Exhibit
      10.1

     

    


    
      

      

    

    


     

    


    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 November 26th,
      2008

     

     

    


    


    
      

      

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      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.

            	
              5

            
	 	
              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

            	
              7

            
	 	
              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

            


    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              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.

            	
              25

            
	 	
              Section
                5.2

            	 	
              Escrow
                of Series B Preferred 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.

            	
              28

            
	 	
              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

            	
              29

            
	 	
              Section
                7.3

            	 	
              Negative
                Covenant

            	
              30

            


    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              Section
                7.4

            	 	
              Notification

            	
              31

            
	 	
              Section
                7.5

            	 	
              No
                Negotiation

            	
              31

            
	 	
              Section
                7.6

            	 	
              Best
                Efforts

            	
              31

            
	 	
              Section
                7.7

            	 	
              Payment
                of Liabilities

            	
              31

            
	
              ARTICLE
                VIII

            	GENERAL
              AND MISCELLANEOUS PROVISIONS	
              31

            
	 	
              Section
                8.1

            	 	
              Notices

            	
              31

            
	 	
              Section
                8.2

            	 	
              Expenses

            	
              32

            
	 	
              Section
                8.3

            	 	
              Amendment

            	
              32

            
	 	
              Section
                8.4

            	 	
              Entire
                Agreement

            	
              32

            
	 	
              Section
                8.5

            	 	
              Public
                Announcements

            	
              33

            
	 	
              Section
                8.6

            	 	
              No
                Third-Party Beneficiaries

            	
              33

            
	 	
              Section
                8.7

            	 	
              Assignment

            	
              33

            
	 	
              Section
                8.8

            	 	
              Severability

            	
              33

            
	 	
              Section
                8.9

            	 	
              Governing
                Law

            	
              33

            
	 	
              Section
                8.10

            	 	
              Consent
                to Jurisdiction

            	
              33

            
	 	
              Section
                8.11

            	 	
              Headings;
                Interpretation

            	
              34

            
	 	
              Section
                8.12

            	 	
              Construction

            	
              34

            
	 	
              Section
                8.13

            	 	
              Counterparts

            	
              34

            
	 	
              Section
                8.14

            	 	
              Confidentiality

            	
              34

            
	 	
              Section
                8.15

            	 	
              Termination

            	
              34

            


    

    


    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

    


    AGREEMENT
      AND PLAN OF MERGER

    


    THIS
      AGREEMENT AND PLAN OF MERGER (this
      “Agreement”),
      dated
      as of November 26th,
      2008
      (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
      and members, respectively, to consummate the business combination transaction
      provided for herein in 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. 

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    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 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 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
      Series B Preferred Stock, par value $.001 per share (“Series
      B Preferred”),
      or
      100,000 shares of Series B Preferred, at a price of $5.00 per share (the
“Series
      B Preferred Consideration”
or
      the
“Merger
      Consideration”).
      Except as otherwise provided herein, the Series B Preferred shall be convertible
      in according with the provisions thereof any time after the second anniversary
      of its issuance date into shares of Buyer’s common stock (the “Conversion
      Shares”),
      have
      a conversion price equal to the average of the closing bid and asked prices
      of
      Buyer’s shares of common stock for four days prior to the date of this
      Agreement.

     

    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. 

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    Section
      1.8 The
      Financing.
      Buyer
      shall use its best efforts to obtain $1,200,000 in new capital (the
“Financing”)
      and
      shall provide capital to the Surviving Corporation based upon the Surviving
      Corporation achieving the following milestones: $50,000 upon a financing
      arranged by Buyer for the Surviving Corporation of not less than an initial
      $400,000, $150,000 upon a financing arranged by Buyer for the Surviving
      Corporation of not less than an additional $400,000 and $300,000 upon a
      financing arranged by Buyer for the Surviving Corporation of not less than
      an
      additional $400,000. An additional $500,000 shall be reserved as a credit
      facility to finance production letters of credit based upon a subsequent
      financing. The capital provided to the Surviving Corporation under this Section
      1.8 shall be administered by Buyer’s CFO and shall be used by the Surviving
      Corporation to meet shipping commitments and cover operating costs, including
      payments of salaries and other overhead items.  

    


    ARTICLE
      II

    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.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    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 settlement payments made by GreenCore
      Air, Inc .in the case styled SolCool
      One, LLC v. Green Core Air, Inc., et al.,
      Case
      No. CYRS 002866 in the Superior Court of the State of California, County of
      San
      Bernardino, Rancho Cucamonga District), 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.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    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 Section
      1.7
      there
      are no other Members’ Certificates issued or outstanding. 

    


    (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.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    
 

    (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,
      2007 and (ii) the Company’s unaudited balance sheet (the “Company
      Balance Sheet”),
      statement of cash flows and income statement each dated as of September 30
      2008
      (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. 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    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;

     

    (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

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (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.

     

    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

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (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. 

     

    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.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (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”):
      

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (i) any
      real
      estate leases;

    


    (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.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (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.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (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

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    (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 other than
      to
      Jack Dowling pursuant to his Consulting 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.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    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
      Series B Preferred, the Conversion Shares issuable upon conversion of the Series
      B Preferred (collectively, 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.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    (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:

    


    (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).

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    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
      or 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. 

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    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 or Series B Preferred
      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 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. 

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    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. 

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    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. 

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    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. 

    


    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. 

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    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. 

     

    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
      D
      attached
      hereto.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

       

    

    (f) Employment
      Agreements.
      The
      Members shall have entered into the Employment Agreements attached hereto as
      Exhibits
      E-1,
      E-2,
      E-3,
      E-4
      and
E-5.

     

    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.

    


    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.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    (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 Series B Preferred Shares.
      The
      Series B Preferred Shares shall be placed by Buyer with Seyfarth Shaw LLP to
      secure Seller’s indemnification obligations under this Agreement and any damages
      arising from litigation between Seller and Green Core Technology as set forth
      in
      the Company Disclosure Letter. The escrow agreement shall be in the form
      attached hereto as Exhibit
      F
      (the
“Escrow
      Agreement”).
      The
      escrow shall be for a period of two years from the date of this
      Agreement.

     

    Section
      5.3 Adjustment
      for Dilutive Issuances.
      If
      Buyer, at any time prior to conversion of the Series B Preferred 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 $0.50 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.

    


    The
      following shall be deemed “Excluded
      Issuances”
for
      the
      purpose of this Section 5.3:

     

    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;

    


    The
      issuance or sale of shares of Common Stock issuable upon the exercise of
      outstanding securities of the Buyer; and

    


    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.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

    Section
      5.4 Spin-off
      of the Company.
      The
      Members of the Company may choose to either convert their Series B Preferred
      Shares or to take the Company public through a firm commitment underwritten
      initial public offering (“IPO”)
      under
      the Securities Act. In the event that the bid price of Buyer’s shares of Common
      Stock is less or unchanged from the date of this Agreement until the date of
      the
      IPO, Buyer shall retain 50% of the Company’s common stock that is not
      distributed to the public. In the event that the bid price of Buyer’s shares of
      Common Stock increases 200% or more from the date of this Agreement until the
      date of the IPO, Buyer shall retain 75% of the Company’s common stock that is
      not distributed to the public. In the event that the bid price of Buyer’s shares
      of Common Stock is greater than the bid price of the Buyer’s Common Stock on the
      date of this Agreement but less than 200% more than the bid price of Buyer’s
      Common Stock on the date of this Agreement, then Buyer shall receive an
      additional 5% of the Company’s common stock that is not distributed to the
      public for each 20% increase in Buyer’s Common Stock bid price.

    


    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

    


    (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.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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. 

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    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

    


    (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;

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (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;

    


    (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.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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):

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(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

    815
      Connecticut Ave., N.W., Suite 500 

    Washington,
      D.C. 20006

    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

    525
      Amigos Drive

    Suite
      “5”

    Redlands,
      California 92373

    Attention: Mark
      Walsh, Managing Member

    Facsimile: (909)
      747-0311

    


    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. 

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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.

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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 the funding obligation 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 November 26th,
      2008;
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.

    


    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

    


     

    


    [REMAINDER
      OF PAGE LEFT BLANK.]

     

     

     

     

     

     

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    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:

              	
                Managing
                  Member 

              	 
	 	 	 	 
	 	
                MEMBER:

              	 
	 	 	 	 
	 	
                /s/
                  Mark Walsh 

              	 
	 	
                Mark
                  Walsh 

              	 
	 	 	 	 
	 	 	 	 
	 	   
	 


      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    


    Buyer
      Sub Articles of Incorporation

    


    


    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    


    Buyer
      Sub Bylaws

    


    


    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

    


    Form
      of Acquisition Warrant

    


    


    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D

    


    Legal
      Opinion

     

     

    
      
        
        

      

      
        D-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      E-1 through E-5

    


    Employment
      Agreements

     

     

    
      
        
        

      

      
        E-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      F

    


    Form
      of Escrow Agreement

     

     

    
      
        
        

      

      
        F-1