the transactions
contemplated hereby will not, (i) conflict with or violate any Law, court order,
judgment or decree applicable to Buyer or Buyer Sub or by which any of their
respective property is bound, (ii) violate or conflict with the
Articles of Incorporation or Bylaws (or comparable organizational documents) of
either Buyer or Buyer Sub, or (iii) result in any breach of, or constitute a
default (or an event which with notice or lapse of time of both would become a
default) under, or give to others any rights of termination or cancellation of,
or result in the creation of a Lien on any of the properties or assets of Buyer
or any of its Subsidiaries pursuant to, any contract, instrument, Permit or
license to which Buyer or any of its Subsidiaries is a party or by which Buyer
or any of its Subsidiaries or their respective property is bound, except in the
case of clauses (i) and (iii) for conflicts, violations, breaches or defaults
which, individually or in the aggregate, would not have or result in a Material
Adverse Effect on Buyer.
 
(b)           Except for the filing of the Articles of Merger and the
Certificate of Merger, and applicable requirements, if any, under “takeover” or
“blue sky” Laws of various states, neither Buyer nor Buyer Sub is required to
submit any notice, report or other filing with any Governmental Entity in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby the failure of which to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on Buyer.  No waiver, consent, approval or authorization of any
Governmental Entity or any third party is required to be obtained or made by
Buyer or Buyer Sub in connection with its execution, delivery or performance of
this Agreement the failure of which to obtain or make, individually or in the
aggregate, would have or result in a Material Adverse Effect on Buyer.
 
Section 3.4           Broker’s Fees.  Neither Buyer nor Buyer Sub has any
liability or obligation to pay any fees or commissions to any broker, investment
banking firm, finder or agent with respect to the transactions contemplated by
this Agreement other than fees and commissions to Jesup & Lamont Securities
Corporation in connection with the Financing.
 
Section 3.5           Issuance of the Issuable Securities. The Issuable
Securities are duly authorized and, when issued and paid for in accordance with
the terms hereof and thereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens other than restrictions on transfer
provided for in this Agreement or the Escrow Agreement attached as Exhibit D
hereto imposed by applicable securities laws and shall not be subject to
preemptive or similar rights of stockholders.  Assuming the accuracy of the
representations and warranties of the Purchasers, the Issuable Securities will
be issued in compliance with all applicable federal and state securities
laws.  The issue and sale of the Issuable Securities will not, immediately or
with the passage of time, obligate the Buyer to issue shares of its securities
to any person other than the Purchasers and will not result in a right of any
holder of Buyer’s securities to adjust the exercise, conversion, exchange or
reset price under such securities.
 
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Section 3.6           Capitalization.  The approximate aggregate number of
shares and type of all authorized, issued and outstanding classes of capital
stock, options and other securities of the Buyer (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of
the Buyer) is specified in the SEC Reports (as defined below).  Except as
specified in the SEC Reports, no securities of the Buyer are entitled to
preemptive or similar rights, and no person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated hereby; except as specified in the SEC Reports,
the Buyer has not issued any other options, warrants or scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
entered into any agreement giving any person any right to subscribe for or
acquire, any shares of Common Stock; except as specified in the SEC Reports,
there are no contracts, commitments, understandings, or arrangements by which
the Buyer is or may become bound to issue additional shares of the capital stock
of the Buyer or options, securities or rights convertible into shares of capital
stock of the Buyer; except for customary adjustments as a result of stock
dividends, stock splits, combination of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
Buyer (or in any agreement providing rights to security holders) and the
issuance and sale of the shares of Common Stock will not obligate Buyer to issue
securities to any person (other than the Purchasers) and will not result in a
right of any holder of securities to adjust the exercise, conversion, exchange
or reset price under such securities; Buyer is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of Buyer.
 
Section 3.7           SEC Reports.  The Common Stock of Buyer is registered
pursuant to Section 12(g) of the Exchange Act.  Buyer has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the calendar year prior to the Closing Date (the
foregoing materials being collectively referred to herein as the “SEC
Reports” and together with this Agreement, the “Disclosure Materials”).  As of
their respective dates, or to the extent corrected by a subsequent restatement,
the SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
 
Section 3.8          Financial Statements.  The financial statements of Buyer
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing (or to he extent corrected by
a subsequent restatement).  Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of Buyer and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments.
 
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Section 3.9           Tax Matters.  Buyer (i) has accurately and timely prepared
and filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all material taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith, with
respect to which adequate reserves have been set aside on the books of Buyer and
(iii) has set aside on its books provision reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply.  There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of Buyer know of no basis for such claim.  Buyer has not waived or extended any
statute of limitations at the request of any taxing authority.  There are no
outstanding tax sharing agreements or other such arrangements between Buyer and
any other corporation or entity and Buyer is not presently undergoing any audit
by a taxing authority.
 
Section 3.10        Environmental Matters. To Buyer’s knowledge, Buyer (i) is
not in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) does not own or
operate any real property contaminated with any substance in violation of any
Environmental Laws, (iii) is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and (iv) is not subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
Buyer’s knowledge, threatened investigation that might lead to such a claim.
 
Section 3.11         Litigation. There is no pending action which adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Shares.
 
Section 3.12        Employment Matters. To Buyer’s knowledge, Buyer is in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.  Buyer is not a party to any
collective bargaining agreement.
 
Section 3.13         Compliance.  Buyer, except in each case as, individually or
in the aggregate, has not and could not reasonably be expected to result in a
Material Adverse Effect (i)  is in violation of any order of any court,
arbitrator or governmental body having jurisdiction over Buyer or its properties
or assets, or (ii) to Buyer’s knowledge, is or has been in violation of any
statute, rule or regulation of any governmental authority applicable to Buyer.
 
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Section 3.14         Regulatory Permits. To Buyer’s knowledge, Buyer possesses
all certificates, authorizations and permits issued by the federal, state, local
or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits, individually or in the aggregate, has not and could not reasonably
be expected to result in a Material Adverse Effect (“Material Permits”), and
Buyer has not received any notice of proceedings relating to the revocation or
modification of any such Material Permit.
 
Section 3.15         Title to Assets. Buyer has good and marketable title in all
personal property owned by it that is material to the business of Buyer, in each
case free and clear of all Liens, except for Liens that do not, individually or
in the aggregate, have or result in a Material Adverse Effect.
 
Section 3.16         Patents and Trademarks.  To Buyer’s knowledge, Buyer owns,
possesses, licenses or has other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology, Internet domain names, know-how and other intellectual property
(collectively, the “Intellectual Property”) necessary for the conduct of its
business as now conducted or as proposed to be conducted; except as set forth in
the SEC Reports and except where such violations or infringements would not
reasonably be expected to result in a Material Adverse Effect, and (a) to
Buyer’s knowledge, there are no rights of third parties to any such Intellectual
Property; (b) to Buyer’s knowledge, there is no infringement by third parties of
any such Intellectual Property; (c) there is no pending or, to Buyer’s
knowledge, threatened action, suit, proceeding or claim by others challenging
Buyer’s rights in or to any such Intellectual Property, and Buyer is unaware of
any facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to Buyer’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual
Property; and (e) there is no pending or, to Buyer’s knowledge, threatened
action, suit, proceeding or claim by others that Buyer infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and Buyer is unaware of any other fact which would form a
reasonable basis for any such claim.  All of the licenses and sublicenses and
consent, royalty or other agreements concerning Intellectual Property which are
necessary for the conduct of Buyer’s business as currently conducted to which
Buyer is a party or by which any of its material assets are bound (other than
generally commercially available, non-custom, off the shelf software application
programs having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements”) are valid and binding obligations of Buyer
and, to Buyer’s knowledge, the other parties thereto, enforceable in accordance
with their respective terms, except to the extent that enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors’ rights generally, and there exists no event or condition which will
result in a material violation or breach of or constitute (with or without due
notice or lapse of time or both) a default by Buyer under such License
Agreement.
 
Section 3.17         Insurance. Buyer is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses and location in which Buyer is
engaged.  To Buyer’s knowledge, it will be able to renew existing insurance
coverage for Buyer as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
 
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Section 3.18         Transactions With Affiliates and Employees.  Except as set
forth in the SEC Reports made on or prior to the date hereof, none of the
officers or directors of Buyer and, to Buyer’s knowledge, none of the employees
of Buyer is presently a party to any transaction with Buyer or to a presently
contemplated transaction (other than for services as employees, officers and
directors) that would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
 
Section 3.19        Sarbanes Oxley Act.  Buyer is in compliance with applicable
requirements of the Sarbanes Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
 
Section 3.20        Private Placement. Assuming the accuracy of the Members’
representations and warranties set forth in Section 2, no registration under the
Securities Act is required for the offer and sale of the Issuable Securities by
Buyer to the Purchasers hereunder and thereunder.  Buyer’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and Buyer has taken no
action designed to, or which to its knowledge is likely to have the effect of
terminating the registration of Buyer’s Common Stock under the Exchange Act, nor
has Buyer received any notification that the Commission is contemplating
terminating such registration.
 
Section 3.21        No Directed Selling Efforts or General
Solicitation.  Neither Buyer nor any of its affiliates, nor any person acting on
its or their behalf has conducted any “general solicitation” or “general
advertising” (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Shares.
 
Section 3.22        Investment Company.  Buyer is not required to be registered
as, and is not an affiliate of, and immediately following the Closing will not
be required to register as, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
 
Section 3.23        Questionable Payments.  Neither Buyer nor, to Buyer’s
knowledge, directors, officers, employees, agents or other persons acting on
behalf of Buyer has, in the course of its actions for, or on behalf of,
Buyer:  (a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to foreign or domestic
political activity; (b) made any direct or indirect unlawful payments to any
foreign or domestic governmental officials or employees from corporate funds;
(c) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended or (d) made any other unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
 
Section 3.24         Application of Takeover Protections.  Except as described
in the SEC Reports, there is no control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under Buyer’s charter documents or the laws of
the State of Nevada that is or could reasonably be expected to become applicable
to Purchasers as a result of the parties fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation Buyer’s issuance of the Shares and the Purchaser’s ownership of the
Shares.
 
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Section 3.25     Disclosure.  No representation or warranty by Buyer or Buyer
Sub contained in this Agreement, including any statement contained in the Buyer
Disclosure Letter or any document delivered in connection herewith, contains any
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein not misleading.
 
ARTICLE IV
Conditions of Merger
 
Section 4.1            Conditions to Obligations of Buyer and Buyer Sub to
Effect the Merger.  The obligations of Buyer and Buyer Sub to effect the Merger
will be subject to the satisfaction or waiver of the following conditions prior
to the Effective Time:
 
(a)           Representations and Warranties.  Those representations and
warranties of the Company and the Members set forth in this Agreement will be
true and correct as of the Closing Date (except to the extent such
representations and warranties expressly relate to a specific date in which case
such representations and warranties will be true and correct as of such
date).  Buyer shall receive a certificate to such effect executed by the
Company’s Manager.
 
(b)           Agreements and Covenants.  The Company and the Members shall have
performed in all material respects all obligations and complied in all material
respects with all of their respective agreements and covenants required to be
performed or complied with under this Agreement.  The Buyer shall receive a
certificate to such effect executed by the Company’s Manager.
 
(c)           Certificate of Secretary.  Buyer will have received from the
Company’s Secretary or another authorized officer or manager of the Company, a
certificate (i) certifying the Company’s Articles of Organization, (ii)
certifying the Company’s Operating Agreement, (iii) certifying the bylaws of the
Company, (iv) certifying the resolutions of the board of managers of the
Company, (v) certifying the resolutions of the Members and (vi) attesting to the
incumbency of the officers of the Company.
 
(d)           Required Consents.  Any consent, authorization, order or approval
of (or filing or registration with) any third party identified by Buyer on
Schedule 4.1(d) will have been obtained or made.
 
(e)           Legal Opinion.  Buyer will have received an opinion, dated the
Closing Date, of counsel to the Company, in substantially the form of Exhibit C
attached hereto.
 
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Section 4.2           Conditions to Obligations of the Company and the Members
to Effect the Merger.  The obligations of the Company and the Members to effect
the Merger will be further subject to the satisfaction or waiver of the
following conditions prior to the Effective Time:
 
(a)           Representations and Warranties.  Those representations and
warranties of Buyer and Buyer Sub set forth in this Agreement will be true and
correct as of the Closing Date (except to the extent such representations and
warranties expressly relate to a specific date in which case such
representations will be true and correct as of such date).  The Company shall
receive a certificate to such effect executed by the Buyer’s Chief Executive
Officer.
 
(b)           Agreements and Covenants.  Buyer and Buyer Sub shall have
performed in all material respects all obligations and complied in all material
respects with all agreements and covenants of Buyer and Buyer Sub required to be
performed or complied with by them under this Agreement.  The Company shall
receive a certificate to such effect executed by the Buyer’s Chief Executive
Officer.
 
(c)           Certificate of Secretary.  The Company will have received from the
corporate secretary of each of Buyer and Buyer Sub a certificate (i) certifying
Buyer’s and Buyer Sub’s Articles of Incorporation and Articles of Incorporation,
respectively, (ii) certifying the bylaws of Buyer and Buyer Sub, (iii)
certifying the resolutions of the board of directors of Buyer and Buyer Sub, and
(iv) certifying the resolutions of the stockholder of Buyer Sub.
 
(d)           Required Consents.  Any consent, authorization, order or approval
of (or filing or registration with) any third party identified by the Company on
Schedule 4.2(d) will have been obtained or made.

 
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ARTICLE V
Further Assurances and Covenants
 
Section 5.1           Non-Competition and Other Covenants.
 
(a)           Agreement Not to Compete.  For a period of two (2) years after the
Closing Date none of the Members shall be engaged or interested in any business
which distributes energy efficient equipment.  Each of the Members shall be
deemed to be interested in a business if he or she is engaged or interested in
that business as a member, stockholder, manager, director, officer, employee,
salesman, sales representative, agent, partner, individual proprietor,
consultant or otherwise, but not if such interest is limited solely to ownership
of 2% or less of the equity or debt securities of any class of a corporation
whose shares are listed for trading on a national securities exchange or traded
in the over the counter market.
 
(b)           Non-solicitation.  For a period of five (5) years after the
Closing Date, none of the Members shall, directly or indirectly, (a) cause or
attempt to cause any customer, client, account or vendor, or prospective
customer, client, account or vendor to divert, terminate, limit or in any manner
modify or fail to enter into any actual or potential business relationship with
the Surviving Corporation, or (b) divert, solicit or employ, or attempt to
divert, solicit or employ, any employees of the Surviving Corporation except for
those individuals identified on Schedule 5.2(b).  For purposes of this Section
5.2, a prospective customer, client, account or vendor shall mean any customer,
client, account or vendor that any Member was involved with or had Knowledge of
in his or her position with the Company for the twelve month period prior to the
Closing Date.
 
(c)           Necessary and Reasonable.  Each Member agrees that the covenants
provided for in Section 5.2 hereof are necessary and reasonable in order to
protect the Surviving Corporation in the conduct of its business, to protect the
trade secrets and other proprietary information of the Surviving Corporation and
to protect the Surviving Corporation in the utilization of the assets, tangible
and intangible, including the goodwill of the Surviving Corporation.
 
Section 5.2           Escrow of Common Stock Shares.  The Common Stock Shares
shall be placed by Buyer with Seyfarth Shaw LLP to secure Seller’s
indemnification obligations under this Agreement, the departure of Mark Walsh
prior to two years from the Effective Date and any damages arising from
litigation between Seller and Green Core Technology as forth in the Company
Disclosure Letter.  The escrow agreement shall be in the form attached hereto as
Exhibit E (the “Escrow Agreement”).  
 
Section 5.3           Adjustment for Dilutive Issuances.  If Buyer, at any time
prior to conversion of the Common Stock Shares, shall issue any shares of Common
Stock or securities of Buyer convertible into shares of Common Stock at a price
per share of Common Stock less than $0.12 per share, other than an Excluded
Issuance (as hereinafter defined), then, and in each such case, the Members
shall be entitled to participate on the same terms in such additional issuance
of securities.
 
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The following shall be deemed “Excluded Issuances” for the purpose of this
Section 5.3:
 
a.           Buyer’s granting of stock options, and/or issuance of Common Stock
upon exercise thereof, to directors, officers, employees or consultants of Buyer
pursuant to any benefit plan approved by the holders of a majority of the shares
of Common Stock;
 
b.           The issuance or sale of shares of Common Stock issuable upon the
exercise of outstanding securities of the Buyer;
 
c.           The issuance of shares of Common Stock or securities convertible
into or exchangeable or exercisable for shares of Common Stock (and the shares
of Common Stock issuable upon the conversion, exercise or exchange thereof) in
connection with any future acquisition, merger or other business combination,
purchase of assets or of all or a portion of a business or other strategic
relationship entered, by the Company or any of its subsidiaries; and
 
d.           the current financing with Optimus Capital Partners.
 
ARTICLE VI
Survival and Indemnification
 
Section 6.1           Survival of Representations.  All representations,
warranties and covenants of the parties contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the other parties to this Agreement, until the earlier of the
termination of this Agreement or two (2) years after the Closing Date (the
“Survival Period”), whereupon such representations, warranties and covenants
will expire (except for covenants that by their terms survive for a longer
period). The parties’ post-closing remedies for a breach are not limited by the
pre-closing discovery of a breach.
 
Section 6.2           Indemnification of Buyer and Buyer Sub.  Subject to the
limitations set forth in this ARTICLE VI, the Company and the Members agree to
jointly and severally indemnify and hold harmless Buyer, Buyer Sub and their
respective officers, directors, agents and employees, and each Person, if any,
who controls or may control Buyer within the meaning of the Securities Act
(hereinafter referred to individually as an “Indemnified Person” and
collectively as “Indemnified Persons”) from and against any and all third party
claims, demands, actions, causes of actions, losses, costs, damages, liabilities
and expenses including, without limitation, reasonable legal fees (hereinafter
referred to as “Damages”):
 
(a)           Arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants given or
made by the Company or any Member in this Agreement or any certificate, document
or instrument delivered by or on behalf of the Company or any Member pursuant
hereto (other than with respect to changes in the truth or accuracy of the
representations and warranties of the Company or any Member under this Agreement
after the date hereof if the Company or such Member has advised Buyer and Buyer
Sub of such changes in an update to the Company’s Disclosure Letter delivered
prior to the Closing and Buyer and Buyer Sub have nonetheless proceeded with the
Closing); or
 
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(b)           Resulting from any failure of any Member to have good, valid and
marketable title to the issued and outstanding Membership Interests held by such
Member, free and clear of all liens, claims, pledges, options, adverse claims,
assessments or charges of any nature whatsoever, or to have full right, capacity
and authority to vote such Membership Interests in favor of the Merger and the
other transactions contemplated by the Agreement.
 
Section 6.3           Indemnification of Members and Company.  Subject to the
limitations set forth in this ARTICLE VI, the Buyer and Buyer Sub agree to
jointly and severally indemnify and hold harmless the Members and their
respective heirs, successors and assigns, and the Company and its officers,
managers, agents and employees, from and against any and all Damages:
 
(a)           Arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants given or
made by the Buyer or Buyer Sub in this Agreement or any certificate, document or
instrument delivered by or on behalf of the Buyer or Buyer Sub pursuant hereto
(other than with respect to changes in the truth or accuracy of the
representations and warranties of the Buyer or Buyer Sub under this Agreement
after the date hereof if the Buyer or Buyer Sub has advised the Members and
Company of such changes in an update to the Buyer Disclosure Letter delivered
prior to the Closing and the Members and Company have nonetheless proceeded with
the Closing);
 
(b)           Resulting from any breach of any covenant, agreement or obligation
of Buyer or Buyer Sub in this Agreement or any certificate, document or
instrument delivered by or on behalf of the Buyer and Buyer Sub hereto (except
where the breach has resulted from an act or omission of the Company or the
Members before the Closing); or
 
(c)           In connection with any personal guarantees of the Members executed
in the ordinary course of business prior to Closing and identified on Schedule
1.2.

 
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Section 6.4           Limitations on Indemnity Obligations.
 
(a)           Notwithstanding anything to the contrary herein, in no event shall
a party or person having the indemnity obligation under this ARTICLE VI
(“Indemnifying Party”) have any liability for an indemnity obligation under this
ARTICLE VI unless and until the Damages relating to the party’s indemnity claims
exceed $10,000 in the aggregate.  From and after the time the aggregate Damages
for an Indemnified Party’s indemnity claims exceed $10,000, the limitation set
forth in this Section 6.4 shall be of no further force and effect and the
Indemnifying Party shall be liable for the entire amount of the Damages, subject
to the liability limitations set forth below;
 
(b)           No Indemnified Person shall be entitled to seek indemnification
from any Indemnifying Party pursuant to this ARTICLE VI with respect to any
claim or demand unless the Indemnified Party notifies such Indemnifying Party of
such claim or demand in writing within two years after the Closing Date; and
 
(c)           Notwithstanding anything to the contrary herein, in no event will
the Member’s indemnity obligations under this ARTICLE VI exceed the aggregate
amount of $500,000, (the amount of the value of the Merger Consideration as of
the Closing Date).  In no event will the Buyer’s indemnity obligation under this
ARTICLE VI exceed the aggregate amount of $500,000.
 
Section 6.5           Escrow.  Upon notice to the Members specifying in
reasonable detail the basis therefor, Buyer may give notice of a claim in such
amount under the Escrow Agreement. Neither the exercise of nor the failure to
give a notice of a claim under the Escrow Agreement will constitute an election
of remedies or limit Buyer in any manner in the enforcement of any other
remedies that may be available to it.
 
ARTICLE VII
Covenants of The Company Prior to Closing
 
Section 7.1           Access and Investigation.  Between the date of this
Agreement and the Closing, and upon reasonable advance notice received from
Buyer, the Company shall (and the Members shall cause the Company to):
 
(a)           afford Buyer and its representatives and prospective lenders and
their representatives (collectively, “Buyer Group”) full and free access, during
regular business hours, to the Company’s personnel, properties (including
subsurface testing), contracts, Permits, books and records and other documents
and data, such rights of access to be exercised in a manner that does not
unreasonably interfere with the operations of the Company; (b) furnish Buyer
Group with copies of all such contracts, Permits, books and records and other
existing documents and data as Buyer may reasonably request; (c) furnish Buyer
Group with such additional financial, operating and other relevant data and
information as Buyer may reasonably request; and
 
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(b)           otherwise cooperate and assist, to the extent reasonably requested
by Buyer, with Buyer’s investigation of the properties, assets and financial
condition related to the Company.
 
Section 7.2           Operation of the Business of Seller.  Between the date of
this Agreement and the Closing, the Company shall (and the Members shall cause
the Company to):
 
(a)           conduct its business only in the ordinary course of business,
consistent with past practice;
 
(b)           except as otherwise directed by Buyer in writing, and without
making any commitment on Buyer’s behalf, use its best efforts to preserve intact
its current business organization, keep available the services of its officers,
employees and agents and maintain its relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having business
relationships with it;
 
(c)           confer with Buyer prior to implementing operational decisions of a
material nature;
 
(d)           otherwise report periodically to Buyer concerning the status of
its business, operations and finances;
 
(e)           make no material changes in management personnel without prior
consultation with Buyer;
 
(f)            maintain its assets in a state of repair and condition that
complies with Laws and is consistent with the requirements and normal conduct of
the Company’s business;
 
(g)           keep in full force and effect, without amendment, all material
rights relating to the Company’s business;
 
(h)          comply with all Laws and contractual obligations applicable to the
operations of the Company’s business;
 
(i)            continue in full force and effect the insurance coverage under
the policies set forth in Schedule 2.13 or substantially equivalent policies;
 
(j)            except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or terminate
any Employee Benefit Plan without the express written consent of Buyer, and
except as required under the provisions of any Employee Benefit Plan, not make
any contributions to or with respect to any Employee Benefit Plan without the
express written consent of Buyer, provided that the Company shall contribute
that amount of cash to each Employee Benefit Plan necessary to fully fund all of
the benefit liabilities of such Employee Benefit Plan on a plan-termination
basis as of the Closing;
 
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(k)           upon request from time to time, execute and deliver all documents,
make all truthful oaths and do all other acts that may be reasonably necessary
or desirable in the opinion of Buyer to consummate the transactions contemplated
by this Agreement, all without further consideration; and
 
(l)            maintain all books and records of the Company relating to the
Company’s business in the ordinary course of business, consistent with past
practice.
 
Section 7.3           Negative Covenant.  Except as otherwise expressly
permitted herein, between the date of this Agreement and the Closing Date, the
Company shall not, and the Members shall not permit the Company to, without the
prior written consent of Buyer:
 
(a)           take any affirmative action, or fail to take any reasonable action
within its control, the result of which would be likely constitute a Material
Adverse Effect on the Company;
 
(b)           make any modification to any material contract or Permit; or
 
(c)           enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to the business of the Company
or its assets, liabilities or properties.
 
Section 7.4           Notification.  Between the date of this Agreement and the
Closing, the Company and the Members shall promptly notify Buyer in writing if
any of them becomes aware of (a) any fact or condition that causes or
constitutes a breach of any of the Company’s or such Member’s representations
and warranties made as of the date of this Agreement or (b) the occurrence after
the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or
constitute a breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or the
Company’s or such Member’s discovery of, such fact or condition. Should any such
fact or condition require any change to the Company Disclosure Letter, the
Company and the Members shall promptly deliver to Buyer a supplement to the
Company Disclosure Letter specifying such change. Such delivery shall not affect
any rights of Buyer under this Agreement. During the same period, the Company
and the Members also shall promptly notify Buyer of the occurrence of any breach
of any covenant of the Company or such Member or of the occurrence of any event
that may make the satisfaction of the conditions to Closing impossible or
unlikely.
 
Section 7.5           No Negotiation.  Until such time as this Agreement shall
be terminated pursuant to the terms hereof, neither the Company nor any Member
shall directly or indirectly solicit, initiate, encourage or entertain any
inquiries or proposals from, discuss or negotiate with, provide any nonpublic
information to or consider the merits of any inquiries or proposals from any
Person (other than Buyer) relating to any business combination transaction
involving the Company, including the sale by Members of the Membership
Interests, the merger or consolidation of the Company or the sale of the
Company’s business or any of the the Company’s assets (other than in the
ordinary course of business). The Company and the Members shall notify Buyer of
any such inquiry or proposal within twenty-four (24) hours of receipt or
awareness of the same.
 
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Section 7.6           Best Efforts.  The Company and the Members shall use their
best efforts to cause the conditions in Section 4.1 to be satisfied.
 
Section 7.7           Payment of Liabilities.  The Company shall pay or
otherwise satisfy in the ordinary course of business, consistent with past
practice, all of its liabilities and obligations.
 
ARTICLE VIII
General and Miscellaneous Provisions
 
Section 8.1           Notices.  All notices and other communications given or
made pursuant hereto will be in writing and will be deemed to have been duly
given or made (a) as of the date delivered, if delivered personally or by
overnight courier, (b) on the third Business Day after deposit in the U.S. mail,
if mailed by registered or certified mail (postage prepaid, return receipt
requested), or (c) when successfully transmitted by facsimile (with a confirming
copy of such communication to be sent as provided in clauses (a) or (b) above),
and, in each case to the parties at the following addresses or facsimile number
(or at such other address for a party as will be specified by like notice,
except that notices of changes of address will be effective upon receipt):
 
(a)           If to Buyer or Buyer Sub:
 
Neah Power Systems, Inc.
222118 20th Avenue
Suite 142
Bothell, Washington 98021
Attention:       Gerard C. D’Couto, President and CEO
Facsimile:       (425) 483-8454
 
With a copy (which will not constitute notice) to:
 
Seyfarth Shaw LLP
975 F Street, N.W.
Washington, D.C. 20004
Attention:       Ernest M. Stern, Esq.
Facsimile:       (202) 641-9260
 
(b)           If to the Company or to the Members (prior to the Closing Date):
 
SolCool One, LLC
1881 Commercenter E, Suite 216
San Bernardino, CA 92408
Attention:       Mark Walsh, Manager
Facsimile:       (909) 806-3563
 
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With a copy (which will not constitute notice) to:
 
Anker, Reed, Hymes, Schreiber & Cohen
1901 Avenue of the Stars, 11th Floor
Los Angeles, CA 90067
Attention:  Martin S. Reed, Esq.
Facsimile: (310) 286-7120

For purposes of this Agreement, a “Business Day” shall mean any day that is not
a Saturday, a Sunday or other day on which banking organizations in Washington,
D.C. are authorized or required by law to close.
 
Section 8.2           Expenses.  All fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby will be
paid by the party incurring such fees, costs and expenses.
 
Section 8.3           Amendment.  This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
 
Section 8.4           Entire Agreement.  This Agreement and the schedules and
exhibits attached hereto, constitute the entire agreement and supersede any and
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.  
 
Section 8.5           Public Announcements.  Buyer and the Company will consult
with each other before holding any press conferences, analyst calls or other
meetings or discussions and before issuing any press release or other public
announcements with respect to the transactions contemplated by this Agreement,
including the Merger.  The parties will provide each other the opportunity to
review and comment upon any press release or other public announcement or
statement with respect to the transactions contemplated by this Agreement,
including the Merger, and will not issue any such press release or other public
announcement or statement prior to such consultation, except as may be required
by applicable Law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.  The parties agree that the
initial press release or releases to be issued with respect to the transactions
contemplated by this Agreement will be mutually agreed upon prior to the
issuance thereof.  In addition, the Company will, and will cause its
Subsidiaries to consult with Buyer regarding communications with customers,
members and employees relating to the transactions contemplated by this
Agreement.
 
Section 8.6           No Third-Party Beneficiaries.  Except for the parties
hereto, this Agreement is not intended to confer upon any other Person any
rights or remedies hereunder.
 
Section 8.7           Assignment.  This Agreement will not be assigned by
operation of Law or otherwise, except that Buyer and Buyer Sub may assign all or
any of their rights hereunder to any Affiliate of Buyer; provided, however, that
no such assignment will relieve the assigning party of its obligations
hereunder.  This Agreement will be binding upon, and will be enforceable by and
inure to the benefit of the parties hereto and their respective successors and
assigns.
 
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Section 8.8           Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party.  Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
 
Section 8.9           Governing Law.  This Agreement will be governed by, and
construed in accordance with, the Laws of the State of Washington applicable to
contracts executed in and to be performed entirely within that State.
 
Section 8.10         Consent to Jurisdiction.  Any dispute arising under this
Agreement shall be submitted to arbitration administered by JAMS pursuant to its
Comprehensive Arbitration Rules and Procedures before a single arbitrator in
Bothell, Washington in the event that both Buyer and the Company agree to submit
such dispute to binding arbitration.  Judgment on the Award may be entered in
any court having jurisdiction.  Submission of a dispute under this Agreement
shall not preclude Buyer and the Company from seeking provisional remedies in
aid of arbitration from a court of appropriate jurisdiction.  In the event that
the parties do not agree to submit such dispute to arbitration, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
federal court located in the State of Washington or any Washington state court
in the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement; (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court; and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a federal court sitting in the State of Washington or a Washington
state court.
 
Section 8.11         Headings; Interpretation.  The headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.  Whenever the words “include,”
“includes” or “including” are used in this Agreement, they will be understood to
be followed by the words “without limitation.”
 
Section 8.12         Construction.  In the event of an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
 
Section 8.13         Counterparts.  This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed will be deemed to be an original but all of which
will constitute one and the same agreement.
 
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Section 8.14         Confidentiality.  The Company, Buyer and Buyer Sub each
recognize that they have received and will receive confidential information
concerning the other during the course of the Merger negotiations and
preparations.  Accordingly, the Company, Buyer and Buyer Sub each agree (a) to
use its respective best efforts to prevent the unauthorized disclosure of any
confidential information concerning the other that was or is disclosed during
the course of such negotiations and preparations, and is clearly designated in
writing as confidential at the time of disclosure, and (b) to not make use of or
permit to be used any such confidential information other than for the purpose
of effectuating the Merger and related transactions.  The obligations of this
section will not apply to information that (i) is or becomes part of the public
domain, (ii) is disclosed by the disclosing party to third parties without
restrictions on disclosure, (iii) is received by the receiving party from a
third party without breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law.
 
Section 8.15         Termination.  This Agreement may be terminated either (i)
by the Company  in the event that Buyer fails to meet either the funding date
for $100,000 as set forth in Section 1.8 or (ii) by Buyer or the Company upon
written notice to the other, if the Closing has not been consummated on or prior
to 5:00 p.m. (Pacific time) on July 31, 2009; provided, however, that the right
to terminate this Agreement under this Section 8.15 shall not be available to
any party whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time. Nothing in this Section 8.15 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.
 
[REMAINDER OF PAGE LEFT BLANK.]

 
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IN WITNESS WHEREOF, Buyer, Buyer Sub, the Company and the Members have executed
this Agreement as of the date first written above.
 
NEAH POWER SYSTEMS, INC.
   
By:
/s/ Gerard C. D’Couto
Name:
Gerard C. D’Couto
Title:
President
   
NEAH POWER ACQUISITION CORP.
   
By:
/s/ Gerard C. D’Couto
Name: 
Gerard C. D’Couto
Title:
President
   
SOLCOOL ONE, LLC
   
By:
/s/ Mark Walsh
Name:
 Mark Walsh
Title:
Manager
   
MEMBER:
   
/s/ Mark Walsh
Mark Walsh

 
 
 

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EXHIBIT A
 
Buyer Sub Articles of Incorporation

 
A-1

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EXHIBIT B
 
Buyer Sub Bylaws

 
B-1

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EXHIBIT C
 
Legal Opinion

 
C-1

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EXHIBIT D
 
Form of Escrow Agreement

 
D-1

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