Unassociated Document


    SERIES
B PREFERRED STOCK PURCHASE AGREEMENT

     

    This Series B Preferred Stock Purchase
Agreement (this “Agreement”)
is made and entered into as of April 17, 2009, by and among Energy and Power
Solutions, Inc., a California corporation (the “Company”),
and the parties listed on the schedule of Investors attached to this Agreement
as Exhibit A
(each hereinafter individually referred to as an “Investor”
and collectively referred to as the “Investors”).

     

    WHEREAS, the Company desires
to sell to the Investors, and the Investors desire to purchase from the Company,
shares of the Company’s Series B Stock (as defined below), on the terms and
conditions set forth in the Agreement.

     

    WHEREAS, the Bridge Notes (as
defined below) will automatically convert into shares of Series B Stock upon the
closing of the transactions contemplated by this Agreement.

     

    NOW, THEREFORE, in consideration of the
above recitals and the mutual covenants made herein, the parties hereby agree as
follows:

     

    1.        
    PURCHASE
AND SALE OF SERIES B STOCK.

     

    1.1           Authorization.  As
of the First Closing (as defined below), the Company will have authorized the
issuance, pursuant to the terms and conditions of this Agreement, of up to
35,000,000 shares of the Company’s Series B Preferred Stock, $0.0001 par value
per share (the “Series B
Stock”).  The Series B Stock shall have the powers,
preferences, and rights and the qualifications, limitations and restrictions set
forth in the Amended and Restated Articles of Incorporation of the Company
attached to this Agreement as Exhibit B (the
“Restated
Articles”).  The Company will further have reserved up to
35,000,000 shares of Common Stock, issuable upon conversion of the Series B
Stock (the “Conversion
Shares”).

     

    1.2           Agreement
to Purchase and Sell.  Pursuant to the
terms set forth herein, including but not limited to the satisfaction by the
Company of all applicable closing conditions set forth in Section 4 below, and
in reliance on the representations and warranties set forth herein, each
Investor agrees, severally and not jointly, to purchase, and the Company agrees
to sell and issue to such Investor at one or more Closings (as defined below)
the number of shares of Series B Stock set forth opposite such Investor’s name
on Exhibit A
attached hereto at a purchase price of $1.72 per share (the “Price Per
Share”).  The shares of Series B Stock purchased, sold and
issued pursuant to this Agreement are sometimes hereinafter referred to as the
“Purchased
Shares”.

    


     

    1.3           Note
Conversion. Certain of the Investors
(the “Noteholders”)
as set forth on Exhibit
A, have made loans to the Company pursuant to those certain 8% Unsecured
Convertible Promissory Notes issued by the Company in the aggregate principal
amount of $2,000,000 dated March 20, 2009 (collectively, the “Bridge
Notes”), the principal and interest outstanding under which automatically
convert (the “Note
Conversion”) into shares of Series B Stock at a price per share equal to
$1.376.  In conjunction with the transactions set forth in Section 1.2
and pursuant to the Note Conversion, the Company will issue an aggregate of
1,461,993 shares of Series B Stock upon the conversion of all Bridge Notes
(consisting of $2,000,000 principal amount plus accrued interest) pursuant to
the terms of this Agreement and the Bridge Notes.  Each Noteholder
acknowledges and agrees that the issuance by the Company of the number of shares
of Series B Stock set forth opposite such Noteholder’s name on Exhibit
A constitutes payment in full of all principal, accrued interest and any
other amounts due under the Convertible Notes held by such
Noteholder.  At the Closing, the Bridge Notes will be terminated in
their entirety and shall be of no further force and effect, and the Noteholders
agree to surrender the Bridge Notes to the Company for
cancellation.

     


    
      
         


      

      
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    1.4           The
Closing.  The purchase and
sale of the Series B Stock and Note Conversion (a “Closing”,
and the first of such Closings, the “First
Closing”) will take place at the offices of Sheppard Mullin Richter &
Hampton LLP, 650 Town Center Drive, 4th Floor,
Costa Mesa, CA 92626, at 12:00 p.m. Pacific Time on April 17, 2009 or at such
other time and place as the Company and the Investors mutually agree upon in one
or more closings (the “Closing
Date”).  Subject to the terms and conditions set forth in this
Agreement, the Company may sell up to an additional 14,534,884 shares of Series
B Stock in the aggregate to purchasers acceptable to the Company, Altira, NGEN
and Robeco (each a “Subsequent
Purchaser”) at the Price Per Share; provided, however, that any
such sale may only occur during that certain period beginning on the Closing
Date and ending on the 60th day thereafter (the “Subsequent Sale
Period”).  Any such sale shall be made during the Subsequent
Sale Period and upon the same terms and conditions as those set forth herein,
and each Subsequent Purchaser shall become a party to this Agreement (and Exhibit A hereto
shall be amended to include such Subsequent Purchaser), the Investor Rights
Agreement, the Right of First Refusal and Co-Sale Agreement and the Voting
Agreement and shall have the rights and obligations, and be treated as, an
Investor hereunder and thereunder.  Each closing of a sale of Series B
Stock to one or more Subsequent Purchasers during the Subsequent Sale Period
shall be a Closing for purposes of this Agreement.  Each Investor
hereby agrees to waive any rights of first refusal it may have in connection
with the sale of Shares to Subsequent Purchasers during the Subsequent Sale
Period.  At each Closing, subject to the terms and conditions hereof,
the Company will deliver to each Investor a certificate representing the number
of Purchased Shares that such Investor is purchasing as shown on Exhibit A against
delivery to the Company by such Investor of the full Price Per Share for such
shares of Series B Stock at such Closing, paid by (a) wire transfer of funds to
an account designated by the Company in writing, (b) surrender of the Bridge
Notes to the Company for cancellation pursuant to Section 1.3 or (c) a
combination of the foregoing.

     

    1.5           Defined
Terms Used in this Agreement.  In addition to
the terms defined above and below, the following terms used in this Agreement
shall be construed to have the meanings set forth or referenced
below.

     

    “Altira”
means Altira Technology Fund V L.P.

     

    “Code”
means the Internal Revenue Code of 1986, as amended.

     

    “First Refusal
and Co-Sale Agreement” means the amended and restated right of first
refusal and co-sale agreement among the Company, the Investors and certain other
parties, dated as of the date of the First Closing, substantially in the form of
Exhibit E
attached hereto.

     

    “Employment
Agreements” means employment agreements between the Company and each of
the Executives, substantially in the form of Exhibit I attached
hereto.

      
        
           


        

        
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    “Executives”
means the Founders, Peter Ludlum, Iyad Darcazallie and Charles
Allured.

     

    “Founders”
means Jay Zoellner, Shiva Subramanya, Staffan Akerstrom and George
Botich.

     

    “Investors’
Rights Agreement” means the amended and restated investors’ rights
agreement among the Company and the Investors, dated as of the date of the First
Closing, substantially in the form of Exhibit D attached
hereto.

     

    “Material Adverse
Effect” means any
effect, change, development, event or circumstance that, considered together
with all other effects, changes, developments, events or circumstances, is or
could reasonably be expected to be or to become materially adverse to, or has or
could reasonably be expected to have a result in a material adverse effect on,
(a) business, assets (including intangible assets), liabilities, financial
condition, property or results of operations of the Company, (b) the ability of
the Company to consummate the transactions contemplated by this Agreement or to
perform any of its obligations under this Agreement and the Transaction
Agreements or (c) the rights or benefits explicitly granted to the Investors in
this Agreement or the Related Agreements.

     

    “NGEN”
means NGEN II, L.P.

     

    “Related
Agreements” means the Investors’ Rights Agreement, the First Refusal and
Co-Sale Agreement and the Voting Agreement.

     

    “Robeco”
collectively means Stichting Custody Robeco Master CleanTech II (USD), Stichting
Custody Robeco Master CleanTech II (EUR), and The Environment Agency Active
Pension Fund.

     

    “Securities
Act” means the Securities Act of 1933, as amended.

     

    “Voting
Agreement” means the amended and restated voting agreement among the
Company, the Investors and certain other parties, dated as of the date of the
First Closing, substantially in the form of Exhibit F attached
hereto.

     

    2.           REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company
hereby represents and warrants to each Investor as of the Closing that, except
as set forth in the Schedule of Exceptions (“Schedule of
Exceptions”) attached to this Agreement as Exhibit C and
delivered to the Investors and their counsel in connection with the Agreement
(which Schedule of Exceptions shall be additional representations and warranties
to the Investors by the Company under this Section 2), the statements in the
following paragraphs of this Section 2 are all true and complete:

     

    2.1           Organization,
Good Standing and Qualification.  The Company has
been duly incorporated and organized, and is validly existing in good standing,
under the laws of the State of California.  The Company has the
requisite corporate power and authority to enter into, execute, deliver and
perform its obligations under this Agreement and the Related Agreements, to sell
and issue the Purchased Shares, to own and operate its properties and assets and
to carry on its business as currently conducted by the Company and as presently
proposed to be conducted.  The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect.


    
      
         


      

      
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    2.2          Capitalization.  The
capitalization of the Company consists of the following:

     

    (a)           Preferred
Stock.  Immediately prior to the First Closing, a total of
41,000,000 authorized shares of preferred stock, $0.0001 par value per share,
(the “Preferred
Stock”), 6,000,000 of which are designated as “Series A Preferred Stock,”
5,148,912 of which are issued and outstanding (the “Series A
Stock”), and 35,000,000 of which are designated as “Series B Preferred
Stock,” none of which are issued and outstanding.  Upon the Closing,
the powers, preferences and rights and the qualifications, limitations and
restrictions, of the Series B Stock will be as stated in the Restated Articles
and as provided by law.

     

    (b)           Common
Stock.  Immediately prior to the First Closing, a total of
53,000,000 authorized shares of Common Stock, of which 4,210,000 shares are
issued and outstanding.  The Company has reserved up to 35,000,000
shares of Common Stock issuable upon conversion of the Purchased
Shares.

     

    (c)           Options; Reserved Shares for
Option Issuances; Warrants.  The Company has reserved 7,296,324 shares of Common Stock
for issuance to officers, directors, employees and consultants of the Company
pursuant to its 2007 Stock Award Plan duly adopted by the Board of Directors and
approved by the Company shareholders (the “Plan”).  Of
such shares of Common Stock reserved under the Plan, (i) options to purchase
565,022 shares have been granted and are currently outstanding, and (ii)
6,731,302 shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to the Plan. The Company has
furnished to the Investors (or their counsel(s)) complete and accurate copies of
the Plan and form of agreement used thereunder.  The Company has
approved the issuance of 40,364 shares of Common Stock to certain Executives as
part of the 2008 management bonus.  The Company has reserved 398,432
shares of Common Stock for issuance upon the exercise of a warrant issued to
Charles Allured to acquire up to 210,000 shares of Common Stock and broker’s
warrants to acquire in the aggregate up to 188,432 shares of Common
Stock.  Except for the conversion privileges of the Purchased Shares,
the Investors’ Rights Agreement, the First Refusal and Co-Sale Agreement, the
Bridge Notes and the securities and rights described in this Section 2.2(c),
there is no outstanding option, warrant, right (including conversion and
preemptive rights and rights of first refusal) or agreement for the purchase or
acquisition from the Company of any shares of its capital stock or any
securities convertible into or ultimately exchangeable or exercisable for any
shares of the Company’s capital stock.  Apart from the exceptions
noted herein or in the Schedule of Exceptions, no shares of the Company’s
outstanding capital stock, or stock issuable upon exercise or exchange of any
outstanding options, warrants or rights, or other stock issuable by the Company,
are subject to any preemptive rights, rights of first refusal or other rights to
purchase such stock (whether in favor of the Company or any other person),
pursuant to any agreement or commitment of the Company.  Except for
the Voting Agreement to be entered into concurrently herewith, the Company is
not a party or subject to any agreement or understanding, and, to the best of
the Company’s knowledge, there is no agreement or understanding between any
persons that affects or relates to the voting or giving of written consents with
respect to any security or the voting by a director of the
Company.


    
      
        
           


        

        
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      (d)           Outstanding Shares Validly
Issued; Compliance with Securities Laws.  The outstanding
shares of the capital stock of the Company are duly authorized and validly
issued, fully paid and nonassessable and have been issued in compliance with all
applicable federal and state securities laws and approved by all requisite
shareholder action.

       

    

    (e)           Securities Issued at Fair
Market Value.  The Company has not issued or sold any of its
securities at less than fair market value, as determined by the Board of
Directors of the Company (the “Board”)
in good faith, to any person.  To the Company’s knowledge, the Company
has not modified or amended the terms of any of the Company’s securities in such
a way as to cause the holder of such security to recognize ordinary income
subject to an excise tax pursuant to Section 409A of the Code.

     

    (f)           Outstanding Shares
Table.  The Schedule of Exceptions sets forth a complete list
as of immediately prior to the Closing of the number of outstanding shares or
other securities owned as a class by each class or series of shareholders,
optionholders, warrantholders and other security holders together with any other
securities reserved for issuance.

     

    2.3           Subsidiaries.  The Company does
not presently own or control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, association, or
other entity.

     

    2.4           Due
Authorization.  All corporate
action on the part of the Company’s directors, officers and shareholders
necessary for the authorization, execution, delivery of, and the performance of
all obligations of the Company under, this Agreement and the Related Agreements,
the authorization, issuance, reservation for issuance and delivery of all of the
Purchased Shares being sold and issued under this Agreement and of the
Conversion Shares, and the filing of the Restated Articles has been taken or
will be taken prior to the First Closing, and this Agreement constitutes, and
the Related Agreements when executed and delivered will constitute, valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms.

     

    2.5           Valid Issuance of
Stock.

     

    (a)           The
Purchased Shares, when issued and paid for as provided in this Agreement, will
be duly authorized and validly issued, fully paid and nonassessable and free of
any liens or encumbrances, other than (i) restrictions imposed by this Agreement
and the Related Agreements (ii) restrictions imposed by securities laws, and
(iii) liens or encumbrances created by or imposed upon the Investors through no
action of the Company.  The Conversion Shares have been duly and
validly reserved for issuance upon conversion of the Purchased Shares, and when
issued upon such conversion in accordance with the Restated Articles, will be
duly authorized and validly issued, fully paid and nonassessable and free of any
liens or encumbrances, other than (iv) restrictions imposed by this Agreement
and the Related Agreements, (v) restrictions imposed by securities laws and (vi)
liens or encumbrances created by or imposed upon the Investors through no action
of the Company.

     

    (b)           Based
in part on the representations made by the Investors in Section 3 hereof,
the offer and sale of the Purchased Shares solely to the Investors in accordance
with this Agreement, no transfer of Purchased Shares by any holder thereof and
that no commission or other remuneration is paid or given, directly or
indirectly, for soliciting the issuance of Conversion Shares upon conversion of
the Purchased Shares, the issuance of the Conversion Shares is exempt from the
registration and prospectus delivery requirements of the Securities Act, and the
securities registration and qualification requirements of the currently
effective provisions of the securities laws of the states in which each of the
Investors is a resident of based upon its address set forth on Exhibit
A.


    
      
         


      

      
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    2.6           Third
Party Consents.  Except for the
qualifications and filings referenced in Section 2.7 below, no consent, approval,
qualification, order or authorization of, or filing with, any person or entity
is required in connection with the Company’s valid execution, delivery or
performance of this Agreement or the Related Agreements, or the offer, sale or
issuance of the Purchased Shares by the Company, the issuance of the Conversion
Shares, or the consummation of any other transaction contemplated on the part of
the Company hereby.

     

    2.7           Governmental
Consents.  No consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in order to enable
the Company to execute, deliver and perform its obligations under this Agreement
and the Related Agreements, except for (i) the filing of
the Restated Articles with the Secretary of State of the State of California and
(ii) such qualifications or filings under applicable securities laws as may be
required in connection with the transactions contemplated by this
Agreement.  All such qualifications and filings will, in the case of
qualifications, be effective on the First Closing and will, in the case of
filings, be made within the time prescribed by law.

     

    2.8           Litigation.  There is no
action, suit, proceeding, claim, arbitration or investigation (“Action”)
pending (or, to the Company’s knowledge, currently threatened) against the
Company.  The foregoing includes, without limitation, any Action
pending (or, to the Company’s knowledge, currently threatened) involving the
prior employment of any of the Company’s Founders, employees or contractors,
their use in connection with the Company’s business of any information or
techniques allegedly proprietary to any of their former employers, their
obligations under any agreements with prior employers or negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business.  The Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality and there is no Action by the Company currently
pending or which the Company intends to initiate.

     

    2.9           Proprietary
Information and Inventions Assignment Agreement.  Each employee,
consultant, officer and contractor of the Company has entered into and executed
Proprietary Information and Inventions Assignment Agreement in the form attached
to this Agreement as Exhibit G or an
employment or consulting agreement containing substantially similar terms (such
agreement, the “Proprietary
Information and Inventions Assignment Agreement”) and no such employee or
contractor has excluded works or inventions from such employee’s, officer’s,
consultant’s or contractor’s Proprietary Information and Inventions Assignment
Agreement.

     

    2.10           Status of Proprietary
Assets.


    
      
         


      

      
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      (a)           Status.  The
Company owns or has sufficient title and ownership of, or is duly licensed under
or otherwise authorized to use, all patents, patent applications, trademarks,
service marks, trade names, copyrights, mask works, trade secrets, domain names,
confidential and proprietary information and designs and proprietary rights
necessary to enable it to carry on its business as now conducted and as
presently contemplated to be conducted (all of the foregoing collectively
hereinafter referred to as the “Proprietary
Assets”), and without any conflict with or infringement of the rights of
others.  Section 2.10(a) of the Schedule of Exceptions contains a
complete list of the Company’s Proprietary Assets (and pending applications
therefor).  No third party has any ownership right, title, interest,
claim in or lien on any Proprietary Asset owned by the Company.

       

    

    (b)           Licenses; Other
Agreements.  The Company has not granted, and there are not
outstanding, any options, licenses or agreements of any kind relating to any
Proprietary Asset, nor is the Company bound by or a party to any option, license
or agreement of any kind with respect to any of its Proprietary
Assets.  The Company is not obligated to pay any royalties or other
payments to third parties with respect to the marketing, sale, distribution,
manufacture, license or use of any Proprietary Asset or any other property or
rights.  The Company has not received any communications alleging that
the Company has violated or, by conducting its business, would violate any of
the patents, patent applications, trademarks, service marks, trade names,
copyrights, mask works, trade secrets or other proprietary rights or processes
of any other person or entity.  There are no agreements,
understandings, instruments, contracts, judgments, orders or decrees to which
the Company is a party or by which it is bound that involve indemnification by
the Company with respect to infringements of any of the patents, patent
applications, trademarks, service marks, trade names, copyrights, mask works,
trade secrets or other proprietary rights or processes of any other person or
entity.  The Company is not aware that any of its employees or
consultants is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, which contract,
agreement, judgment, decree or order would interfere with the use of such
employee’s or consultant’s best efforts to promote the interests of the Company
or that would conflict with the Company’s business as now conducted and as
presently proposed to be conducted.  Neither the execution or delivery
of this Agreement, nor the carrying on of the Company’s business as now
conducted and as presently proposed to be conducted by the employees or
consultants of the Company, will, to the best of the Company’s knowledge,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee or consultant is now obligated.  It is not
currently, nor will it be necessary to use any inventions, trade secrets or
proprietary information of any of its employees or consultants (or persons
it currently intends to hire) made prior to their employment by or provision of
services to the Company.

     

    (c)           Open Source
Software.  None of the Company’s Proprietary Assets includes or
incorporates into its source code any open source software that is licensed
under the GNU General Public License or another open source code license having
a similar “contaminating” effect on such Proprietary Assets, or that would
otherwise require the Company to release any portion of its source code, or to
permit free redistribution, reverse engineering or modification of any of the
Company’s Proprietary Assets.


    
      
         


      

      
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      (d)           No Infringement. To
the best of the Company’s knowledge, the Company has not violated or infringed,
and is not currently violating or infringing any Proprietary Asset of any other
person or entity.  The Company has not received any communications
alleging that the Company (or any of its employees or consultants) has violated
or infringed or, by conducting its business as proposed, would violate or
infringe, any Proprietary Asset of any other person or entity.

       

    

    (e)           Government
Funding.  No government funding, facilities or resources of a
university, college, other educational institution or research center or funding
from third parties was used in the development of the Company’s Proprietary
Assets and no governmental entity, university, college, other educational
institution or research center has any claim or right in or to the Company’s
Proprietary Assets.

     

    (f)           Protection of Proprietary
Assets.  The Company has taken commercially reasonable steps to
protect its confidential information and has not disclosed any of its
Proprietary Assets or other confidential information of the Company to any third
party except under a binding non-disclosure agreement, the form of which has
previously been provided to the Investors.

     

    2.11           Compliance
with Law and Documents.  The Company is
not in violation or default of any provisions of its articles of incorporation
or bylaws, each as amended to date, and upon the filing with the Secretary of
State of the State of California of the Restated Articles, will not be in
violation or default of any provisions thereof.  The Company is not in
violation of any term or provision of any mortgage, indebtedness, indenture,
contract, agreement, instrument, judgment or decree in any material respect, or,
to the best of the Company’s knowledge, any applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company’s business or properties.  The execution, delivery
and performance of this Agreement and the Related Agreements, the consummation
of the transactions contemplated hereby or thereby, and the issuance of the
Purchased Shares, will not result in any such violation or default, or be in
conflict with or result in a violation or breach of, with or without the passage
of time or the giving of notice or both, its articles of incorporation or
bylaws, as amended, any judgment, order or decree of any court or arbitrator to
which the Company is a party or is subject, any agreement or contract of the
Company, or, to the Company’s knowledge, a violation of any statute, law,
regulation or order, or an event which results in the creation of any mortgage,
pledge, lien, charge or encumbrance upon any of the properties or assets of the
Company.  The Company has not received any notice of any violation of
any such statute, law, regulation or order that has not been remedied prior to
the date hereof.

     

    2.12           Registration
Rights. Except as
provided in the Investors’ Rights Agreement, the Company is not under any
obligation to register under the Securities Act any of its currently outstanding
securities or any securities issuable upon exercise or conversion of its
currently outstanding securities nor is the Company obligated to register
or qualify any such securities under any state securities or blue sky
laws.

     

    2.13           Title to
Property and Assets.  The Company has
good and marketable title to all of its properties and assets; has good title to
all of its leasehold interests; and owns its properties and assets free and
clear of all mortgages, deeds of trust, liens, encumbrances and security
interests, except for statutory liens for the payment of current taxes that are
not yet delinquent and liens, encumbrances and security interests which arise in
the ordinary course of business and which do not affect material properties and
assets of the Company.  With respect to the property and assets it
leases, the Company is in compliance with such leases and holds a valid
leasehold interest free of any liens, claims or encumbrances, subject to the
exceptions noted in the preceding sentence.

    
      
         


      

      
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    2.14           Financial
Statements.  The Company has
delivered to the Investors its consolidated unaudited balance sheet and
statements of operations and cash flows for the year ended December 31, 2008 and
the three months ended March 31, 2009 (the “Financial
Statements”).  The Financial Statements together with any notes
thereto, are correct in all material respects and present fairly the financial
condition and operating results of the Company as of the date(s) and during the
period(s) indicated therein.  The Financial Statements have been
prepared in accordance with accounting principles that are generally accepted in
the United States (“GAAP”) except that
they do not contain all of the notes required under GAAP and are subject to
certain year-end adjustments. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, subject to normal year-end
audit adjustments.  Except as set forth in the Financial Statements or
in Section 2.14
of the Schedule of Exceptions, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to March 31, 2009 and
(ii) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate are not material to the financial condition or
operating results of the Company.

     

    2.15           Contracts and Other
Commitments.

     

    (a)           Section
2.15 of the Schedule of Exceptions sets forth all contracts, agreements and
instruments, whether written or oral, to which the Company is a party or by
which they are bound that involve (a) obligations of, or payments to, the
Company in excess of $250,000 or (b) the Proprietary Assets (collectively, the
“Material
Contracts”).  All of the Material Contracts are valid, binding
and in full force and effect in all material respects, subject to laws relating
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application relating to the enforcement of creditors’ rights or the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies and to general principles of equity.  The
Company is not, nor to the Company’s knowledge is any other party to the
Material Contracts, in default under any of the Material Contracts.

     

    (b)           Other
than (i) standard employee benefits generally made available to all
employees, (ii) standard director and officer indemnification agreements
approved by the Board, (iii) the purchase or grant of shares of the
Company’s capital stock approved by the Board and (iv) the transactions
contemplated by this Agreement and the Related Agreements, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, employees, affiliates, or any affiliate
thereof.

     

    (c)           There
are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company is a party or by which it is bound that
involve (i) the grant of rights to manufacture, produce, assemble, license,
market, or sell its products to any other person or that affect the Company’s
exclusive right, if any, to develop, manufacture, assemble, distribute, market
or sell its products, (ii) indemnification by the Company with respect to
infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale agreements entered into in the ordinary course of
business), or (iii) indemnification or guarantee by the Company of any
indebtedness of any other entity.


    
      
         


      

      
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    2.16           Absence
of Changes.  Since March 31, 2009, there has not
been:

     

    (a)           any
change in the liabilities, financial condition, operations, business or affairs
of the Company, except changes in the ordinary course of business that would be
not expected, individually or the aggregate, to have a Material Adverse
Effect;

     

    (b)           any
threatened or pending litigation, which, if successful, would have a Material
Adverse Effect;

     

    (c)           any
damage, destruction or loss, whether or not covered by insurance, to the assets,
properties, financial condition, operating results, prospects or business of the
Company;

     

    (d)           any
waiver by the Company of a valuable right or of a material debt owed to
it;

     

    (e)           any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of
business;

     

    (f)           any
change or amendment to a Material Contract other than change orders in the
ordinary course of business;

     

    (g)           any
material change in any compensation arrangement or agreement with any employee,
officer, director or shareholder;

     

    (h)           any
sale, assignment or transfer by the Company of any its assets, properties or
rights other than the sale of inventory in the ordinary course, including
without limitation patents, trademarks, copyrights, trade secrets or other
intangible assets;

     

    (i)           any
resignation or termination of employment of any officer or key employee of the
Company;

     

    (j)           receipt
of notice that there has been a loss of, or material order cancellation by, any
major customer of the Company;

     

    (k)           any
incurrence of indebtedness for money borrowed or other liabilities in excess of
$250,000 individually or $1,000,000 in the aggregate;

     

    (l)           any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Company, with respect to any of its material properties or assets, except liens
for taxes not yet due or payable;

     


    
      
         


      

      
        -10-

        
          

        

      

      
         


      

    

     

    
      (m)           any
loans or guarantees made by the Company to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;

       

      (n)           any
declaration or payment of a dividend, or any authorization or making of a
distribution upon or with respect to any class or series of the Company’s
capital stock, or directly or indirectly the redemption, purchase or other
acquisition of any of such stock by the Company; or

       

    

    (o)           any
agreement or commitment by the Company to do any of the things described in this
Section 2.16.


     

    2.17           Employee
Matters.

     

    (a)           As
of the date hereof, the only officers and employees of the Company are those
officers and employees listed on Section 2.17(a) of the Schedule of
Exceptions.  The Company is not aware that any officer or other
employee intends to terminate his or her employment with the Company, nor does
the Company have a present intention to terminate the employment of any officer
or employee.  Except as set forth on the Schedule of Exceptions, the
employment of each officer and employee of the Company is terminable at the will
of the Company.

     

    (b)           The
Company is not delinquent in payments to any of its officers, employees,
consultants, or independent contractors for any wages, salaries, commissions,
bonuses, or other direct compensation for any service performed for it to the
date hereof or amounts required to be reimbursed to such employees, consultants,
or independent contractors. The Company has complied with all applicable state
and federal equal employment opportunity laws and with other laws related to
employment, including those related to wages, hours, worker classification,
collective bargaining, and the payment and withholding of taxes and other sums
as required by law.  The Company has withheld and paid to the
appropriate governmental entity or is holding for payment not yet due to such
governmental entity all amounts required to be withheld from employees of the
Company and is not liable for any arrears of wages, taxes, penalties, or other
sums for failure to comply with any of the foregoing.

     

    (c)           The
Company is not a party to or bound by any currently effective deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation agreement, or any Employee
Benefit Plan as defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended, nor has the Company contracted or agreed to establish
any such plan.

     

    (d)           The
Company is not bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the Company’s knowledge, has sought to represent any of the employees,
representatives or agents of the Company.  There is no strike or other
labor dispute involving the Company pending, or to the Company’s knowledge,
threatened, nor is the Company aware of any labor organization activity
involving its employees.

    
      
        
        

      

      
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    2.18           Tax
Matters.  The Company has
timely filed all tax returns and reports (federal, state, and local) as required
by law.  These returns and reports are true and correct in all
material respects.  The Company has paid all taxes and other
assessments due, except those contested by it in good faith.  The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof.  The Company
has never had any tax deficiency proposed or assessed against it and has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge.  None of the Company’s
federal income tax returns and none of its state income or franchise tax or
sales or use tax returns has ever been audited by governmental
authorities.  Since the date of the Financial Statements, the Company
has made adequate provisions on its books of account for all taxes, assessments,
and governmental charges with respect to its business, properties, and
operations for such period.  The Company has withheld or collected
from each payment made to each of its employees, the amount of all taxes,
including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.

     

    2.19           Minute
Books.  The minute books
of the Company, a true and correct copy of which has been made available to the
Investors and their counsel, contain a complete record of all meetings, consents
and actions of the board of directors (and any committee thereof) and the
shareholders of the Company since the time of its incorporation, accurately
reflecting all transactions referred to in such minutes in all material
respects.

     

    2.20           Disclosure.  The Company has
fully provided the Investors with all the information that the Investors have
requested for deciding whether to acquire the Purchased Shares and all
information that the Company believes is reasonably necessary to enable each
Investor to make such a decision.  No representation or warranty of
the Company contained in this Agreement nor any schedules or exhibits attached
hereto or any certificate furnished or to be furnished to Investor at the
Closing, nor the last version of any financial projections provided by Company
to the Investors (to the extent so provided) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made, except that with respect to any
financial projections presented by the Company to Investor, the Company
represents only that the projections were prepared by the management of the
Company in a good faith effort to describe the Company’s presently proposed
business and products and the markets therefor; provided, however, that the
Company does not warrant that it will achieve any of such
projections.

     

    2.21           Permits.  The Company has
all franchises, permits, licenses and any similar authority necessary for the
conduct of its business as currently conducted, the lack of which would be
reasonably expected to have a Material Adverse Effect.  The Company
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.

     

    2.22           Business
Practices.  Neither the
Company nor, to the Company’s knowledge, any person acting on behalf of the
Company has paid or delivered, or promised to pay or deliver, directly or
indirectly through any other person, any monies or anything else of value to any
government official or employee of any political party, for the purpose of
illegally or improperly inducing or rewarding any action by the official
favorable to the Company.

    
      
        
        

      

      
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    2.23           Real
Property Holding Corporation.  The Company is
not now and never has been a “United States real property holding corporation”
as defined in §897(c)(2) of the Code and Treasury Regulation §1.897-2(b), and
has filed with the Internal Revenue Service all statements, if any, with its
United States income tax returns, which are required under Treasury Regulation
§1.897-2(h).  The Company shall provide prompt notice to the Investors
following any “determination date” (as defined in Treasury Regulation Section
1.897-2(c)(1)) on which the Company becomes a United States real property
holding corporation.  In addition, upon a written request by an
Investor, the Company shall provide such Investor with a written statement
informing such Investor whether such Investor’s interest in the Company
constitutes a United States real property interest.  The Company’s
determination shall comply with the requirements of Treasury Regulation Section
1.897-2(h)(1) or any successor regulation, and the Company shall provide timely
notice to the Internal Revenue Service, in accordance with and to the extent
required by Treasury Regulation Section 1.897-2(h)(2) or any successor
regulation, that such statement has been made.  The Investors will
reasonably cooperate with the Company’s efforts to make the determination as to
whether the Company qualifies as a real property holding corporation by
furnishing the Company with any information reasonably necessary for the Company
to make the determination described in this Section 2.23.  The
Company’s written statement to an Investor shall be delivered to such Investor
within 10 days of the Investor’s written request therefor, provided, however, that such
10-day notice period shall be tolled pending receipt from the Investor of the
information reasonably required by the Company to make the requested
determination.  The Company’s obligation to furnish such written
statement shall continue notwithstanding the fact that a class of the Company’s
stock may be regularly traded on an established securities market or the fact
that there is no preferred stock then outstanding.

     

    2.24           Insurance.  The Company has
in full force and effect insurance policies sufficient in amount (subject to
reasonable deductibles) to allow it to replace any properties or assets that
might be damaged or destroyed.  All of the Company’s insurance
policies are set forth in Section 2.24 of the Schedule of
Exceptions.  The Company is not in default with respect to any
material provision contained in any such policy, and the Company has
not received notice of cancellation or non-renewal thereof.

     

    2.25           Related
Transactions.  (a) There is
no indebtedness, either directly or indirectly, between the Company and any
Founder, present or former officer, director, employee or shareholder, or to any
of their respective parents, spouses or children, in any amount whatsoever,
other than travel, relocation and other expenses which are advanced and
reimbursed in the ordinary course of business; (b) no Founder, present or
former officer, director, employee or shareholder (nor any person in the
immediate family of any such officer, director, employee or shareholder), has
any material direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship that is material to the Company or which competes with the Company;
(c) no Founder, officer, director, employee, consultant or shareholder of
any of its shares or any member of their immediate families is, directly or
indirectly, interested in any contract with the Company; and (d) the
Company is not a guarantor or indemnitor of any indebtedness of any person, firm
or corporation.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    2.26           Environmental
and Safety Laws.  The Company is
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.  No action, proceeding, permit revocation,
writ, injunction or claim is pending or, to the Company’s knowledge, threatened
concerning the Company’s or its subsidiaries’ facilities and the Company is not
aware of any fact or circumstance which could involve the Company or any of its
subsidiaries in any environmental litigation or impose any material
environmental liability upon the Company.  As of the Closing, to the
Company’s knowledge, no Hazardous Material (as defined below) is present on any
Company or subsidiary facility and, to the Company’s knowledge, no reasonable
likelihood exists that any Hazardous Material present on other property will
come to be present on a Company or subsidiary facility.  The Company
has obtained all indemnification agreements from all prior owners, lessors
and/or operators of any property on which a Company or a subsidiary facility is
located required to be obtained under any written agreements between the Company
(or any of its subsidiaries) and any current owner of such property,
indemnifying the Company with respect to any liability relating to or arising
from the presence of or migration of any Hazardous Material at such facilities
with respect to periods prior to the Company or subsidiaries’ use of such
facilities.  There are no underground storage tanks, asbestos or PCBs
present on any Company facility.  For the purposes of this Section
2.26, the term “Hazardous
Material” shall mean any material or substance that is prohibited or
regulated by any environmental law or that has been designated by any
governmental authority to be radioactive, toxic, hazardous or otherwise a danger
to health, reproduction or the environment.

     

    2.27           Investment
Company Act.  The Company is
not an “investment company,” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as
amended.

     

    2.28           Use of
Proceeds; Budgeting; Reporting.  The Company shall
use the proceeds from the sale of the Series B Stock for working capital and
general corporate purposes as set forth in the Company’s 2009 business plan and
annual budget, substantially in the form of Exhibit L attached
hereto, which will be approved by the Investors prior to the First Closing (the
“Annual
Budget”).

     

    3.           REPRESENTATIONS,
WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTORS.  Each Investor
hereby represents and warrants to, and agrees with, the Company, with respect to
the purchase of the Series B Stock and the Conversion Shares as follows, which
representations and warranties and agreements in no way limit or affect the
Company’s representations and warranties hereunder:

     

    3.1           Authorization.  This Agreement
constitutes the Investor’s valid and legally binding obligation, enforceable in
accordance with its terms except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors’ rights generally, (b)
applicable federal or state securities law limits on indemnification and (c) the
effect of rules of law governing the availability of equitable
remedies.  The Investor represents that it has full power and
authority to enter into this Agreement and the
Related Agreements.

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    3.2           Purchase
for Own Account.  The Purchased
Shares to be acquired by the Investor hereunder will be acquired for investment
for such Investor’s own account, not as a nominee or agent, and not with a view
to the public resale or distribution thereof within the meaning of the
Securities Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same, all other than by such
Investor to affiliated funds under common control.  If not an
individual, the Investor also represents that it has not been formed for the
specific purpose of acquiring the Purchased Shares.

     

    3.3           Disclosure
of Information.  At no time was
the Investor presented with or solicited by any publicly issued or circulated
newspaper, mail, radio, television or other form of general advertising or
solicitation in connection with the offer, sale and purchase of the Purchased
Shares.  The Investor acknowledges that the Company is in the very
early stages of development and therefore its future plans are highly
speculative.  The Investor has received or has had full access to all
the information it considers necessary or appropriate to make an informed
investment decision with respect to the Purchased Shares to be purchased by such
Investor under this Agreement and acknowledges that the business plans of the
Company provided to the Investor (including any financial information and/or
projections) were necessarily incomplete and were intended only to give the
Investor a general idea of the Company’s future intentions.  The
Investor further has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Purchased Shares and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to such Investor or to
which such Investor had access.  The foregoing, however, does not in
any way limit or modify the representations and warranties made by the Company
in Section 2.

     

    3.4           Investment
Experience.  The Investor
understands that the purchase of the Purchased Shares involves substantial
risk.  The Investor: (a) has experience as an investor in
securities of companies in the development stage and acknowledges that the
Investor is able to fend for itself, can bear the economic risk of such
Investor’s investment in the Purchased Shares and has such knowledge and
experience in financial or business matters that such Investor is capable of
evaluating the merits and risks of this investment in the Purchased Shares and
protecting its own interests in connection with this investment and/or
(b) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.  The Investor
represents that (i) if the Investor is an individual, he or she resides in the
state identified on Exhibit A, and (ii)
if the Investor is an entity, then the office in which its investment decision
was made is located at the address on Exhibit A.

     

    3.5           Accredited
Investor Status.  The Investor is
an “accredited investor” within the meaning of Regulation D, Rule 501(a),
promulgated under the Securities Act.

     

    3.6           Restricted
Securities.  The Investor
understands that the Purchased Shares and the Conversion Shares are
characterized as “restricted securities” under the Securities Act inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under the Securities Act and applicable regulations thereunder
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.  In this connection, Investor
represents that Investor is familiar with Rule 144 of the Securities Act,
as presently in effect, and understands the resale limitations imposed thereby
and otherwise by the Securities Act.  Investor understands that the
Company is under no obligation to register any of the securities sold hereunder
except as provided in the Investors’ Rights Agreement.  Investor
understands that no public market now exists for any of the Purchased Shares and
that it is uncertain whether a public market will ever exist for the Purchased
Shares or the Conversion Shares.

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    3.7           Further
Limitations on Disposition.  Without in any
way limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Purchased Shares or the
Conversion Shares unless and until:

     

    (a)           there
is then in effect a registration statement under the Securities Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or

     

    (b)           the
Investor shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and, at the expense of Investor or its transferee, with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the
Securities Act.

     

    Notwithstanding the provisions of
paragraphs (a) and (b) above, no such registration statement or opinion of
counsel shall be required:  (i) for any transfer of any Purchased
Shares or Conversion Shares in compliance with Rule 144 or Rule 144A,
or (ii) for any transfer of Purchased Shares or Conversion Shares by an
Investor that is a partnership, limited liability company, or a corporation to
(A) a partner of such partnership, a member or manager of such limited
liability company, or shareholder of such corporation, (B) a retired
partner of such partnership, a retired member of such limited liability company
who retires after the date hereof, (C) the estate of any such partner,
member or shareholder, (D) an “affiliate” (as defined in Section 7.2 below) or
(iii) for the transfer by gift, will or intestate succession by any
Investor to his or her spouse or lineal descendants, siblings or ancestors or
any trust for any of the foregoing; provided that in each
of the foregoing cases the transferee agrees in writing to be subject to the
terms of this Section 3 (other than Section 3.5) to the same extent as
if the transferee were an original Investor hereunder.

     

    3.8           Legends.  It is understood
that the certificates evidencing the Purchased Shares and the Conversion Shares
will bear the legends set forth below:

     

    (a)           THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    (b)           Any
legend required by the Related Agreements.

     

    (c)           Any
legend required by the laws of the State of California, including any legend
required by the California Department of Corporations and Sections 417 and 418
of the California Corporations Code or any other state securities laws,
including a legend substantially in the form of the following:

     

    THE
SHARES EVIDENCED BY THIS CERTIFICATE (I) ARE CONVERTIBLE INTO SHARES OF COMMON
STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER AT ANY TIME PRIOR TO AUTOMATIC
CONVERSION THEREOF AND (II) AUTOMATICALLY CONVERT INTO COMMON STOCK OF THE
COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN REQUIREMENTS OR UPON
CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY’S PREFERRED STOCK, ALL PURSUANT
TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE COMPANY’S AMENDED AND
RESTATED ARTICLES OF INCORPORATION.  A COPY OF SUCH AMENDED AND
RESTATED ARTICLES OF INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT THE
COMPANY’S PRINCIPAL OFFICE.

     

    The
legend set forth in (a) above shall be removed by the Company from any
certificate evidencing Purchased Shares or Conversion Shares if a registration
statement under the Securities Act is at that time in effect with respect to the
legended security or upon delivery to the Company of an opinion by counsel,
reasonably satisfactory to the Company, that such security can be freely
transferred in a public sale without such a registration statement being in
effect and that such transfer will not jeopardize the exemption or exemptions
from registration pursuant to which the Company issued the Purchased Shares or
Conversion Shares.

     

    4.           CONDITIONS TO INVESTORS’ OBLIGATIONS
AT CLOSING.  The obligations
of each Investor under Section 1 of this Agreement are subject to the
fulfillment or waiver, on or before the applicable Closing, of each of the
following conditions:

     

    4.1           Representations
and Warranties True.  Each of the
representations and warranties of the Company contained in Section 2 shall
be true and complete as of the date of the Closing (except to the extent such
representations and warranties address matters as of a particular date or
period, in which case such representations and warranties shall be true and
correct as of such date or period) with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.

     

    4.2           Performance.  The Company shall
have performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing and shall have obtained all approvals, consents
and qualifications necessary to complete the purchase and sale described
herein.

    
      
        
        

      

      
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    4.3           Restated
Articles Effective; Secretary’s Certificate.  The Restated
Articles shall have been duly adopted by the Company by all necessary corporate
action of its Board and shareholders, and shall have been duly filed with and
accepted by the Secretary of State of the State of California and be in full
force and effect.  The Secretary of the Company shall deliver to the
Investors at the Closing a certificate stating that the copies of the Company’s
Restated Articles and Bylaws and the Board and shareholder resolutions relating
to the sale and issuance of the Purchased Shares attached thereto are true and
complete copies of such documents and resolutions.

     

    4.4           Compliance
Certificate.  The Company shall
have delivered to the Investors at the Closing a certificate signed on its
behalf by its President and Chief Executive Officer certifying that the
conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled and
stating that there shall have been no Material Adverse Effect.

     

    4.5           Securities
Exemptions.  The offer and
sale of the Purchased Shares to the Investors pursuant to this Agreement shall
be exempt from the registration requirements of the Securities Act, the
qualification requirements of the California Corporate Securities Law of 1968,
as amended and the registration and/or qualification requirements of all other
applicable state securities laws.

     

    4.6           Proceedings
and Documents.  All corporate and
other proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Investors and their counsel, and the Investors shall
have received all such counterpart originals and certified or other copies of
such documents as they may reasonably request, including, without limitation,
copies of the resolutions of the Board and shareholders of the Company
authorizing the filing of the Restated Articles, and the issuance of the
Purchased Shares, and evidencing the approval of this Agreement, the Related
Agreements, and any other matters contemplated hereby and thereby.

     

    4.7           Board of
Directors; Observer Seats.  Effective as of
the Closing, the Board shall consist of five members: (i) four designated by the
holders of the Preferred Stock, with one member designated by each of Altira,
NGEN, and Robeco, and one independent director and (ii) one designated by the
holders of Common Stock, who will be the current chief executive officer of the
Company.  In addition, Altira, NGEN and Robeco each will be entitled
to designate a non-voting observer on the Board, and the holders of the Common
Stock will be entitled to designate two non-voting observers on the Board, in
each case pursuant to the terms and conditions set forth in the Voting
Agreement.

     

    4.8           Investors’
Rights Agreement.  The Company and
the Investors shall have executed and delivered the Investors’ Rights
Agreement.

     

    4.9           First
Refusal and Co-Sale Agreement.  The Company, the
Founders and the Investors shall have executed and delivered the First Refusal
and Co-Sale Agreement.

     

    4.10           Voting
Agreement.  The Company, the Founders and the Investors shall
have executed and delivered the Voting Agreement.

    
      
        
        

      

      
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    4.11           Opinion
of Company Counsel.  Investor shall
have received an opinion from Sheppard Mullin Richter & Hampton, LLP,
counsel for the Company, dated as of the date of the First Closing, in the form
satisfactory to the Investors and their counsel substantially in the form
attached hereto as Exhibit
H.

     

    4.12           Employment
Agreements.  The Company and
each of the Executives shall have executed the Employment
Agreements.

     

    4.13           Management
Rights Letter.  The Company shall have entered into a
Management Rights Letter with Altira, substantially in the form attached hereto
as Exhibit
J.

     

    4.14           Annual
Budget.  The Investors shall have approved the Company’s 2009
Annual Budget.

     

    4.15           Consents,
Permits and Waivers.  The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the
Agreements.

     

    4.16           Indemnification
Agreements.  The Company shall
have entered into an indemnification agreement with the designee of Altira to
the Board substantially in the form attached hereto as Exhibit
K.

     

    4.17           Cancellation
of Notes.  All principal and interest outstanding under all of
the Bridge Notes shall have been converted into shares of Series B Stock and the
original Bridge Notes shall be cancelled upon the books of the
Company.

     

    4.18           Series A
Dividend.  The Company shall have declared and issued a dividend of 0.1133332
shares of the Corporation’s Series A Stock for each share of the Corporation’ s
Series A Stock outstanding as of the First Closing.

     

    4.19           Closing
Deliverables.  In addition to
any deliverables set forth in 4.1 through 4.17 hereof, the Company shall have
delivered to each of the Investors, and their counsel, the following: (a)
certificate of the Secretary of State of the State of California dated as of a
date within three (3) calendar days of the applicable Closing, with respect to
the good standing of the Company; (b) certificates of good standing from the
applicable authorities in any other jurisdiction in which the Company is
qualified to do business, dated as of a recent date before the applicable
Closing; and (c) stock certificates representing the Purchased
Shares.

     

    5.           CONDITIONS
TO THE COMPANY’S OBLIGATIONS AT CLOSING.  The obligations
of the Company to the Investors under this Agreement are subject to the
fulfillment or waiver on or before the applicable Closing of each of the
following conditions by Investor:

     

    5.1           Representations
and Warranties.  The
representations and warranties of Investor contained in Section 4 shall be true
and complete on the date of the applicable Closing with the same effect as
though such representations and warranties had been made on and as of the
applicable Closing.

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    5.2           Payment
of Purchase Price; Cancellation of Bridge Notes.  The Investor
shall have delivered to the Company the cash purchase price specified on Exhibit A as
well as any Bridge Notes for cancellation in accordance with the provisions of
Section 1.

     

    5.3           Restated
Articles Effective.  The Restated
Articles shall have been duly adopted by the Company by all necessary corporate
action of its Board and shareholders, and shall have been duly filed with and
accepted by the Secretary of State of the State of California.

     

    5.4           Securities
Exemptions.  The offer and
sale of the Purchased Shares to Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act, the
qualifications requirements of the law and the registration and/or qualification
requirements of all other applicable state securities laws.

     

    6.           POST-CLOSING
COVENANTS.

     

    6.1           Insurance.  To the extent not
already in place, the Company shall use its reasonable best efforts to obtain as
promptly as practicable after the date hereof from financially sound and
reputable insurers (a) Directors and Officers insurance in an amount and with
coverage satisfactory to the Board and the Investors, and (b) if requested by at
least sixty-six and two-thirds percent (66 2/3%) of the Preferred Stock (voting
together as a single class), key man life insurance for those of the Company’s
executives and in the amounts as directed by the Board, and will use reasonable
best efforts to cause such insurance policies to be maintained in full force and
effect until such time as the Board determines that such insurance should be
discontinued.  The Company agrees to use commercially
reasonable efforts to maintain in full force and effect, general business and
liability insurance policies, with extended coverage, from reputable insurers,
with coverage customary for entities engaged in similar lines of business and
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its assets or properties that might be damaged or destroyed; provided
that the terms and scope of
such coverage shall be satisfactory to the Board and the
Investors.

     

    6.2           Proprietary
Information Agreements.  The Company will
cause each person now or hereafter employed by it (or engaged by the Company as
a consultant/independent contractor) with access to confidential information
and/or trade secrets, including all officers and directors of the Company, to
enter into a Proprietary Information and Inventions Assignment
Agreement.  In addition, the Company shall not amend, modify,
terminate, waive or otherwise alter, in whole or in part, any of the
above-referenced agreements or any restricted stock agreement between the
Company and any employee without the unanimous consent of those members of the
Board elected solely by the holders of the Preferred Stock.

     

    6.3           Delaware
Reincorporation.  Following the First Closing and an
assessment by the Company of the feasibility and potential commercial
consequences of doing so, if it is deemed appropriate by the Board, the Company will reincorporate in the
State of Delaware.

     

    7.           GENERAL
PROVISIONS.

     

    7.1           Survival
of Warranties.  The
representations, warranties and covenants of the Company and the Investors
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closings and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of any of
the Investors, their counsel or the Company, as the case may be.

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    7.2           Transfer;
Successors and Assigns.  The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties, including transferees of
any Purchased Shares.  Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.  Notwithstanding anything herein to the contrary,
an Investor may assign its rights and obligations hereunder to any affiliate of
such Investor.  For purposes of this Agreement, an individual, firm,
corporation, partnership, association, limited liability company, trust or any
other entity shall be deemed an “affiliate” of such Investor who, directly or
indirectly, controls, is controlled by or is under common control with Investor,
including, without limitation, any partner, officer, director, member or manager
of such Investor and any venture capital fund now or hereafter existing that is
controlled by or under common control with one or more managers or general
partners of or shares the same management company with Investor.

     

    7.3           Governing
Law.  This Agreement
shall be governed by and construed under the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, without reference to principles of
conflict of laws or choice of laws.

     

    7.4           Addition
of Other Parties to This Agreement.  Persons or
entities which purchase from the Company in the future Series B Stock may, at
the discretion of the Board, become parties to this Agreement (as amended from
time to time) by executing a counterpart signature page to this
Agreement.  By execution of such counterpart signature page, this
Agreement shall be automatically amended and such person or entity shall be an
“Investor” for all purposes of this Agreement, and as such shall be entitled to
the rights and benefits, and be bound by the obligations, of this
Agreement.  Immediately after each such Closing, Exhibit A shall be
amended to list the new Investor(s) and the number of shares of Series B Stock
purchased by such Investor hereunder.

     

    7.5           Counterparts.  This Agreement
may be executed in any number of counterparts (including by facsimile or email
with scanned attachment), each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.

     

    7.6           Headings.  The headings and
captions used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.  All
references in this Agreement to sections, paragraphs, exhibits and schedules
shall, unless otherwise provided, refer to sections and paragraphs hereof and
exhibits and schedules attached hereto, all of which exhibits and schedules are
incorporated herein by this reference.

     

    7.7           Notices.  Any notice
required or permitted to be given to a party pursuant to the provisions of this
Agreement will be in writing and will be effective and deemed given to such
party under this Agreement on the earliest of the following:

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    (a)           the
date of personal delivery;

     

    (b)           one (1)
business day after transmission by facsimile, addressed to the other party at
its facsimile number specified herein (or hereafter noticed to the parties
hereto), with written confirmation of transmission;

     

    (c)           one (1)
business day after deposit express courier for United States deliveries, or
three (3) business days after such deposit for deliveries outside of the
United States; or

     

    (d)           three (3)
business days after deposit in the United States mail by registered or certified
mail for United States deliveries.

     

    All notices not delivered personally or
by facsimile will be sent with postage and/or other charges prepaid and properly
addressed to the party to be notified at the address set forth below such
party’s signature on this Agreement or on an Exhibit hereto, or at such other
address as such other party may designate by ten (10) days advance written
notice to the other parties hereto.  All notices for delivery outside
the United States will be sent by facsimile or by express
courier.  Any notice given hereunder to more than one person will be
deemed to have been given, for purposes of counting time periods hereunder, on
the date effectively given to the last party required to be given such
notice.  Notices to the Company should be marked
“Attention:  Jay Zoellner, Chief Executive Officer” and should be
delivered to 150 Paularino Avenue A120, Costa Mesa CA 92626, Facsimile:
714-957-1093, with a copy to Stephanie Brecher, Esq., Sheppard Mullin Richter
& Hampton, LLP, 650 Town Center Drive, 4th Floor,
Costa Mesa, California 92626, Facsimile: 714-428-5992.  Notices to the
Investors should be delivered to the address or facsimile numbers set forth on
Exhibit A
hereto or as shown in the Company’s records, as such records may be updated in
accordance with the provisions hereof, with a copy to John A. Eckstein, Esq.,
Fairfield and Woods P.C., 1700 Lincoln Street, Suite 2400, Denver, Colorado,
80203-4524, Facsimile 303-830-1033.

     

    7.8           No
Finder’s Fees.  Each party
represents that it neither is nor will be obligated for any finder’s or broker’s
fee or commission in connection with this transaction.  Each Investor
agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finders’ or broker’s fee (and any
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible.  The Company agrees to
indemnify and hold harmless Investor from any liability for any commission or
compensation in the nature of a finder’s or broker’s fee (and any asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.

     

    7.9           Costs and
Expenses.  On or about the
First Closing, the Company shall reimburse Altira for all reasonable
out-of-pocket expenses it incurs in connection with the transactions contemplated herein, including but not
limited to travel, due diligence expenses, consultants and legal fees, not to exceed an aggregate of
$50,000, upon presentation of invoices therefor, provided, however, that the
Company may reimburse a higher amount if it has pre-approved such higher amount
in writing.

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    7.10           Amendments
and Waivers.  Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the approval of
the holders of a majority of the Series B Stock.  Any amendment or
waiver effected in accordance with this Section shall be binding upon each
holder of any Purchased Shares and/or Conversion Shares at the time outstanding,
each future holder of such securities, and the Company; provided, however, that
no condition set forth in Section 4 may be
waived with respect to any Investor who does not consent thereto.  No
delay or failure to require performance of any provision of this Agreement shall
constitute a waiver of that provision as to that or any other
instance.  No waiver granted under this Agreement as to any one
provision herein shall constitute a subsequent waiver of such provision or of
any other provision herein, nor shall it constitute the waiver of any
performance other than the actual performance specifically waived.

     

    7.11           Adjustments
for Stock Splits, Etc.  Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Preferred Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or series of
stock, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the effect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.

     

    7.12           Waiver of
Right of First Refusal.  NGEN and Robeco, to the extent they
hold any notice rights and rights of first refusal to purchase securities of the
Company pursuant to Section 3 of that certain Investors’ Rights Agreement, dated
November 30, 2007, by and among the Company and the parties listed therein,
hereby waive any and all such notice rights and related notice periods and
rights of first refusal with respect to this issuance of the Purchased Shares
and/or Conversion Shares pursuant to this Agreement.

     

    7.13           Waiver of
Anti-dilution Rights.  NGEN and Robeco
hereby waive any adjustments to the applicable conversion price and conversion
ratio of their Series A Stock in accordance with the Company’s Amended and
Restated Articles of Incorporation with respect to the issuance of Purchased
Shares and/or Conversion Shares as contemplated herein.

     

    7.14           Third
Parties.  Nothing in this
Agreement, express or implied, is intended to confer upon any person, other than
the parties hereto and their successors and assigns, any rights or remedies
under or by reason of this Agreement.

     

    7.15           Severability.  If any provision
of this Agreement is determined by any court or arbitrator of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
provision will be enforced to the maximum extent possible given the intent of
the parties hereto.  If such clause or provision cannot be so
enforced, such provision shall be stricken from this Agreement and the remainder
of this Agreement shall be enforced as if such invalid, illegal or unenforceable
clause or provision had (to the extent not enforceable) never been contained in
this Agreement.  Notwithstanding the forgoing, if the value of this
Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or
arbitrator of competent jurisdiction shall be binding, then both parties agree
to substitute such provision(s) through good faith negotiations.

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    7.16           Entire
Agreement.  This Agreement
and the Related Agreements and the documents referred to herein, together with
all the Exhibits hereto, constitute the entire agreement and understanding of
the parties with respect to the subject matter of this Agreement, and supersede
any and all prior understandings and agreements, whether oral or written,
between or among the parties hereto with respect to the specific subject matter
hereof.

     

    7.17           Further
Assurances.  From and after
the date of this Agreement, upon the request of Investor or the Company, the
Company and Investor shall execute and deliver such instruments, documents or
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this
Agreement.

     

    7.18           Delays
and Omissions.  Except as
expressly provided herein, no delay or omission to exercise any right, power or
remedy accruing to any party to this Agreement upon any breach or default of any
other party under this Agreement shall impair any such right, power or remedy of
such non-defaulting party, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, nor of or in any similar breach
or default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring.  Any waiver, permit, consent or approval of any
kind or character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.  All remedies,
either under this Agreement or by law or otherwise afforded to any party to this
Agreement, shall be cumulative and not alternative.

     

    7.19           Arbitration.  Any dispute,
claim, question, or disagreement involving the interpretation or enforcement of
any provision of this Agreement or breach hereof or otherwise arising under or
in connection with this Agreement shall be submitted to binding arbitration in
Orange County, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (expedited procedures) then in
effect.  There shall be three (3) arbitrators, all of whom shall be
neutral, and at least one (1) of whom shall be an attorney licensed to practice
law in the State of California for at lease ten (10) years.  The
arbitrators shall have the authority to exclude evidence found to be irrelevant,
redundant, or prejudicial beyond its probative value, and are instructed to
exercise that authority consistently with reasonably expediting the
proceeding.  The arbitrators may order specific performance,
preliminary and final injunctive relief, and other equitable
relief.  The arbitrators may make awards to the substantially
prevailing party in their discretion and all fees, costs, and expenses of
enforcing any right of such substantially prevailing party under or with respect
to this Agreement, including, without limitation, the reasonable fees and
expenses of attorneys and accountants.  The award or order of the
arbitrators may be entered and enforced in any court of competent
jurisdiction.  The arbitration hearing shall begin no more than 90
days after the arbitrators are selected and shall be closed no more than 60 days
thereafter, unless such time periods are extended or waived by the
parties.  The arbitrators’ award shall be issued within 30 days after
the hearing is closed.

     

    7.20           Injunctive
Relief.  The Parties agree that damages cannot reasonably
compensate the Parties in the event of a violation of the covenants and
restrictions in this Agreement and that it may be difficult to ascertain the
damages which would be suffered by the Parties in such
cases.  Accordingly, the Parties hereby agree and consent that, in the
event of any such actual or threatened breach or violation, notwithstanding
Section 7.19, any party may obtain injunctive relief in order to prevent the
potential or continuing violation of the terms of this Agreement from any court
of competent jurisdiction located in Orange County, California; provided, however, that any
determination of the fair market value of securities shall be made by binding
arbitration in accordance with the provisions of Section 7.19 above, and such
arbitration may proceed concurrently with any action for injunctive
relief.  The award of permanent or temporary injunctive relief shall
in no way limit any other remedies to which a party may be entitled as a result
of any such breach.

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    7.21           Corporate
Securities Law.  THE SALE OF
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE.  THE RIGHTS OF ALL SUCH PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.

     

    7.22           Aggregation
of Stock.  All shares of
Series B Stock held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.

     


    
      
         


      

      
        -25-

        
          

        

      

      
         


      

    


    In
Witness Whereof, the Parties hereto have executed this Series B Preferred
Stock Purchase Agreement as of the date first written above.

    


    COMPANY:

    


    ENERGY
AND POWER SOLUTIONS, INC.

    


    By: /s/ Jay Zoellner                
Name: Jay
Zoellner
Title:
President and CEO

     

     

     

     

     

     

     

     

     


    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    In
Witness Whereof, the Parties hereto have executed this Series B Preferred
Stock Purchase Agreement as of the date first written above.

    


    INVESTORS:

    


    ALTIRA
TECHNOLOGY FUND V L.P.

    


    By:
Altira Management V LLC

    Its
General Partner

    


    By:  Altira
Group LLC

    Its Sole
Managing Member

    


    


    By: /s/ James R. Newell            
Jim
Newell
Managing
Member

     

     

     

     

     

     

     

     


    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    In
Witness Whereof, the Parties hereto have executed this Series B Preferred
Stock Purchase Agreement as of the date first written above.

    


    INVESTORS:

    


    NGEN
II, L.P.

    


    By: NGEN
Partners II, LLC

    Its
General Partner

    


    


    By: /s/ Steven Parry            
Steven
Parry
Managing
Member

     

     

     

     

     

     

     

    


    



    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    In
Witness Whereof, the Parties hereto have executed this Series B Preferred
Stock Purchase Agreement as of the date first written above.

    


    INVESTORS:

    


    THE
ENVIRONMENT AGENCY ACTIVE

    PENSION
FUND

    


    By: 
The Environment Agency,
its
Administrative Authority

     

    By: 
Robeco Institutional Asset Management B.V.,
its
Authorized Agent

     

    By: 
/s/ J. G. van der Boon                
Name: J.
G. van der Boon
Title:

     

    
      By: /s/ A. J. C. van den Ouweland            
Name: A.
J. C. van den Ouweland
Title:

       

    

    STICHTING
CUSTODY ROBECO MASTER

    CLEAN
TECH II (EUR)

    


    
      By: 
/s/ J. G. van der Boon                
Name: J.
G. van der Boon
Title:

       

      
        By: /s/ A. J. C. van den Ouweland            
Name: A.
J. C. van den Ouweland
Title:



    

    STICHTING
CUSTODY ROBECO MASTER

    CLEAN
TECH II (USD)

    


    


    
      By: 
/s/ J. G. van der Boon                
Name: J.
G. van der Boon
Title:

       

      
        By: /s/ A. J. C. van den Ouweland            
Name: A.
J. C. van den Ouweland
Title:

      

    

    
 


    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]